Best way to invest £80,000 without tying it up for too long

[Deleted User]

We've always been very slap-dash with savings in the past, placing convenience and lack of hassle over return on investment. But nowadays it seems that we get non-stop hassle on our poor performance accounts so we've decided to make an effort to ensure that our time spent on admin pays off! We've got around £80,000 in savings. We'll want access to some of this for spending over the next few years (we might spend a lot or we might spend very little - if our business does well we'll add to it). I've scoured this website and forums and have come up with the following plan for this coming year. Can any of you experts see any obvious flaws or suggest anything better? We don't like to take risks.

ISA's

My partner and I will invest £3,600 each into ISA's - not yet sure which one is best. Any advice welcome!

Halifax Regular Saver Accounts - 10% interest for one year

1. Open one in my name and one in my partners name and pay the maximum of £500 per month into each.
2. At the end of the 12 month period, re-invest in the highest paying account available.

Alliance and Leicester's Online Premier Direct Account - 8.5% Interest in first year on balances up to £2,500

1. Open one in my name and one in my partners name with £2,500 (total £5,000)
2. We both get a £25 cash bonus and my parnter's mum who already has an A&L account will get £50 for referring us.
3. We pay in £500 per month into each account which is then immediately transferred into our Halifax Regular Saver Accounts (above)
4. Withdraw all interest and pay it into our Kaupthing Edge account (below)
5. Close accounts at end of year.

Kaupthing Edge - 6.5% Interest

We'll keep what's left of the money here, earning 6.5% interest.

Well....are we on the right track or do we need to go back to the drawing board?

debbie42

Seems like a good approach to me. Have you considered putting 5K into a guaranteed saver (6.25% with bonus) as your nominated Halifax account to get the bonus 2% on the RS? That would work out better overall than leaving it at the 6.5%. It would be inaccessible for the year to qualify for the bonus, though.

whu

if you are higher rate tax payers you could consider NS%I index linked certificates - they are fixed for 3 or 5 years but if you break it after 12 months you will get the accrued interest at the time - £15000 per person maximum per issue

[Deleted User]

Hi Debbie,

I imagine we'd need to put £5,000 into two guaranteed saver acconts to get the 12% on both of our Regular Saver accounts. That would mean tieing up £10,000 in an account offering 6.25% in order to get an extra 2% on the money we pay into our regular savers.

If I understand it correctly, In practice we'll only get the equivilent of 12% interest on £6,000 as we can only dribble money into the regular saver accounts. In order to get the extra 2% we have to commit £10,000 to guaranteed savings accounts earning 6.25%. So if things stay constant we loose .25% on £10,000 (£25?) to gain 2% on £6,000 (£120?).

So Kaupthing Edge (or another instant access account) would have to increase interest rates quite a bit before we'd start to lose out - right?

So yes - if I understand this correctly you're right! Thank you!! (I'm just trying to get my head around all of this - I've never paid attention to interest rates in the past!)

Hi Whu,

We pay tax at standard rate, but thank you anyway!

debbie42

Deleted_User wrote: »

So Kaupthing Edge (or another instant access account) would have to increase interest rates quite a bit before we'd start to lose out - right?

So yes - if I understand this correctly you're right! Thank you!! (I'm just trying to get my head around all of this - I've never paid attention to interest rates in the past!)

That's roughly how I've worked it out, having just done a v. similar thing myself, and figured it was worth it. Even if I do have to dip into the guaranteed saver account then I'd only lose the 2% bonus on the regular saver (which I wouldn't have had anyway), plus the 1% on the saver, which isn't too bad, in an emergency.

The Guaranteed Saver isn't a fixed rate (unlike the Regular Saver), but does have a guarantee linked to the base rate.