Any Product That Would Pay Say 3% for Bals £500,000+

cwep2

You basically want a ladder of gilts with various maturities, since the coupons/interest payments are often lower than the yield to maturity. You can buy these via places like hl.co.uk or iWeb, but have to do so oh the phone rather than online.

There are 2-4 Gilt maturities per year and they pay interest (coupons) every 6 months. Most of these coupons are low, reflecting lower rates over the last decade, like 0.5-1%, so as a result, the "yield" on these gilts is >3% but that means you buy it for say 95, you get a few coupons at say 0.75% of 100, and when it matures you get 100 back, so 'most' of that >3% yield is capital gain only realised at maturity and a smaller part of the yield is the regular coupons. There are some higher yielding ones, eg 2028 treasury stock yielding 6% but these cost more than 100 to buy since the regular interest received is worth more than the neutral yield. 

Worth knowing that capital gains on gilts are tax free, but coupons (interest payments) are taxable, so actually it's more tax efficient to buy a gilt with a lower coupon.

To create a ladder of gilts buy say 1-2 issues per year for the next decade and maybe 1-2 per two years for longer dates. The first year without any gilt maturities is 2043. There are gilts going on for the next 50 years. Since they only pay coupons every 6 months, between these you would need to keep this in instant access savings accounts until the next payment.

Gilts offer lower rates than current 1 2 3 4 5yr fixed rate accounts, but still above 3% for everything between 2-30years. Basically most gilts have a yield of 3.something at the moment, but a month ago it was above 4%.... Gilts are paid by the govt so you don't need to worry about FSCS - ultimately the FSCS guarantee is paid out by the govt so if the govt fails to pay gilts then any FSCS guarantee is probably worthless as well!

cwep2

Note I am talking only about fixed rate gilts, there are also index linked gilts which pay a rate relative to inflation - colloquially known as 'linkers' but these have uncertain payouts in the future and are much more complex to explain.

The fixed maturity/coupon gilts are similar to fixed rate accounts, with most of the interest only being paid when it matures.

jimjames

cwep2 said:

You basically want a ladder of gilts with various maturities, 

Although the OP has asked for a savings account for 3% they haven't actually said what they are trying to achieve with it. There may be many options other than a savings account that would be more appropriate but without context it's impossible to know. For values in the millions it would at least be worth an exploratory meeting with an IFA to consider options.

km1500

The OP did not ask for a savings account, they asked for a product.

Millyonare

Getting just 3% on £500k is a very low return. Seems almost pointless.

GeoffTF

What is your tax position? A gilt with a very low coupon that is either well under par or index linked would generate most of the return as a tax free capital gain.

snae

If you don't care about tax you could split the grand sum into £85 thou' bundles to drop into fixed-rate bond accounts.

Maybe do an £85k into a 5 year fixed bond account each year, splitting the rest up into one, two or three year accounts until you make it to the fith year and then start all over again.

This way you not only take advantage of the savings allowance (if your salary is minute enough) but your money is always "somewhere". £85k is the max protected amount per institution, keep this in mind!

All interest earned can be put into a separate "holding account" to be reinvested a little while after they come through

If just using the 5 bundles of 85 over ten years at 5% each, you'll have well over 100k in interest.

If you do care about tax, a stocks and shares ISA might be worth trying, sticking on 20 a year. All income from say dividends is tax free.