Cash Ladder which bank

refluxer

20122013 said:

My 5 year cash ladder will start on 6 April each year

Do you need to wait until 6th April to get started ? With interest rates gradually decreasing*, it might make more sense to start now if you're able, especially if you're looking at fixed rate accounts. When it comes to setting up a 'savings ladder', there's no real benefit to waiting until the start of the new tax year that I can think of and if you needed to specifically push any annual or maturity interest payments into the 2027-28 tax year (for example), then you could simply take out a 2 year fixed rate now rather than a 1 year fixed rate on 6th April next year.

Personally, I prefer to take out fixed rate accounts at regular intervals throughout the year, when funds are available. That way, once they start maturing, you don't have to wait a year for the next set of funds to become available (as you would have to with your intended plans) which could prove useful, should your financial situation suddenly change.

* Obviously there's no guarantee what will happen to interest rates in the meantime of course - that's all part of the gamble.

20122013 said:

These are the accounts I have shortlisted, may I asked whether I have missed anything, I have chosen these as I have heard / have used them before:

The rates for a number of the accounts you mentioned are pretty poor - if you're going to go to the trouble of setting up a savings ladder, it would make sense to try and get the best return for your money that you can. While there are a number of banks near the top of the fixed rate 'best buy' tables that I also wouldn't consider using, you can (for example) get between 4.25% and 4.41% in a 2 year bond with established names like Ford Money, Oxbury, Secure Trust and DF Capital (compared with the 4% you mentioned from NatWest or Cambridge BS). 

Looking beyond the high-street names will pay dividends (so to speak) in the long run. Of the banks I mentioned above, I've used Ford and Oxbury many times, both of which have been 'sound' and reliable for me - not a single issue.

I guess one question would be that if you're not looking at starting this until April next year though, why are you looking at specific accounts/rates now ?

ab56

I note OP does not mention use of ISAs - annual 'allowance' currently of £20000 where interest earned is not currently taxable. 

masonic

Ocelot said:

masonic said:

Yes, for multi-year fixes, choose an account that has interest paid to an external account if you want to make use of your Personal Savings Allowance across each year of the fix. Or choose an account that permits access during the term. Interest is only considered taxable by HMRC once it reaches an account upon which you are able to make withdrawals.

If only that were true in practice. I get taxed every year for multi-year fixed rate accounts, despite letters telling them so.

Yes, this is a problem for those not completing a tax return. But NS&I is an institution that reports to HMRC contrary to BBSI return rules but consistent with tax legislation. It is just a shame that other financial institutions cannot do that.

20122013

refluxer said:

20122013 said:

My 5 year cash ladder will start on 6 April each year

Do you need to wait until 6th April to get started ? With interest rates gradually decreasing*, it might make more sense to start now if you're able, especially if you're looking at fixed rate accounts. When it comes to setting up a 'savings ladder', there's no real benefit to waiting until the start of the new tax year that I can think of and if you needed to specifically push any annual or maturity interest payments into the 2027-28 tax year (for example), then you could simply take out a 2 year fixed rate now rather than a 1 year fixed rate on 6th April next year.

Personally, I prefer to take out fixed rate accounts at regular intervals throughout the year, when funds are available. That way, once they start maturing, you don't have to wait a year for the next set of funds to become available (as you would have to with your intended plans) which could prove useful, should your financial situation suddenly change.

* Obviously there's no guarantee what will happen to interest rates in the meantime of course - that's all part of the gamble.

20122013 said:

These are the accounts I have shortlisted, may I asked whether I have missed anything, I have chosen these as I have heard / have used them before:

The rates for a number of the accounts you mentioned are pretty poor - if you're going to go to the trouble of setting up a savings ladder, it would make sense to try and get the best return for your money that you can. While there are a number of banks near the top of the fixed rate 'best buy' tables that I also wouldn't consider using, you can (for example) get between 4.25% and 4.41% in a 2 year bond with established names like Ford Money, Oxbury, Secure Trust and DF Capital (compared with the 4% you mentioned from NatWest or Cambridge BS). 

