in between houses - what to do with the money?

JimJamMum

Hi all,

My husband and I have separated and have sold our family home. I have about £225k sitting in my bank. I'm back in with my folks (with my children) until I work out which secondary school I would like my daughter to go to (and which one she gets in to) and will then buy a house more in that direction. I think we find out which school in Feb or March so I will not be looking until then. My folks think I will end up being here for a couple of years at least...but I hope they are wrong!

So what would you do with this money during this time? It will be more than 6 months so wont be covered as house sale funds. It will have to be split I think to get the £85k protection from the FSCA (is that right?) It may be less than a year so is an ISA a good plan? I feel like I'm drowning in options and so would love some guidance please.

eskbanker

You can only pay up to £20K into ISAs in any tax year so that's a relatively peripheral issue - your best bet will probably be to pick three of the top-ranked easy access accounts:

https://www.moneysavingexpert.com/savings/savings-accounts-best-interest/

mika_dm

Income Bonds

3.59% gross/3.65%
AER, variable

From NS&I are covered by UK Government up to 1 million pounds. Safe enough I would say.
Interest rate is not great (compared with other banks) but is safe.

Bigwheels1111

First things first, your income makes a big difference.
Above or below £17,570. Below means you should not pay much tax.
Above is 20% unless your a higher rate tax payer.
Second, 85k FSCS protection is correct.
But what about your interest over 85k. That’s not covered.
So 75k in 3 easy access accounts.

Personally for true easy access I would go with 
Tandem 5% no withdraw limit.
Gatehouse bank 5% takes 3 days to get your money ie 25k limit per working day.
Shawbrook 5.2% can’t remember limit if any.
Some have better rates but don’t personally have accounts with them.
6 months could give you £5,600 ish in interest.

r6mile

You will have to split it, and as it may be less than a year I wouldn’t put it in a fix most of which are at least a year.

My suggestion would be to put into accounts that allow limited or notice access (assuming you don’t need unlimited withdrawals) as you will get a better rate.

For example:

- 20k in the new Coventry Four Access ISA @ 4.9%
- 85k in the Leeds BS limited access @ 5.1%
- 85k Paragon Double Access @5.05%
- 35k Monument Bank @5.03%

Lots of different options. You could also consider fixed that are 6-9 months long and get up to 5.7% ish, if you were happy to forego any access during that time.

tetrarch

Premium Bonds are tax-free 4.65% (nominal) for at least part of it as an alternative

Regards

Tet

Albermarle

OP - You may be unfamiliar with some of the banks mentioned, but these smaller banks normally pay better interest than bigger banks.
Every savings provider mentioned in these links are covered by the £85K Compensation.
Best savings accounts: 5.1% easy access or 6.2% fixed rates (moneysavingexpert.com)
Compare The Best UK Savings Accounts (moneyfactscompare.co.uk)

Another thing to note is that if you try to send £80K all in one go your banks fraud dept might block it for a while. Plus some have a limit less than that per daily withdrawal.

kjs31

I am in a similar position being ‘between houses’ currently and don’t want to tie up any cash in a fixed term product as I will be buying another house fairly soon. I am doing the ‘chase the best rate’ currently but you really need to consider your tax position. If you are a standard rate tax payer you can earn £1000 in interest in each tax year before you need to pay tax on the interest. If you are a higher rate tax payer it’s £500. You will need to add your interest payments to your taxable income to see if that makes a difference to your tax band too as that could affect your entitlement to child benefit for example. 

At 5% interest (you should be able to do a bit better than that - around 5.1 -5,2% currently for instant access) you will earn £937.50 in interest each month. That’s going to take you over the personal savings allowance so you will need to pay some tax. 

With £225k I would

a. open a cash ISA and fund up to the limit of 20k per annum. Best rate currently is Coventry Building Society @ 4.9% but you are limited to 4 penalty free withdrawals a year. I would leave the money in there and touch it last personally as the interest is free of tax. 

205k remaining 

b. Open a 6 month fix account (or 2) if you definitely won’t need the money for 6 months. Monument bank is top currently @ 5.56% but the interest will all be paid at maturity and you are very close to it landing in the current tax year or the next so get a crack on if you want to land it in the current year. Hampshire Trust is second best currently (rates change daily so check for best rates on the day). 

2 x 85k 6 month fixes = £170k so 35k remaining. 

c. put the remaining 35k in the best instant access account. Coventry Building Society allows 3 penalty free withdrawals and has a rate of 5.2% currently. 

Do check the rates periodically and move the money if your account becomes uncompetitive (you can’t do that with a fixed rate product until maturity however). I have moved my money quite a bit so far. When I started 4% was a good rate but now unless it’s over 5% it’s uncompetitive unless it’s an easy access ISA. 

jaceyboy

if you dont want multple accounts I would bung it all in NS&I Direct Saver at 3.65% and rake in £684 per month until you decide, all money will be protected