How much can I afford to invest? - Page 3 (2024)

28 May at 2:47PM edited 28 May at 4:25PM

...'. Cash is currently a not half-bad option with 5%+ still available, especially if the current rate of inflation isto be believed, but this situation wont last long.'

I need to find 4.75% + accounts I think fixed term offers higher interests, that is ok for me. As 'Member Exclusive Bond. It offers our best available fixed savings rate of 5.5% AER/gross a year for 18 months. And you can pay in a lump sum of up to £10,000.'

I am wondering what is the difference between a bond and fixed term savings account, as the ones I have looked at do not allow any withdrawls at all. if that is the case is one better than the other?

EthicsGradient Posts: 947 Forumite

28 May at 3:09PM edited 28 May at 3:12PM

MQA said:

Roger175 said:

...'. Cash is currently a not half-bad option with 5%+ still available, especially if the current rate of inflation isto be believed, but this situation wont last long.'

Would you mind sharing whether the 5%+ option is still avaiable?

I need to find 4.75% + accounts I think fixed term offers higher interests, that is ok for me. As 'Member Exclusive Bond. It offers our best available fixed savings rate of 5.5% AER/gross a year for 18 months. And you can pay in a lump sum of up to £10,000.'

I am wondering what is the difference between a bond and fixed term savings account, as the ones I have looked at do not allow any withdrawls at all. if that is the case is one better than the other?

"Bond" is a vague term; it usually means "fixed term and fixed rate" (and those 2 nearly always go together too, with no withdrawals allowed) for building societies or banks. The 5.5% looks like Nationwide; it's a pretty good deal if the term suits you. You can get around 5% from various providers, sometimes with restrictions, on easy-access accounts - seeBest savings accounts: 5.02% easy access or 5.13% fixed rates (moneysavingexpert.com)(or the MoneyFactsCompare equivalent, which still lists Ulster Bank - you have to have/open a current account with them too, which may be a bit of faff - search for "Ulster" discussion on this forum). You'll also find at that link RCI Bank at 5.05% for 2 years, and SmartSave at 5.13% for 1 year. Everyone anticipates interest rates will drop a bit, so the longer the fix, the lower the rate at the moment.

Your other option could be a notice account - 5.25% available for 90 days notice (which will vary, like easy-access accounts, but hopefully stay slightly above them; check the Ts & Cs before signing up - a decent one will give you advance notice of at least the period you have to give notice, so that if they do decide to drop their rate a lot, you can get out without being forced to accept the new rate). Given your needs, a notice account might work well for you.

Roger175 Posts: 158 Forumite

28 May at 4:27PM edited 28 May at 4:29PM

MQA said:

Roger175 said:

...'. Cash is currently a not half-bad option with 5%+ still available, especially if the current rate of inflation isto be believed, but this situation wont last long.'

Would you mind sharing whether the 5%+ option is still avaiable?

I need to find 4.75% + accounts I think fixed term offers higher interests, that is ok for me. As 'Member Exclusive Bond. It offers our best available fixed savings rate of 5.5% AER/gross a year for 18 months. And you can pay in a lump sum of up to £10,000.'

I am wondering what is the difference between a bond and fixed term savings account, as the ones I have looked at do not allow any withdrawls at all. if that is the case is one better than the other?

MQA - look at the best buy rate savings section of MSE (https://www.moneysavingexpert.com/savings/savings-accounts-best-interest/) - there are quite a few providers paying 5% plus, albeit the longer term (2 & 3 year accounts) are now beginning to drop off. Savings bonds and savings account should be considered pretty much the same thing.

We have created a savings ladder whereby we keep what we need in instant access accounts and then put the rest into 1, 2 & 3 year fixes, spread between my wife and myself. We currently have a weighted average of 5.275%, but this will reduce as some of the better payers drop off. As the accounts mature, we re-evaluate and look for the next best fix whilst topping up pensions/ISAs as appropriate. For instance we need to find £40k for this year's ISA, but I have just had a £20k account mature from Alica Bank, so we bunged £10k each into the Halifax Bond that you mention as this is paying a very good rate. The ISAs will be funded by some other accounts which will mature later this year. Once the ISA's are funded this will go to S&S, since I am well aware we are holding too much cash, but this shouldn't be a huge problem with current interest rates.

28 May at 10:34PM edited 28 May at 11:34PM

Roger175 said:

MQA - look at the best buy rate savings section of MSE (https://www.moneysavingexpert.com/savings/savings-accounts-best-interest/) - there are quite a few providers paying 5% plus, albeit the longer term (2 & 3 year accounts) are now beginning to drop off. Savings bonds and savings account should be considered pretty much the same thing.

