When to start a fixed savings account and what is the best period to fix for

MStancliffe

I’ve currently got £100k in a Chase easy access savings with 1.5%. I’m now ready to move a chunk into a fixed savings account whilst keeping some for “just in case” cash. But with Bank of England rates going up every month and new savings accounts offers coming even more regularly I was looking for advice as to when to best jump and for how long?

1kevfp

I'm in a similar position, I have 40k in Premium Bonds ( and live in hope) but my returns have flatlined  to about 1% and I have 26k in Atom Bank instant saver 1.5% - I'm thinking of shifting some of that dosh to Atom's 1 year fixed rate now at 3.2% but wonder should I wait until the Bank of England next meeting in September to see what happens then and hope September P Bonds cough up a bit more?
I'm a basic rate tax pensioner, no Isa's held ( crap anyway) and won't acheive the 1k tax free interest threshold  - thoughts anyone?
Ta
Kev

Bigwheels1111

For a start the max in one account should be 85K in total for FSCS protection

How long before you plan to spent the money, For a house or car, holiday etc.

Im not fixing until Jan or Feb, as the BOE sit 3 more times this year and should raise rates 3 times.

I am taking a risk buy using easy access accounts at 1.90%, 1.84% and 31 day pot with Zopa at 1.95%.

I will take the loss now for future gains.

I want 3 or 4 , 5 year fixed rates at 4% or more paying anually.

To give me a nice income every year.

refluxer

MStancliffe said:

I’ve currently got £100k in a Chase easy access savings with 1.5%. I’m now ready to move a chunk into a fixed savings account whilst keeping some for “just in case” cash. But with Bank of England rates going up every month and new savings accounts offers coming even more regularly I was looking for advice as to when to best jump and for how long?

One option to consider is a notice account which would allow you to (essentially) fix for a shorter period (typically 1, 3 and 6 months). If you split the money into chunks and take out notice accounts with different durations, you could then stagger it such that you could fix at the best rate at the time each notice period ends. This approach is probably better than fixing the whole amount now (in the current climate of increasing interest rates), but would need to be re-assessed when rates top out and definitely before they start to fall.

So, for example, you could put £20k of accessible cash into the best easy access account @ 1.8-1.9%, £20k into a 1 year fix @ 3.2% now and then put £20k chunks into notice accounts with different notice periods, giving your notice immediately so as to turn them into 1, 3 or 6 month fixed rates. Zopa make this easy with their 'pot' system - some of their notice rates aren't the best, however they do seem to increase the rates on existing accounts every now and again which is a good thing. 1 or 3 month notice periods offer the best compromise IMO - 6 month notice account rates don't offer enough of a premium for me. (Zopa do 7, 31 and 95 day 'boosted pots')

In terms of easy access accounts, note that Paragon have recently put the rate up on previous issues of their Triple Access account to 2% and this increase could well be passed on to the current issue in coming weeks, meaning that 2% easy access accounts may not be too far away. If you didn't want the hassle of multiple notice accounts as mentioned above, then you can certainly do a lot better than Chase's 1.5% in another easy access account and take it from there. I've gone with Zopa because they offer a decent easy access rate and intend to make use of their 'boosted pot' system for some of the money, which simplifies the above approach quite a bit.

MStancliffe

Bigwheels1111 said:

For a start the max in one account should be 85K in total for FSCS protection

How long before you plan to spent the money, For a house or car, holiday etc.

Im not fixing until Jan or Feb, as the BOE sit 3 more times this year and should raise rates 3 times.

I am taking a risk buy using easy access accounts at 1.90%, 1.84% and 31 day pot with Zopa at 1.95%.

I will take the loss now for future gains.

I want 3 or 4 , 5 year fixed rates at 4% or more paying anually.

To give me a nice income every year.

Chase was a quick fix from a FD savings account at .1%. I’ve recently retired at 55 and whilst my private pension is sorted I used some of my lump sum, along with proceeds from a property sale, for a motor home and home improvements but I also wanted some cash for projects, rainy days and emergency funds with a guess at £100k which is probably too much but better than not enough. I’ve never really saved before. Just paid off the mortgages early with disposable income. I’ve got to re-tile the roof and putting solar panels on at the same time seems a good idea at the moment. 

I must admit I don’t want to be moving money around every month or 2 as just setting up the Chase account made me nervous and had to check moving my money back worked ok. I also don’t want lots of accounts as I’m convinced I’ll lose some of it or forget how to get it back. 

So I kind of just wanted it be a safe and easy to manage and earn a good rate. I’d be happy to stick £50k in a longer term fixed account and the rest in easy access ideally, with the same provider, but for safety I guess this is not a good idea. But I would be kicking myself if in 6 months if I could have fixed with an extra 1% or 2 if I’d just been patient.

Albermarle

But I would be kicking myself if in 6 months if I could have fixed with an extra 1% or 2 if I’d just been patient.

Although to put things in perspective in 6 months time, inflation could be 15%, so whether you get 3 % or 4 %  interest will not will not stop the value of your savings being badly affected, so probably not worth agonising about it too much.

Also when you look at rates fixed for 3 years etc they already include an element of prediction for future rates, so even if the B of E rate goes up this will not necessarily be reflected in these longer term fixes, unless the Bof E hike rates more than already expected.

Oasis1

I'd move 85K into Zopa for the time being. Easy to manage via the app, and you'll get confident boosting it too for extra interest (e.g. 1.95% at 31 days notice). They seem to be quick at increasing the interest on their easy access saver too, so you shouldn't have to worry about switching to other banks to keep up.

Then when you feel BoE aren't going to increase the interest rate anymore, go for the best fixed term account on the market.

Shedman

1kevfp said:

...
I'm a basic rate tax pensioner, no Isa's held ( crap anyway) and won't acheive the 1k tax free interest threshold  - thoughts anyone?
Ta
Kev

Move more than £30k of that money to the fixed rate and you would be close to hitting the £1k threshold next tax year if you took an annual interest option so it might be better to select monthly interest (if available).  

You would then likely keep below the threshold this year as say £26k @ 1.5% for April to Aug (5 months) , then £30k @ 3.2% Sep to Mar (7 months) would total about £725 interest this tax year.  And the remaining 5 months of the fixed rate next tax year would be £400 so if you then, say, rolled into another 12 month fix @3.5% but with monthly interest there would around £610 interest from that so in total just over £1k so you'd only have a few quid tax to pay (assuming Liz doesn't give us a boost to the personal savings allowance as part of her flip flop let's make it up on the fly fiscal policies...)