Looking beyond the high-street names will pay dividends (so to speak) in the long run. Of the banks I mentioned above, I've used Ford and Oxbury many times, both of which have been 'sound' and reliable for me - not a single issue.

I guess one question would be that if you're not looking at starting this until April next year though, why are you looking at specific accounts/rates now ?

I have used up all my ISA Allowance for this year. (so now thinking other options of minimising tax) 

Great question about why I am looking at the accounts now, if I am not looking to start on 6 April.  I am hoping to get the 'better rate' now before they start to decrease and was planning to align it with the tax year, so it maybe  easier to work out the numbers. My money for the cash ladder are in EA / RS  and earning over the highest current fixed rates, but I think it may serve me better if I move them to fixed rates accounts shortly.  

Good point - about opening accounts at different time of year..  

I would need to check again which bank / institution TCs and not to get caught out with the small prints. 

A lot to think about, also thinking whether to stop the RS accounts once they mature and add them to fixed accounts, as rates will start to decrease. 

refluxer

20122013 said:
I am hoping to get the 'better rate' now before they start to decrease and was planning to align it with the tax year, so it maybe  easier to work out the numbers. My money for the cash ladder are in EA / RS  and earning over the highest current fixed rates, but I think it may serve me better if I move them to fixed rates accounts shortly.  

Fixed rate savings accounts/bonds typically have funding windows of between 1 and 4 weeks (with 2 weeks being the most common) so the earliest you'd be able to open them in order to fund them on 6th April 2026 would be sometime in March next year. You can't open one now and leave it unfunded until then, as it would be closed once the funding window ends.

While your EA cash might be earning more than it would be in a fixed rate account taken out now, I guess you need to think about how many more 0.25% drops it would take for that not to be the case. By the time that drop happens, the fixed rates may have dropped too in anticipation.

It's a tricky thing to get right for sure, which is why I'm in favour of spreading the risk by trying to get the balance right between easy access and a staggered ladder of fixed rate accounts (just as you're proposing) while also keeping an eye on base rate predictions to get a sense of whether rates are likely to head up or down and over what time-frame.

If you're wanting fixed rate accounts to mature in specific tax years and you have some funds available before next April then, as I mentioned, you just choose the appropriate term to ensure that happens. It's not an easy decision taking out a fixed rate account when it's lower than the easy access account the money is currently in though, I realise ! You're effectively banking on rates falling as predicted.

20122013

refluxer said:

20122013 said:
I am hoping to get the 'better rate' now before they start to decrease and was planning to align it with the tax year, so it maybe  easier to work out the numbers. My money for the cash ladder are in EA / RS  and earning over the highest current fixed rates, but I think it may serve me better if I move them to fixed rates accounts shortly.  

Fixed rate savings accounts/bonds typically have funding windows of between 1 and 4 weeks (with 2 weeks being the most common) so the earliest you'd be able to open them in order to fund them on 6th April 2026 would be sometime in March next year. You can't open one now and leave it unfunded until then, as it would be closed once the funding window ends.

While your EA cash might be earning more than it would be in a fixed rate account taken out now, I guess you need to think about how many more 0.25% drops it would take for that not to be the case. By the time that drop happens, the fixed rates may have dropped too in anticipation.

It's a tricky thing to get right for sure, which is why I'm in favour of spreading the risk by trying to get the balance right between easy access and a staggered ladder of fixed rate accounts (just as you're proposing) while also keeping an eye on base rate predictions to get a sense of whether rates are likely to head up or down and over what time-frame.

If you're wanting fixed rate accounts to mature in specific tax years and you have some funds available before next April then, as I mentioned, you just choose the appropriate term to ensure that happens. It's not an easy decision taking out a fixed rate account when it's lower than the easy access account the money is currently in though, I realise ! You're effectively banking on rates falling as predicted.

My plan will be to make sure I have funds when needed, and then the best rate possible..  a lot of bank accounts to think about but the plus side (as you have said more flexibility / access to my funds). 

I think I will have less RS accounts once they matures..  and focus on more tax efficient products.