Best options to get monthly income from £100,000?

chubsta

asking for a friend...

£100,000 available, non-tax-payer with about £6000 of annual allowance left.

Would like to out the £100,000 somewhere safe, not bothered about increasing the capital, but would like monthly interest paid out into current account. Capital won't need to be accessed for at least 5 years.

Having never had such a sum myself, I am in no position to offer advice so thought I would ask here. I have seen there are accounts currently offering around 4.25% that seem suitable which would give a decent income each month, I am guess the 100k would have to be split between 2 different banks in order to be covered by any guarantees?

As always, any and all advice is warmly welcomed!

Bigwheels1111

As of today you want Atom bank 4.45% app only and Gatehouse bank 4.45%.
The rate will be less as interest is not compounded, I think that’s the right term.
I have accounts with both of them and they are great.
https://moneyfacts.co.uk/savings-accounts/monthly-interest-accounts/?quick-links-first=false

Untick the box marked, show quick links first.

Bigwheels1111

The true rate would be 4.36%.
100k + 4.36% = £4360 / 12 = £366.33 a month ish.

Albermarle

Savings account comparison tool
Compare The Best UK Savings Accounts | moneyfacts.co.uk

Would like to out the £100,000 somewhere safe, not bothered about increasing the capital, but would like monthly interest paid out into current account. Capital won't need to be accessed for at least 5 years.

'Safe' is not such a simple concept in this scenario.
Yes in 5 years the £100K will still be there if it is in a savings account. However in term of buying power today, it will be worth a lot less than £100K due to inflation . Maybe £80K ( could be more or less depending on the actual inflation in those 5 years) 

Normally the way to beat inflation is to invest the money, but some points to consider:
1) It is not guaranteed that it will beat inflation
2) You may in fact lose money, ( but not all of it unless you invest in something crazy)

However for both points the chances of a positive result increase the longer the investment is held ( based on historical statistics) . Five years would be a minimum, ideally > 10 years.

So your friend may not be bothered about increasing capital, but may be bothered about the capital losing its value and should consider investing at least some of it, especially if that part can be left alone for longer.

refluxer

According to Savings Champion, Gatehouse, Atom and Vanquis are the best options for monthly income at the moment. They're paying 4.45 to 4.50%* on fixed rate accounts of between 2 and 4 years, depending on how long you want to fix for.

https://savingschampion.co.uk/best-buys/personal/monthly-income-accounts

* the quoted rates are AER so if monthly interest is paid away then the lower (gross) rate will be achieved - check provider's site for the monthly/gross rate.

eskbanker

Bigwheels1111 said:

https://moneyfacts.co.uk/savings-accounts/monthly-interest-accounts/?quick-links-first=false

Untick the box marked, show quick links first.

That's what the last part of your link does, so no need to do so manually after following it!

chubsta

Thanks very much for the replies, very helpful!

The reduction in 'value' of the lump sum due to inflation is a concern, however other factors have to be taken into account, one of which being a reluctance to actually spend any of the money, which has been growing over many years (the total sum involved is much more than £100,000); in our discussions about what to do with the money, I always get the reply 'its for the future, I may need it someday!'. When asked what it could possibly be used for, when the house, car etc are all paid for and insured, I always get a bit of a blank, followed by 'I would like to leave it to the kids' - said children stand to inherit about £250,000 each from property when we peg it so I think that is enough!

So, following on from further discussion, we (this is my other half we are talking about here and although linked financially we have always kept most of our money separate) have decided that at least in the short term a monthly income from it would be a good thing - as long as she doesn't have to actually spend any of the money saved she can live with that.

It is great having a financially-responsible partner, but sometimes you can be a little too cautious sometimes - I am taking early retirement in the next year or so so will have a guaranteed income for life so we know money won't be an issue.

Bravepants

refluxer said:

According to Savings Champion, Gatehouse, Atom and Vanquis are the best options for monthly income at the moment. They're paying 4.45 to 4.50% on fixed rate accounts of between 2 and 4 years, depending on how long you want to fix for.

https://savingschampion.co.uk/best-buys/personal/monthly-income-accounts

Is the monthly interst paid into the saver's bank account or does it simply accrue in the bond account?

I can't find anything on the websites.

refluxer

Bravepants said:

refluxer said:

According to Savings Champion, Gatehouse, Atom and Vanquis are the best options for monthly income at the moment. They're paying 4.45 to 4.50% on fixed rate accounts of between 2 and 4 years, depending on how long you want to fix for.

https://savingschampion.co.uk/best-buys/personal/monthly-income-accounts

Is the monthly interst paid into the saver's bank account or does it simply accrue in the bond account?

I can't find anything on the websites.

As the heading for that section is 'monthly income', then I'm presuming each of those accounts has the option to have the interest paid away, although you'd obviously have to check the account T&Cs to be sure.

It's just occurred to me though, that the rates quoted in that section on the Savings Champion site are AER so would actually require the interest to be paid into the account in order to achieve that rate. If the interest is paid away, then only the gross rate will be achieved, so using AER in that section is a little misleading IMO.

Eg. paying monthly interest away with the Atom 2 year Fixed Saver would result in the gross rate of 4.36% and not the 4.45% AER stated. 

Band7

Bravepants said:

refluxer said:

According to Savings Champion, Gatehouse, Atom and Vanquis are the best options for monthly income at the moment. They're paying 4.45 to 4.50% on fixed rate accounts of between 2 and 4 years, depending on how long you want to fix for.

https://savingschampion.co.uk/best-buys/personal/monthly-income-accounts

Is the monthly interst paid into the saver's bank account or does it simply accrue in the bond account?

I can't find anything on the websites.

They normally offer both. If you go to https://moneyfacts.co.uk/savings-accounts/monthly-interest-fixed-rate-bonds/?quick-links-first=false, you can see which one does (I think it's probably all of the current top ones). It will be in the T&Cs of the individual accounts, too, and you will be asked during application which option you prefer.

Albermarle

but sometimes you can be a little too cautious sometimes -

Taking no risks is actually quite risky !