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    • Dan.h1131
    • By Dan.h1131 9th May 18, 4:16 PM
    • 6Posts
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    Dan.h1131
    Best Fixed rate ISA to choose
    • #1
    • 9th May 18, 4:16 PM
    Best Fixed rate ISA to choose 9th May 18 at 4:16 PM
    Hi, I have over 20k in my bank earning no interest (50K actually earning no interest right now and 20k earning me about 30 a month with my 123 Current Account) and looking at trying to get some interest on it in a risk free way. I know little to nothing about stocks and shares so looking at a fixed rate ISA. I am happy to lock the money away for 1-5 years depending on the returns I would be getting.
    Not done overly a lot of research but Ford Money seems to be offering a decent rate at 1.45% on a 1 year fixed rate ISA and 1.65% on a 2 year fixed rate ISA. I have seen better rates but want to use a known trusted Bank/Building Society.
    Any advice on the best rates out their would be much appreciated.
Page 1
    • ValiantSon
    • By ValiantSon 9th May 18, 5:49 PM
    • 1,876 Posts
    • 1,735 Thanks
    ValiantSon
    • #2
    • 9th May 18, 5:49 PM
    • #2
    • 9th May 18, 5:49 PM
    Why do you want to use an ISA? You can earn up to 1,000 in interest, each year, as a basic rate tax payer (500 at higher rate) without paying any tax on it. ISA rates are lower than those available on non-ISA accounts, so you would almost certainly be better off opting for a non-ISA account.

    The best fixed rate bonds are (and interest earned in one year on 50,000):

    1yr - Investec = 1.9% (950)
    2yr - Secure Trust Bank = 2.16% (1,080)
    3yr - Vanquis Bank = 2.3% (1,150)
    4yr - Vanquis Bank = 2.52% (1,260)
    5yr - Vanquis Bank = 2.7% (1,350)

    Obviously, these options would push you into paying tax on savings (I have assumed you are a basic rate tax payer), but that does not mean they are a worse option than an ISA. Let's take the 1 year fix as our comparison. In the Ford Money ISA you would expect a return of 725, but with the Investec bond (after tax - assuming you earn the maximum in Santander of 298) you would still earn 900.40 in interest, thus beating the ISA return by 175.40. Of course, you could split the money so that you put 36,000 into the Investec bond and 14,000 into the ISA. Doing this would avoid all tax and give you a combined return of 905 (702 with Investec and 203.with Ford Money). In other words, avoiding the tax through splitting the deposits would see you better of by a grand total of 4.60. Only you can decide if that is a sum worth worrying about.

    Personally, I wouldn't bother with a longer fix than one year as there is a reasonable chance that rates will rise in that time and your 2/3/4/5 year fixed rate could look pretty poor later on. Fix for one year and then review the available rates at that point.
    • Dan.h1131
    • By Dan.h1131 9th May 18, 6:06 PM
    • 6 Posts
    • 0 Thanks
    Dan.h1131
    • #3
    • 9th May 18, 6:06 PM
    • #3
    • 9th May 18, 6:06 PM
    Why do you want to use an ISA? You can earn up to 1,000 in interest, each year, as a basic rate tax payer (500 at higher rate) without paying any tax on it. ISA rates are lower than those available on non-ISA accounts, so you would almost certainly be better off opting for a non-ISA account.

    The best fixed rate bonds are (and interest earned in one year on 50,000):

    1yr - Investec = 1.9% (950)
    2yr - Secure Trust Bank = 2.16% (1,080)
    3yr - Vanquis Bank = 2.3% (1,150)
    4yr - Vanquis Bank = 2.52% (1,260)
    5yr - Vanquis Bank = 2.7% (1,350)

    Obviously, these options would push you into paying tax on savings (I have assumed you are a basic rate tax payer), but that does not mean they are a worse option than an ISA. Let's take the 1 year fix as our comparison. In the Ford Money ISA you would expect a return of 725, but with the Investec bond (after tax - assuming you earn the maximum in Santander of 298) you would still earn 900.40 in interest, thus beating the ISA return by 175.40. Of course, you could split the money so that you put 36,000 into the Investec bond and 14,000 into the ISA. Doing this would avoid all tax and give you a combined return of 905 (702 with Investec and 203.with Ford Money). In other words, avoiding the tax through splitting the deposits would see you better of by a grand total of 4.60. Only you can decide if that is a sum worth worrying about.

