Best place to invest £3k a year that's safe?

(17 Posts)
Rainbowshine Fri 28-Mar-14 21:54:19

DM has decided to give me £3k a year for five years, it's a kind of nest egg/fund for DS. I need somewhere to invest this, so that it is safe, but ideally some return in interest would be great too. DM is amazing for doing this so I'd like to use the money wisely. Would an ISA be best or is there something else that would work better? TIA.

NotALondoner Fri 28-Mar-14 21:59:21

Santander 123 account gives 3% interest I think.

Rainbowshine Fri 28-Mar-14 22:12:50

Thanks I'll look into it

Cindy34 Fri 28-Mar-14 23:42:00

Foxed rate ISA may be worth looking at as the interest is not taxed.

For current accounts that pay interest, you must check the qualifying criteria... Such as amount of money going in each month, number of direct debits that need to come out each month.

Cindy34 Fri 28-Mar-14 23:43:28

Foxed rate - wonder what that is? Fixed Rate.

TSB do a two year fix.

Rainbowshine Sat 29-Mar-14 09:05:19

Thanks Cindy. It's well worth checking the small print you're right!

Cindy34 Sat 29-Mar-14 09:15:33

Without risk you won't get much of a return.

Best returning investments I currently have (excluding property) is 6% company bonds. The risk is quite high though, as can lose the money if the company goes bust.

ISA rates are not that great but if you can lock away the money, so not needing to access it, then rates can be 2% or higher.

I would suggest you consider how likely you are to need then money, when that would be. Do you need instant access, or would 90 days notice work? See what rates you can get for different savings products.

www.savingschampion.co.uk has some best buy tables.

Rainbowshine Sat 29-Mar-14 17:08:06

Thanks again Cindy. I think I could lock it in for 2 years max, and for me I need to at least keep the original sum safe, if that makes sense. Fixed term ISAs or reasonably safe bonds look like the best options. Off to do some research now...

specialsubject Mon 31-Mar-14 14:17:48

money is safe in any licensed uk bank up to 85k.

you can put £2500 in the Nationwide FlexDirect and get 5% for a year, again with a standing order or direct debits needed. TSB also have a 5% one for £2000 maximum.

there are lots of current accounts paying 3% - Santander charge £2 A month and need two direct debits. Put your 3K in Lloyds vantage, TSB enhance or Bank of Scotland vantage and you get a fee free 3%. You need to pay in £1000 a month, you just set up a standing order to shift the same money back and forth.

these are not fixed rates (although the Lloyds ones have been running at least 3 years) so you need to keep an eye on it. You can have up to three of the accounts with each bank, interest at 3% is paid on between £3000 and £5000.

there are no fixed rates better than these unless you lock the money for five years.

you could do better with investments but they have risk. ISA rates are worse but may work out a bit better for you if you pay tax.

savers are dirt I'm afraid, and will be for some years.

specialsubject Mon 31-Mar-14 21:07:00

spoke too soon - forget Lloyds vantage, rate going to crash to 1.5% and closing to new customers from today.

the endless chase continues...

Financeprincess Sun 06-Apr-14 17:36:17

Do you mean 'save', rather than 'invest', Rainbow?

amicissimma Tue 08-Apr-14 21:15:29

Inflation was 1.7% (CPI) or 2.7% (RPI) (which most closely reflects your costs?) in February.

Therefore for the money to hold its value it needs to be earning more interest than that.

There's a price to pay for security - the value of the money can fall due to interest rates being lower than inflation. Dare you risk the stock market? It's generally considered the better bet over the long term, but there is the risk that you could need to cash in the investment just as the market falls.

If the money is for a child, you can open an account in his name and fill in an R85 form so the interest is not taxed. You can also open a JISA in his name, including a stocks and shares JISA (although they can be very difficult to find). This will mean that the child has control of the money at 16.

Your DM's plan sounds like IHT planning, as she's allowed to give away £3000 per year from her estate. That suggests that she might well know what she's doing, or be getting some advice. Could you ask her for suggestions?

jonicomelately Tue 08-Apr-14 21:18:47

Why not consider Premium Bonds? We won £250 in three months, which is a lot more than we'd have received from any bank account.

jonicomelately Tue 08-Apr-14 21:19:18

And the winnings are tax free!

80sMum Tue 08-Apr-14 21:38:36

It depends what you mean by 'safe.'

Are you saying that you are not prepared to take any risk at all with the money? If that's the case then you may as well plonk it in a cash ISA, unless you are a non-tax payer and could get a better rate of interest in an ordinary savings account.

If you mean that you don't want to be too adventurous but you are prepared to take some risk, then I would suggest a stocks & shares ISA, where you could invest the money in funds, rather than individual shares. One of the UK Equity Income Funds might suit you. But you must understand that the fund may go down aswell as up. I happen to believe that the trend is up, so I have risked a fair chunk of my savings there.

You can learn about ISAs and get information about a wide range of funds through a fund supermarket. I use Hargreaves Lansdown's research tools on their website.

specialsubject Tue 08-Apr-14 21:40:54

the OP (if she hasn't won the Premium Bonds and disappeared) probably does mean 'save'.

the official inflation statistics lie unless you buy lots of electronic gadgets and petrol and very little food. Most of us know that our 'personal' inflation is higher than 3%.

anyway, no cash ISAs beat even official inflation.

JaneinReading Tue 08-Apr-14 22:12:00

Yes, remember the R85. Then the account does not have tax taken off it at source. Also make sure the grandparent gives the money to the child eg a cheque payable to the child not to you as it is deemed yours by HMRC you may be taxed on any interest.

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