What to do with savings?

wackyraces

I have 70K lump sum in a savings account, that isn't a particularly high interest rate. I don't need instant access too it but would like to have it somewhere that would allow me to withdraw once per year without penalties. Any advice on what savings accounts I should use?

mary

I suggest you read Martin's Money Saving suggestions,

1st stop tax free mini cash ISAs (Abbey),
2nd stop Regular Savings (Abbey very recent limited offer at 6.5% fixed monthly saver),
3rd stop High Interest Savings account.

Depends how much time you have to keep shuffling accounts and chasing the highest interest payers.

Robert_Sterling_3

What rate of interest are you getting at the moment?

wackyraces

The rate I'm getting in an Abbey account is 3.3%.

Reaper

The rate I'm getting in an Abbey account is 3.3%.

A quick and dirty calculation tells me that by not having it in, say A&L Online Saver which pays 5.35% you are losing out on £1435 per year!

OK - I cheated. I ignored tax and you can't save more than £25,000 with them anyway, but it was only an example. Don't hang around and with a sum of money that large. Keep an eye on interest rates and be prepared to switch each time they drop too far behind.

ED

wackyraces – as your savings are currently with Abbey, do you have their eSaver a/c?

If so, savings of £50,000+ would earn 4.70% gross (or 4.60% for £1+).

If do don't already have an eSaver with Abbey, you'd earn an extra half a percent for the first 6 months of having an Abbey eSaver (5.20% gross). That's almost as good as Birmingham Midshires online a/c @ 5.40% gross. That one can only be linked with one external a/c. It is soon to close to new applicants.

Some people prefer to have no more than £35,000 in any one financial institution, just in case it gets into difficulty. Perhaps you may wish to consider putting some of your lump sum into eSaver with Abbey. Moving it from one Abbey a/c to another would occur instantly. (You'd need to go online to open the a/c, + send proof of iD & address postally.) So no days earning nil interest! Subsequently, you could move part of your sum to Birmingham Midshires or another institution you choose.

Wise words (above) from Mary. So assuming you have no debts (including mortgage) to partially or fully repay with your sum, one idea would be to open several regular, monthly savings a/c's.

Abbey's monthly a/c pays 6.50% gross (12 monthly payments could use up to £6,000).

Halifax have one @ 6% (use up to £3,000 in a year).

5.85% is offered by Derbyshire BS (£12,000 used in a year, and it can continue).

All of those regular, monthly payments could be funded through your Abbey (current) a/c. You'd go online, not less than one working day before each Standing Order is due out, to instantly transfer £'s from eSaver to Abbey a/c.

Actually, if you decide to open a monthly a/c with Halifax, you may wish to also open their Web Saver a/c. It currently pays 4.90%, and you can arrange online for automatic internal standing orders from it direct to your Regular Saver a/c.

Abbey's page re eSaver is here :
http://www.abbey.com/future/savings/easyr/easyr_esaver.html

wackyraces

Thanks for all the information. I do have a mortgage but I am looking to purchase land / build house abroad and so want to keep saving to pay for all that in one go. I shall check out all the information on the accounts that have been given and see which is the best option. I certainly don't want to be losing out on the interest!

djohn2002uk

Am I missing something here or what?
Surely the Abbey monthly saver account, and others like it are not the type of account for someone with a lump sum to invest. The way I see it, if you put monthly payments of £500 into an account such as the Abbey one, at the end of the year only £500 wil have accrued the full 6.5%. The 11th payment will only have 1 months interest and the 12th payment will have nothing. After 13 months you will get an average over the previous year working out at 6months interest which is the same as getting 3.25% on your total of £6,000. Less than he's getting in his present account.
My advice for a "Risk Free" investment would be to check all the Building Societies and see what Investment Bonds they have, that are not tied to the stock market, or any insurance company that they might have ties with. In other words "In House". They usually have 1Yr, 18months, 2Yr, 3Yr and 5Yr bonds at above normal interest rates, and fixed for the term. Some examples are here at the bottom of the page.  http://www.thisismoney.com/savings_rates/saving_deals.shtml
Hope this helps.

ED

djohn2002uk – Funds ready for filtering into regular, monthly savings a/c's are, meanwhile, earning interest in a savings a/c. Example @ 5.20% pro rata for the 1st 6 months of having an Abbey eSaver a/c.

"The 12th payment will have nothing."

The customer's opening deposit is followed by just 11 Standing Orders.

"My advice for a "Risk Free" investment would be to check all the Building Societies and see what Investment Bonds they have, that are not tied to the stock market, or any insurance company that they might have ties with. In other words 'In House'."

Risk free saving is my choice, also. Wise words, djohn2002uk.

Robert_Sterling_3

Am I missing something here or what?

Yes you are.