    Personally, I wouldn't bother with a longer fix than one year as there is a reasonable chance that rates will rise in that time and your 2/3/4/5 year fixed rate could look pretty poor later on. Fix for one year and then review the available rates at that point.
    Originally posted by ValiantSon
    Thanks for the advice. Will definitely look in to this. Investec for instance though, how safe are fixed rate bonds then realistically, with Investec for example? This is all new to me and obviously worry about losing my capital..
    • eskbanker
    • By eskbanker 9th May 18, 6:26 PM
    • 7,142 Posts
    • 7,584 Thanks
    eskbanker
    • #4
    • 9th May 18, 6:26 PM
    • #4
    • 9th May 18, 6:26 PM
    Investec for instance though, how safe are fixed rate bonds then realistically, with Investec for example? This is all new to me and obviously worry about losing my capital..
    Originally posted by Dan.h1131
    The standard measure of 'safety' is membership of the Financial Services Compensation Scheme, which protects deposits of up to 85K per person per institution (and reimburses depositors if firms fail), so if you ensure that any institution you use is a member of this scheme then this should suffice.

    The majority of banks and building societies operating in the UK (but not all) will display their membership of the scheme fairly prominently on their websites, either in page footers or within their 'about us' or 'security' sections, or you can check the central FSCS register.

    For example, Investec publish info relating to their membership at https://www.investec.com/content/dam/united-kingkom/Downloads-and-documents/private-banking/FSCS-Information-and-Exclusions.pdf (although it would be more reassuring if they were capable of spelling 'kingdom' correctly!)
    • ValiantSon
    • By ValiantSon 9th May 18, 6:50 PM
    • 1,876 Posts
    • 1,735 Thanks
    ValiantSon
    • #5
    • 9th May 18, 6:50 PM
    • #5
    • 9th May 18, 6:50 PM
    Thanks for the advice. Will definitely look in to this. Investec for instance though, how safe are fixed rate bonds then realistically, with Investec for example? This is all new to me and obviously worry about losing my capital..
    Originally posted by Dan.h1131
    Glad to help.

    As eskbanker says, Investec are part of the FSCS, so your money is protected.
    • ThriftyFelicity
    • By ThriftyFelicity 9th May 18, 7:11 PM
    • 767 Posts
    • 2,230 Thanks
    ThriftyFelicity
    • #6
    • 9th May 18, 7:11 PM
    • #6
    • 9th May 18, 7:11 PM
    Whether you choose ISA or non-ISA, have you considered creating a savings "ladder"? If you put 10k into each of 1-yr, 2-yr, 3-yr, 4-yr and 5-yr, that means you have some funds coming available each year, which you can either use or roll over into a new 5-yr term. That way you can maximise the interest rate without tying up all of your funds.
    R.I.P. Bart. The best cat there ever was.
    • Dan.h1131
    • By Dan.h1131 9th May 18, 7:25 PM
    • 6 Posts
    • 0 Thanks
    Dan.h1131
    • #7
    • 9th May 18, 7:25 PM
    • #7
    • 9th May 18, 7:25 PM
    Whether you choose ISA or non-ISA, have you considered creating a savings "ladder"? If you put 10k into each of 1-yr, 2-yr, 3-yr, 4-yr and 5-yr, that means you have some funds coming available each year, which you can either use or roll over into a new 5-yr term. That way you can maximise the interest rate without tying up all of your funds.
    Originally posted by ThriftyFelicity
    I have not but something for me to think about. Thanks!
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