Savings with no risks

giogiu1974

Hello everyone, I need an advice here from you all expert 

I have £25,000 in my bank account and I would like to put this money where it generates a bit of income. I need to say that I don't like to risk hence why I haven't invested in shares or bonds as yet. I can save up to £1,000 a month to put it somewhere.

I do have Plan 2 of the student loans and still have £6,945 to repay. I see that the interest is 1.5% but I think it will go higher since my salary goes up every year. I currently repay £165/month for the student loan.

What do you suggest?

Thank you very much all.

Edit: I forgot to mention that I'm in my 40s and already bought a home, so I have a mortgage in place for my first home

Thrugelmir

Have you opened a cash LISA. 

canaldumidi

You won't be able to generate 1.5% from savings, so pay off the debt and stop paying interest on it.

Put the balance into the highest paying savings account available, and then from your income pay into a regular saver.

Linton

Premium Bonds. You are not going to find significiant risk free interest at the moment, it certainly wont be sufficient to prevent your savings steadily decreasing in real value.  But at least PBs will give you a few minutes of excitement every month.

Albermarle

In fact there is nowhere you can put it that is no risk.

Inflation will mean that even in a safe savings account ( or premium bonds ) it will slowly lose value .

So although you will be guaranteed to get your money back with a small amount of interest when you withdraw , it will have lost some of its buying power.

giogiu1974

Thrugelmir said:

Have you opened a cash LISA. 

I can't, I'm over 40s and already bought a house

tebbins

giogiu1974 said:

Hello everyone, I need an advice here from you all expert 

I have £25,000 in my bank account and I would like to put this money where it generates a bit of income. I need to say that I don't like to risk hence why I haven't invested in shares or bonds as yet. I can save up to £1,000 a month to put it somewhere.

I do have Plan 2 of the student loans and still have £6,945 to repay. I see that the interest is 1.5% but I think it will go higher since my salary goes up every year. I currently repay £165/month for the student loan.

What do you suggest?

Thank you very much all.

Edit: I forgot to mention that I'm in my 40s and already bought a home, so I have a mortgage in place for my first home

Based on that student loan repayment level you are almost but not quite a higher rate taxpayer, and even if your gross income does go above the threshold, income tax is net of pension contributions - are you currently paying into a pension scheme?
Before you even think about paying off the student loan read this: https://www.moneysavingexpert.com/students/student-loans-repay

If you don't want to invest, your best bet right now for that much is probably Premium Bonds: https://www.moneysavingexpert.com/savings/premium-bonds/ (edit: unless you're prepared to lock away).
Do you actually need these savings to generate income or do you want the savings to grow? These are quite different propositions.

Thrugelmir

canaldumidi said:

You won't be able to generate 1.5% from savings, so pay off the debt and stop paying interest on it.

You can if you are prepared to lock your money away........

https://www.moneysavingexpert.com/savings/savings-accounts-best-interest/

Dazed_and_C0nfused

canaldumidi said:

You won't be able to generate 1.5% from savings, so pay off the debt and stop paying interest on it.

Put the balance into the highest paying savings account available, and then from your income pay into a regular saver.

If you are willing to tie your money up for 12 months you can.

giogiu1974

tebbins said:

giogiu1974 said:

Hello everyone, I need an advice here from you all expert 

I have £25,000 in my bank account and I would like to put this money where it generates a bit of income. I need to say that I don't like to risk hence why I haven't invested in shares or bonds as yet. I can save up to £1,000 a month to put it somewhere.

I do have Plan 2 of the student loans and still have £6,945 to repay. I see that the interest is 1.5% but I think it will go higher since my salary goes up every year. I currently repay £165/month for the student loan.

What do you suggest?

Thank you very much all.

Edit: I forgot to mention that I'm in my 40s and already bought a home, so I have a mortgage in place for my first home

Based on that student loan repayment level you are almost but not quite a higher rate taxpayer, and even if your gross income does go above the threshold, income tax is net of pension contributions - are you currently paying into a pension scheme?
Before you even think about paying off the student loan read this: https://www.moneysavingexpert.com/students/student-loans-repay

If you don't want to invest, your best bet right now for that much is probably Premium Bonds: https://www.moneysavingexpert.com/savings/premium-bonds/ (edit: unless you're prepared to lock away).
Do you actually need these savings to generate income or do you want the savings to grow? These are quite different propositions.

I've just seen that I have 1.5% interest on my student loan. At the moment I'm at the threshold (48k) and will be earning about 52k in a few months, so I'm afraid the interest for the repayment will go up. Last year I was paying 5.6% interest, now the website says 1.5%! I think it is not correct because interest should be RPI plus 3% according to my salary. How come it's only 1.5%?

It is also true that interests can go up, especially because they are based on the RPI inflation rate.

Yes, I'm paying 9.6% towards my pension.

I did a little calculation and if I'm not wrong, I will repay the 7k debt in 4 years and it will cost me a total of £700 circa in interests.

I was thinking to pay it off now since I will surely repay all of it in 4 years. It is true that repaying it monthly I have more disposable income, but I'm only savings for about 4 years when I will renegotiate my mortgage. So yes, I can lock it for 1-2 years without problems so I have access to higher savings interests. I'm more interested in the savings to grow rather to generate income.

If I pay it in full now, I will also be able to save more money each month since I won't need to repay the £180 monthly and put this extra money in another savings account that can grow.

What do you think?

tebbins

If you are likely to pay it off before it automatically cancels, I suggest paying it off early. Your interest rate at your income level is likely to be RPI + 3%, the student loans system applies the RPI from March 2021 to your balance between September 2021 and August 2022, which was 1.5%, so your rate should be 4.5%.
It looks at least in the short term that RPI may be a fair bit higher next March, currently it's running at 4.8%. However the rate is capped.to ensure it remains competitive with commercial comparators, so it's unlikely the will jump to 7.8%.
There are no savings accounts offering interest rates near that, I think most in the forum would agree that in your particular circumstances, paying it off early would be a sensible move.

Sources:

https://www.gov.uk/government/news/student-loans-interest-rates-and-repayment-threshold-announcement--2

https://www.ons.gov.uk/economy/inflationandpriceindices/timeseries/czbh/mm23

https://www.gov.uk/guidance/how-interest-is-calculated-plan-2