NS&I Fixed Rate Renewal

6022tivo

Just had my renewal through for my NS&I Fixed Interest and I'm not sure what to do with it.

To be honest, it's the last fixed term interest one I have.
Took it out 10 years ago, at the full value.

My options..
Another 5YR at 2.15%
2YR at 1.55%
Get a new car or a massive party

I really don't see the point of that interest rate being fixed, I can only really see them going up??
I am maxed out on current account interest and regular savings, so I don't really know what to do at all!

Any thoughts?

I'm lucky in that I am a bit cash rich at the moment, so unsure what to do.

I pay 25% through salary sacrifice to my pension, I could increase that a bit and live off the cash to bump the wages I suppose..

Bit boring though!

kidmugsy

Sometimes boring is good.

Does anyone offer a "tracker" savings account, or Cash ISA, at the moment? You may remember them - they'd pay out Bank of England Base Rate plus, say, 1% p.a. They might be a place to hold some cash while you ponder.

Alexland

The pound has been strengthening and that might start feeding into lower car prices in time if you can hold on a bit longer.

6022tivo

So, I have a week to make a call.

My options are 5years at NS&I at 2%
Nationwide ISA for 1.4% with no withdrawal penalty.

I'm leaning for the Nationwide, for two reasons.
I may want to treat myself? Although have other funds.
Interesting rates will rise a lot over the next 5 years, and the NS&I 2% will turn out to be poor?

ValiantSon

Why are the NS&I fix or the Nationwide ISA your only options? There are better rates elsewhere.

6022tivo

Ahh ok, so there are penalty free instant access cash isa's offering more than 1.4%?

ValiantSon

No, but the Nationwide ISA isn't really an easy access account either. It is a fixed rate ISA that allows one withdrawal. I was saying that you good get a better rate with a notice account or a one year savings bond, which are broadly comparable products without the ISA wrapper.

ISAs are only advantageous if you would pay income tax on the interest earned elsewhere, and even then, only if the interest rate offered by the ISA is sufficiently high enough, as even with paying income tax on interest you can still be better off.

How much are you intending to save? What income tax rate do you pay? How much access will you need to the money over the course of one year. These are the questions that will allow us to offer suggestions.

6022tivo

It's around £20k, but will have another £20k to add to it in July.
I already have interest from other accounts close to the £1k interest limit.
Tax at 20% but don't want to do a self assessment.
Don't think I will need access, but if I did it would be a one off.

ValiantSon

You don't need to do self assessment if you are paid through PAYE. HMRC will adjust your tax code to collect any tax that is owed.

If you are happy to lock it away for a year then you can get 1.9% from Investec. Alternatively, Secure Trust Bank will pay 1.66% on a 180 day notice account.

6022tivo

1.9 is good, but attracts tax bringing it down to about 1.5% which is 0.1 above the nationwide which would be a lot easy for me to setup and manage. Interesting though.

ValiantSon

6022tivo wrote: »

1.9 is good, but attracts tax bringing it down to about 1.5% which is 0.1 above the nationwide which would be a lot easy for me to setup and manage. Interesting though.

On a £20,000 sum, that 0.12% extra is equal to £24. Not a vast amount of money, but surely not to be sniffed at either?

Setting up the new account with Investec shouldn't be any more complex than setting up the ISA with Nationwide. There is no management required at all. You open the account, deposit the money and a year later take it back out with the interest.

Details and link to Investec here: https://www.moneysavingexpert.com/savings/savings-accounts-best-interest#fixedsavings