Best long term savings options for £2,000?

Old_Timer

Hi, first post on here so go easy on me folks.....

My kids have been left £2,000 by a recently deceased relative and I'm looking for the most productive place to save it (it needs to be save rather than invest as if I lose any of it the wife will kill me). Our initial thinking is to simply deposit the funds somewhere until such time the kids can use it, which if I had to guess, will be at least 5 years, probably more. I guess if someone else pops off and leaves the kids a legacy we would add to the fund. So, I'm not looking for instant access, or any frills, just the best possible place to deposit the funds for the best return.

Any ideas anyone?

martinman3

Yorkshire Building Society has the Treasure Bond which is fixed for 12 months after you open it at which point you can decide whether to re-invest for another 12 months or not. The rate for Bonds opened in this month is 6.00% AER, it may or may not change after 31st May. It can be opened in trust for a child or in child's name if 8 or over.
http://www.ybs.co.uk/savings/future/treasure/index.jsp

Leeds Building Society is unusual in that many of its accounts can be held in trust for a child and, if R85 submitted, allowing the interest to be paid gross.
They have 1 year and 2 year bonds which pay 6.00%/6.05% AER.
They also have the Inflation Buster Bond which is linked to RPI and gives a better return for non-taxpayers than the NS&I Index Linked certificates but the current issue closes on 31st May.
http://www.leedsbuildingsociety.co.uk/savings/rates_notice.html

Derbyshire Building Society also seem to allow most of their accounts to be held in trust for a child but this would need to be checked out to confirm this.
They have a 1 year bond at 6.30% AER
http://www.thederbyshire.co.uk/savings/fixed_rate_bonds/1_year_fixed_rate_bond.aspx?ekmensel=2152299f_24_0_182_4

There must be others too.

My personal opinion is that fixed rate bonds with a term of more than 1 year are probably not a good idea at this time. I feel that 12 months from now rates are more likely to be higher than lower, others may disagree, but you must make that decision for yourself.

No matter which account you decide to open, don't forget the R85 form !

chesky369

Check out whether Halifax still do their 10% childrens' saver - that was one of the best around. How many and how old are the children?

isofa

Look at the Children's Accounts and Trust Funds listed in the savings best buys at Money Facts.

Old_Timer

Thanks all.

chesky, the Halifax 10% account is still available, however, it looks to me like it's a regular saver only, up to £100pm, so I couldn't deposit the £2,000 as an opening balance, unless you know diffferent.

3 kids, they are 14, 13 & 10.

chesky369

Yes, but what you can do is put the money on deposit in one account, then dripfeed the maximum allowed monthly into the Halifax.

martinman3

chesky369 wrote: »

Yes, but what you can do is put the money on deposit in one account, then dripfeed the maximum allowed monthly into the Halifax.

This post is not particularly directed at you but anyone who believes that the child regular saver is better than any other account because it has a headline rate of 10% AER

Your idea keeps being suggested but it is only practical for adult regular savers as you need a deposit account which allows standing orders/regular transfers to dripfeed the monthly contributions.

The other major problem is that the Halifax child regular saver has a maximum monthly contribution of £100 and with an initial investment of £2000 you would need to set up more than one account. Luckily the OP has 3 children but if they had only one the regular saver would be an even worse option than a normal high interest account or bond as after a year of contributing the account would empty and have to start again for the remaining £800.

I have done some calculations to work out the difference between investing £1200 in a high interest bond, YBS Treasure Bond 6.30% AER fixed for a year, and contributing to a Halifax Regular Saver 10% AER fixed for a year.

By dripfeeding £100 each month there are 78 months of interest from regular saver (12+11+10+9...+1) and 66 months of interest from feeder account (11+10+9+8...+1).

Interest from regular saver = 78/12 * 0.10 * 100 = £65
Interest from feeder account = 66/12 * intrate * 100
Interest from bond = 0.063 * 1200 = £75.60

For the regular saver method to pay more interest
66/12 * intrate * 100 must be > 10.60
i.e. feeder account intrate must be > 1.9% AER

Please show me a child account which pays more than 1.9% and allows standing orders to be set up.

If the feeder account is the parent's then you should note that this extra interest is placed in the feeder account instead of the child's account and the child receives less interest as a result. Also for the total interest to be greater the feeder account interest rate must be > 1.9% / 0.8 = 2.375% basic rate or > 1.9% / 0.6 = 3.16% higher rate. The other point worth mentioning is that lump sum may be invested in an account in the name of the child and you may not be able to put it in an account in a adult's name to do this.

The child regular saver is useful for adults making regular contributions from salary to a child up to value of £100 per month but for nothing else.

If you have a lump sum put it in a high interest account/bond.

Old_Timer

Thanks mm. I suspected as such with the dripfeed but hadn't done the sums, you beat me to it. Cheers