What to do with £200,000 which is just sitting in a bank

SChitmehard

My friend has around £400k in various savings accounts in banks earning next to no interest. Inflation is devaluing it so she wants to do something with it.

She needs approx £150k to £200k for a house in the next year or so (I told her to buy one 10 years ago but she didn't listen!), but the rest £200k is spare so to speak.

So how should she invest the £200k and generate max benefit from this. Previously she has invested 25k in fixed term bonds for 1 year etc but now it looks like she can't earn more than 1k in interest so what to do with the rest of the money?? She is not working by the way and not on any benefits if that affects things.

Thanks!

masonic

Why would she be prevented from earning more than £1k in interest? For a sum of this size, it would be sensible for her to get some advice from an Independent Financial Adviser. Nobody here can advise her what to invest in, and it would require a detailed look into her personal circumstances.

sebtomato

Generating max benefits from any spare money probably means investing in the stock market. Not many other investments have returned more in the long term. I wouldn't invest in property now in the UK, considering that we are probably at the top of the market, and lots of headwind coming.

However, stock market means higher risk so long investment period and diversifications are key.

If she is willing to invest money for 5 or 10 years, some index tracker funds or ETFs would be the option. Maybe something like Vanguard LifeStrategy 80, which is well diversified.

penners324

Pensions, S&S ISAs, Chase Savings account.

All would be far better use for that money.

Or does she not want to retire comfortably?

Albermarle

As said, nobody can give any sensible guidance ( beyond that keeping it all in cash is not a good idea) without knowing many more details of the person in question. Unless she has an appetite for learning about investments, pensions etc then a meeting with an IFA is probably the best way forward for a sum of this size.

Audaxer

SChitmehard said:

My friend has around £400k in various savings accounts in banks earning next to no interest. Inflation is devaluing it so she wants to do something with it.

She needs approx £150k to £200k for a house in the next year or so (I told her to buy one 10 years ago but she didn't listen!), but the rest £200k is spare so to speak.

So how should she invest the £200k and generate max benefit from this. Previously she has invested 25k in fixed term bonds for 1 year etc but now it looks like she can't earn more than 1k in interest so what to do with the rest of the money?? She is not working by the way and not on any benefits if that affects things.

Thanks!

If she is not working and not on benefits, does she need the £200k to generate an income, or does she have other sources of household income? If she needs to generate an income, an invested portfolio of £200k could possibly generate a 4% income (£8k per year rising with inflation) for someone of retirement age. If she is younger, then a lower percentage would normally be recommended to ensure she doesn't run out of money. If she is wary about investing herself, it would be best to look for a good Independent Financial Advisor.

If she has other sources of household income and doesn't want to or need to invest it, she could current get instant access cash savings rates of up to 1.5%, or fixed term rates of about 2.5% or slightly more. However even with these rates she will be losing the value to inflation. 

jimjames

Probably something she needs to do herself. If she's not interested in sorting it then not much you can do. As above best option is to speak to an IFA but they won't be advising on bank accounts.