Large sum short term investment

Pipkin1812

Shortly I will be in receipt of around £400K from house sale due to divorce. I am going to be renting for a short period, maybe up to 2 years, until I decide where to live (maybe moving further north). I don’t want to buy immediately until I decide where to buy for my future. Any thoughts on where to invest for a relatively short period as I will need access in a few years. Thanks 

Daliah

2 years is way too short for investing. You need to stick with saving. As you have more than £85k and want to keep it for longer than the FSCS high balance period, you have two basic options

1 - put the entire sum into NS&I. You could put £50k into Premium Bonds and the rest into a Direct Saver. 

2 - for better interest rates, you can check moneyfacts.co.uk. You’d need to split your money into max £85k chunks to have FSCS cover

Albermarle

for a short period, maybe up to 2 years

In this case, your question has been answered by the previous poster. Despite inflation eating at the value it would be better in savings accounts .

Any thoughts on where to invest for a relatively short period as I will need access in a few years.

However if a 'few years ' was 5 years or more , you could consider investing some of it , to try to beat the inflation issue. If a 'few years' was 7 or even 10 years, you could consider investing a bigger proportion.

Pipkin1812

Thanks for replies. I actually meant savings as I appreciate 2 years is to short a time for investment returns and I intend to buy a property in a couple of years time so it is how best to get some interest return in a secure way. 

alternate

Not too bad timing.  Nothing is going to get close to inflation but rates have picked up a little lately.

Pipkin1812

I guess I can use a mix of savings accounts (max£85K). Are there any advantages to using a cash ISA as well? I’ve never had premium bonds, are they a good bet? Also what is the advantage of the Direct Saver account?  Sorry for all the questions. 

george4064

Daliah said:

2 years is way too short for investing. You need to stick with saving. As you have more than £85k and want to keep it for longer than the FSCS high balance period, you have two basic options

1 - put the entire sum into NS&I. You could put £50k into Premium Bonds and the rest into a Direct Saver. 

2 - for better interest rates, you can check moneyfacts.co.uk. You’d need to split your money into max £85k chunks to have FSCS cover

OP should be covered under the FSCS temporary high balance system: https://www.fscs.org.uk/making-a-claim/claims-process/temporary-high-balances/

FSCS protects temporary high balances in your bank account, building society account or credit union account of up to £1million for 6 months. The protection begins from the date the temporary high balance is credited to an individual depositor's account, or to a client's account on an individual's behalf. This date may be earlier than the date the temporary high balance was credited to your account with the failed firm. You don't need to tell us if you have a balance higher than £85,000.

Daliah

george4064 said:

Daliah said:

2 years is way too short for investing. You need to stick with saving. As you have more than £85k and want to keep it for longer than the FSCS high balance period, you have two basic options

1 - put the entire sum into NS&I. You could put £50k into Premium Bonds and the rest into a Direct Saver. 

2 - for better interest rates, you can check moneyfacts.co.uk. You’d need to split your money into max £85k chunks to have FSCS cover

OP should be covered under the FSCS temporary high balance system:.

Sure, for 6 months. Which is less than the OP wants

Daliah

Pipkin1812 said:

I guess I can use a mix of savings accounts (max£85K). Are there any advantages to using a cash ISA as well? I’ve never had premium bonds, are they a good bet? Also what is the advantage of the Direct Saver account?  Sorry for all the questions. 

A cash ISA will only take £20k a tax year. If you are a higher rate tax payer, it might be worth having one but ISA interest rates are generally lower than non-ISA rates so probably not worth it. Have a look at the rates on moneyfacts and do your numbers.

PBs: read the MSE Premium Bond article, then decide whether you think they are worth it for you.

Direct Saver: it takes up to £2m, secured by the Treasury. So you won‘t need to be concerned about FSCS cover. The downside is that the interest rate is rather uncompetitive, and not likely to become competitive any time soon

Pipkin1812

Thanks for the comments, most helpful. Am I likely to exceed the maximum amount of interest I can earn without paying tax on the interest if I were to put it into savings accounts? 

wmb194

Pipkin1812 said:

Thanks for the comments, most helpful. Am I likely to exceed the maximum amount of interest I can earn without paying tax on the interest if I were to put it into savings accounts? 

Yes, of course e.g., £400k @ 1% = £4k, £400k @ 2% = £8k. Premium Bond prizes are tax free, though.