£40K sitting in non-interest bearing account

Jon12345

What to do with it? I think I should be earning some interest, before inflation whittles it away!

Jon

Terry_Towelling

Well, what are you waiting for?

High-interest current accounts plus linked regular savers (Nationwide FlexDirect at 5% for example).

Some 'unlinked' regular savers too (Virgin at 2.25% perhaps)

How about some 1 year fixed rate accounts? (a few available paying between 1.8 and 2%)

What about a notice account? (Paragon 120-day paying 1.66%).

Have you thought about paying something into a SIPP/personal pension for the tax relief? We don't know your personal circumstances to know if this is suitable for you.

Do you have a mortgage? Perhaps some overpayments on that?

S&S ISA?

Spend it all on sweets?

There are many options open to you

kidmugsy

Terry_Towelling wrote: »

Spend it all on sweets?

Do they still make rum & butter toffees?

But seriously, if you can't be fagged searching for suitable interest rates just bung it all into Premium Bonds before the end of the month.

Brynsam

Click on the 'banking and saving' tab at the top of this page for plenty of ideas on where to invest.

Terry_Towelling

kidmugsy wrote: »

Do they still make rum & butter toffees?

They do! You can even get gluten free ones.

If OP can provide a bit more background, some more informed comment could be provided (not necessarily by me, though)

Jon12345

Thanks for the great ideas so far!

Some more info...? Well, I already have £20K stored in a Santander account because they had a good interest rate at the time, so long as I keep paying £500 pm in there. I have one ISA with Virgin. I have a Virgin savings account with perhaps £15K in it.

In my business account, I have about £20K just sitting there. I want to keep maybe £5K there for expenses, but it is such a waste having £15K of it earning nothing!

With the pensions nowadays, can you draw out 100% at any time? I have no idea what is going on with the pension thing nowadays, as they have changed the rules so many times.

Terry_Towelling

Do you have any pension provision beyond the state pension? That definitely seems like something you need to research.

Yes, it will be possible with some schemes to pull the whole fund out at once but only 25% of it will be tax free. The rest will be taxable as income subject to the normal allowances and tax bandings. There is a process, known as UFPLS (Uncrystallised Funds Pension Lump Sum) which lets you draw income where 25% of each withdrawal is tax free and 75% is taxable - again this will be scheme-dependent.

Beyond the above I am neither qualified nor in possession of enough information to advise you on pensions. Others will hopefully step in but they too will need to know more about your current pension arrangements.

Is the £15K your money or does it belong to the business? Either way, it is a waste for it not to be earning anything. Presumably, if it is business money then any interest earned will belong to the business unless you withdraw it and then there may be tax implications. Once again, I am not qualified to advise and I don't know how your business is set up.

Mortgage?

There are some very knowledgeable people on this forum and I hope they will be along soon to offer something more useful.

kidmugsy

Terry_Towelling wrote: »

Yes, it will be possible with some schemes to pull the whole fund out at once but only 25% of it will be tax free. The rest will be taxable as income

Mind you, only if you are 55 or older, or are so ill as to be at death's door.
(My instinct is that the OP hasn't reached 55; I may be entirely wrong.)

Jon12345

I am close to 55. No mortgage.

Business is as a sole trader so leaving it in or drawing it out doesn't really affect the tax implications. There is no corporation tax.

As daft as this sounds, premium bonds seem like a good short term option. I that gives me say £30pm interest on average if I pay in some money from various sources. Currently I am getting nothing. I want to keep the money relatively liquid so I presume premium bonds can be cashed in pretty quickly.

I will also check out the pension option, as if I can draw on that more tax efficiently, it might be worthwhile.

enthusiasticsaver

What you do with the £40k depends on how accessible it needs to be, your attitude to risk and willingness to spend time researching and the eventual aim for the money. At the moment it is being whittled away by inflation so it will be worth less in a few years time. Earning a return on it will minimise the loss.

If it needs to be readily accessible and you don't want to spend time opening up lots of high rate current accounts and regular savers and comply with funding requirements then premium bonds or national savings are easily accessed and earn some return.

If you are willing to open higher rate current accounts like TsB, Nationwide, Tesco, lloyds vantage and Bank of Scotland plus regular savers you could get most if not all of the £40k in accounts earning 2% or 3%. This involves setting up payments in monthly and most of them now ask for direct debits to be set up.

Pensions and investments are another option and certainly pensions are the most tax efficient. If you don't already have one you could open A SIPP and benefit from HMRC topping up your payments by 25%. You can access this after 55 but you need to decide which funds and platform to invest in and it will not be instantly available although you can hold cash within a SIPP.

Terry_Towelling

Premium Bonds may give you some small prizes, or some large ones, or even the top prize but, equally, you may get nothing and you don't get anything until they've been invested for a full month. Probability and chance are separate things. Statistical Probability says you may expect to get X% in return but chance says you could get something or nothing at all.

If you want certainty you'd be better off with a simple easy access account paying about 1.3%pa or a notice account paying 1.66%.

Putting some in a SIPP to get the tax relief is an option but it may mean the cash is not fully accessible at once - and certainly not until you are 55. Although it seems like an easy way to get cash from HMRC, it may not be worth quite that much because you will likely have to pay tax on anything after the 25% TFLS - and you certainly won't want to draw it all out within the 1st year due to the high closure penalty at that point.

So, probably the best for speed, ease of access, a guarantee of a return and no faff is the good old simple savings account.