is it worth locking cash away?

eastmidsaver

good morning, and happy to new year.
i had some money in a fix term account, which came to an end on friday.
i am now deciding whether it is worth locking away for another a year or not.  this is because the fix term rates are not too much different to the best easy access rates.
is it therefore worth locking it away and then losing the flexibility?
thanks in advance.

powerspowers

If interest rates fall this year as expected the difference between fixing now and instant access will get wider. I go for a mix of both 

Aminatidi

I think it depends on the amount personally.

If the difference between locking money away or having it instantly accessible is only £10 I think it makes it a different decision making process than if the difference is £1000 or £10000.

VNX

Also depends on yourself, will you likely need access to the money? 

If not, lock it away even if the rates are similar to easy access. It’s highly expected easy access rates will decrease 

personally I’d fix, but that’s just my opinion.

jimexbox

It's also useful if moving interest payments to the following financial year would benefit you. 

VNX

jimexbox said:

It's also useful if moving interest payments to the following financial year would benefit you. 

How well does this work in practise? I’ve read so many threads about how interest on bonds get reported annually or HMRC and trying to spread interest payments across different years often doesn’t seem to work how HMRC say it should 

eastmidsaver

thanks for all your input.  the amount i am considering is between £5k to £10k.  unsure yet of the exact amount.  i just need to work out exactly how much i might need access too.  also whether it is worth doing an overpayment on my mortgage.

Qyburn

jimexbox said:

It's also useful if moving interest payments to the following financial year would benefit you. 

Most accounts paying interest annually will do this, whether fixed or instant access. I say "most" because I have one Virgin account opened in November 2022 which paid interest in Dec 2022, and December 2023.

masonic

VNX said:

jimexbox said:

It's also useful if moving interest payments to the following financial year would benefit you. 

How well does this work in practise? I’ve read so many threads about how interest on bonds get reported annually or HMRC and trying to spread interest payments across different years often doesn’t seem to work how HMRC say it should 

If you pick an account that only credits interest at maturity, then it will all be reported to HMRC for the tax year of maturity. If you pick an account that credits interest more frequently, but that interest is inaccessible, you'd probably need to submit a tax return to get the proper treatment (which you can do voluntarily). Otherwise HMRC will assume it was accessible in the tax year it was credited.

https://moneyfactscompare.co.uk helpfully shows Interest Paid: On Maturity for those accounts.

Aminatidi

eastmidsaver said:

thanks for all your input.  the amount i am considering is between £5k to £10k.  unsure yet of the exact amount.  i just need to work out exactly how much i might need access too.  also whether it is worth doing an overpayment on my mortgage.

So from a quick look at some rate comparison sites right now it looks like locking it away for a year might get you another £20 a year v an easy access account.

Personally I wouldn't think it's worth not having access to my money for "just" an extra £20/year v having it all easily accessible especially given the bolded part of your post.

Of course that's just my opinion and I'm sure there will be people here who will take the view that every single penny of interest not earned is money missed out on etc. 

Likewise easy access rates may drop a little.

eastmidsaver

hi thanks.   yes i was thinking the same thing,    i guess the main risk is if interest rates fall,  as they say variable easy access accounts are likely to drop soon,   but who really knows.
what i have done today,  after reading comments in this thread,   is locked money i am pretty sure i won't need away for 1 year.     the rest of my money is staying in an easy access account.
i have another fixed term due to end in a few months,  around the same time as my mortgage expires,   so i might use that to make an overpayment.
once again, thanks to everyone for their input.