Where to put £900,000!!

sunflower_lass

We’re selling our house this year and will be going into rented accommodation while we relocate from south to north. 

Which means that for a few months we’ll have £900k to find a safe home for, ideally earning lots of interest to help pay the rent! 

Might anyone be able to suggest places we can safely put the money, and earn interest? My husband and I can split it between us. 

I guess we have to find 10 different places, in order to be covered by the Government’s £85,000 guaranteed safe savings amount? 

Handling a huge amount of money like this is totally foreign to us, so any advice gratefully received, thank you 

InvesterJones

There is FSCS protection for temporary large sums of money, for example for house deposits. But if concerned about that process then splitting it, or storing it with NS&I is considered as safe as possible. For earning maximum interest however (with the associated tax reporting that entails) see something like https://moneyfactscompare.co.uk/savings-accounts/ for a list of the top rates available.

subjecttocontract

I thought there was a 6 month unlimited protection for events such as proceeds from a house sale......Easy to check online.

One consideration if you want to keep things tidy with minimal effort and admin would be NS&I....unlimited protection for your £900K, underwritten by the Gov'......but comes at a cost.....only 3.5%.

BreakingGlass

sunflower_lass said:

Which means that for a few months we’ll have £900k to find a safe home for, ideally earning lots of interest to help pay the rent! 

We also did this 'for a few months' about three years ago - and are still renting and looking for a house to purchase!!

We went for the 'lots of accounts' option - 47 at last count (several just have £1 in since the rate dropped).  You haven't said what your purchase timescale is but consider making use of '90-day notice' accounts for a better rate - my theory is that once we eventually find somewhere to buy we can give 90-day's notice safe in the knowledge that it will take at least 90-days to get to completion of purchase.  Also make use of ISAs for the tax advantages.

I have plenty of time to search for the best rates, but if you don't (or can't be bothered) then you may wish to consider something like Flagstone, or Hargreaves Lansdown's Active Savings, which have the advantage of offering several savings accounts with one simple login - rates are a little lower, however.

eskbanker

sunflower_lass said:

I guess we have to find 10 different places, in order to be covered by the Government’s £85,000 guaranteed safe savings amount? 

subjecttocontract said:

I thought there was a 6 month unlimited protection for events such as proceeds from a house sale......Easy to check online.

The temporary high balances protection is for up to £1m and is provided by FSCS, which is funded by the industry rather than the government:

https://www.fscs.org.uk/making-a-claim/claims-process/temporary-high-balances/

soulsaver

As others have said temporary high balance protection, but should you wish to shop for the best rates  - joint accounts are covered to £170k - so can be 'only' 6 to find - not 10/11. 

Click on the link in my signature box to see the top ten easy access accounts at moment...

cwep2

If you want one place that’s a relatively well known household name, given that you are protected for 6months up to £1mio, Virgin do a private client savings account which pays the BoE bank rate for £500k+ (currently 4.75%). This is paid quarterly and is the gross rate so the equivalent AER is about 4.84%.

There is a £15/month fee but even after this on 500k your AER is only down to about 4.82%. 

Now Virgin were a big clearing bank themselves and were recently bought by/merged with Nationwide. This makes them the 5th biggest bank by assets in the UK after the ‘big 4’, bigger than Santander etc. 

You can of course beat this with various accounts with the likes of Chip and Atom, but I put this here as an alternative that doesn’t get much mention elsewhere. Note that below 500k it pays the bank rate -0.25% and with the £15/month fee it doesn’t make it that competitive for those that want to keep below the 85k FSCS amount (I calculate at 85k it’s equivalent to 4.37% AER after fees), and above £1mio it pays the bank rate +0.25% gross. 

Final caveat, the BoE may cut rates (even this week) and of course the Virgin rate will go down accordingly but a lot of other places will cut rates too in that scenario, in fact many top accounts now have specifically made it that rates track the BoE changes (eg Chip, Chase). 

sunflower_lass

Thank you all, this was immensely helpful, you stars! 

Exodi

My bank account 

Failing that, if you're not planning on plowing the whole £900k back into a house (and if you're buying up north, I suspect that's unlikely unless you plan to live in a mansion with a helipad), I would run through the typical hierarchy, e.g.

Do you have an emergency fund? Most recommend keeping 3-6 months of monthly expenses relatively easily accessible.

Next, what is your pension situation? Oftentimes the tax relief available on pension contributions give this by far a better return than any other type of savings/investment. Particularly attractive if you're a higher rate or additional tax payer.

Next, do you have any high interest debt (high interest defined as higher than could be generally achieved from saving/investing the money, e.g. 5%+, obviously you don't have a mortgage).

Next, have you maximised your annual ISA allowances? Depending on risk tolerance this could be in a £20k per person in a S&S ISA or Cash ISA (though watch this space).

Next you could put £50k per person in premium bonds (tax free, though I personally dislike premium bonds and would not recommend it... though I appreciate they scratch an itch for a lot of people).

Then it's coming up with a long term plan for the rest of the money (whether that's continuing to contribute to pensions, max out ISA allowances, etc) and saving it in accounts, considering the tax implications as you will certainly be paying tax on the interest.

(of course people may dispute the order of these, or include other things (like paying for their kids university), but you get the idea).

SacredStephan

subjecttocontract said:

One consideration if you want to keep things tidy with minimal effort and admin would be NS&I....unlimited protection for your £900K, underwritten by the Gov'......but comes at a cost.....only 3.5%.

The rate drops to 3.3% next week.

aroominyork

You need to take tax into account, especially if a higher rate taxpayer or - and don't miss this - the interest takes you into a higher rate tax band. One option is a low coupon gilt. For example, TG25 matures in June and yields about 3.7%. Its coupon is 0.625% so a basic/higher rate taxpayer would get about 3.575%/3.45% after tax. A higher rate taxpayer would need a savings account grossing 5.75% to match that; a basic rate taxpayer about 4.47%.