We have created a savings ladder whereby we keep what we need in instant access accounts and then put the rest into 1, 2 & 3 year fixes, spread between my wife and myself. We currently have a weighted average of 5.275%, but this will reduce as some of the better payers drop off. As the accounts mature, we re-evaluate and look for the next best fix whilst topping up pensions/ISAs as appropriate. For instance we need to find £40k for this year's ISA, but I have just had a £20k account mature from Alica Bank, so we bunged £10k each into the Halifax Bond that you mention as this is paying a very good rate. The ISAs will be funded by some other accounts which will mature later this year. Once the ISA's are funded this will go to S&S, since I am well aware we are holding too much cash, but this shouldn't be a huge problem with current interest rates.

It is amazing that you have created a Savings ladder. I have managed to recalculate the budget again as a lot of outgoings now checking the saving rates.
Can I take it you mean the Nationwide Bond? as I am picking out funds from variable rate accounts first and triple checking budget is correct before depositing the funds into the Bond.
As I have used up all my ISA and I am wondering if the Bond pays 5.5% (pre tax for 18 months ) what is the difference in investing in funds (if I am going to opt / hope for) funds that delivers around 5%?? as the funds can go up and down but I read that it beats inflation, so hypothetically if the funds do make 5% return, do Bond or Funds make more financial sense? as the funds will need to be invested for 5 years+ but I think if you need to sell funds you can but definitely no access to the Bonds.
is there a way to tell if the fund is doing well?? or do you select the funds that suit your needs and wait till your target sell date to sell?

I have another option which is opening more regular savings account offering 5% to 7% fixed rate - many accounts to manage but can save up £2800 pcm..

Roger175 Posts: 158 Forumite

29 May at 5:58PM edited 29 May at 6:00PM

MQA said:

It is amazing that you have created a Savings ladder. I have managed to recalculate the budget again as a lot of outgoings now checking the saving rates.
Can I take it you mean the Nationwide Bond? as I am picking out funds from variable rate accounts first and triple checking budget is correct before depositing the funds into the Bond.
As I have used up all my ISA and I am wondering if the Bond pays 5.5% (pre tax for 18 months ) what is the difference in investing in funds (if I am going to opt / hope for) funds that delivers around 5%?? as the funds can go up and down but I read that it beats inflation, so hypothetically if the funds do make 5% return, do Bond or Funds make more financial sense? as the funds will need to be invested for 5 years+ but I think if you need to sell funds you can but definitely no access to the Bonds.
is there a way to tell if the fund is doing well?? or do you select the funds that suit your needs and wait till your target sell date to sell?

I have another option which is opening more regular savings account offering 5% to 7% fixed rate - many accounts to manage but can save up £2800 pcm..

MQA, without wishing to go back to basics, investing and saving are very different things. With saving accounts, your capital is not at risk, whereas it most certainly is with investments, albeit, you would have to be very unlucky to lose it all. Having said that, when investing in individual shares, I have lost the lot in a few cases, Carrilion being one example. Consequently one might normally expect investments to provide a higher return in the long term. Don't make the mistake of trying to directly compare the two. At present, there are lots of savings accounts which are better than the rate of inflation by a significant margin, but this is an unusual situation, one that hasn't existed for a long time.

The reason we (wife and I) are holding a lot in cash, as I have already explained is that we unexpectedly sold our BTL and being both retired (or nearly in my case!), we are therefore limited to what we can shelter in Pensions and ISA's. We are therefore making the best of savings accounts as previously described.

In your reply above, you refer to bonds vrs funds - the term bond can be confusing in that you are presumably referring to 'savings' bonds as opposed to compony bonds or government bonds aka 'gilts'. Savings bonds generally are accessible in the case of emergencies, but you will forfeit interest, however don't put anything into either fixed term savings or funds (as in investment funds) if you think you will need to access the money the the near future.

My suggestion would be to work out what cash you will need over the next few years and put this into savings (or savings bonds such as the Nationwide Bond), you could use instant access accounts for money needed in the near future and fixed term accounts for that which is needed later. However, firstly, do work out what you can get into tax efficient shelters (Pensions and ISA) and put as much of your longer term money into these - this money should be invested. What you choose to invest is the difficult bit, but I would suggest you stick with low cost tracker funds which reflect your attitude to risk - difficult to 'advise' on this. You may find, like us, that you will be limited and it may take several years to get your money sheltered, in which case, make the best of fixed term savings accounts in the meantime - they are unlikely to stay at current rates for long!