What to do with £40k?

[Startingout2015]

Post divorce and house sale I will receive circa £40k in a week or two time.

I won't be in the position to buy again for 12-18 months.

Where should I keep it in the mean time?

I've been thinking about:

Instant access savings
Premium bonds
Peer to peer savings

I don't have debts.
I earn a good wage.
My mo they outgoings are low.

[Micah]

Why wont you be in a position to buy again for another year?

It can becgard to get back on the property ladder, so if you have £40k deposit and a good wage, id buy, even if its just a flat to tide you over.

Itherwise speak to your bank about short term savings.

[tilder]

Buying short term can be costly. Stamp duty, fees, moving costs etc. Plus sale fees if its not a long term home.

Will you be renting in the meantime? I would work out cost benefits. So estimate costs of buying, selling and then buying again. Then work out how much renting will cost over the same period. Then factor in potential for interest payments on the cash.

For 12-18 months I personally wouldn't buy unless the housing market was crazy (enough anticipated rise to offset the costs). Premium bonds are good but not a guaranteed rate of return (you could win a million though!)

[JeanSeberg]

£20k in Santander current account at 3% interest.

£15240 in an ISA.

How much will you need for a deposit?

[SparkleSoiree]

Hi startingout2015.

We were in a similar position to you lately and have spent a couple of months trying to figure out what to do. Like you we are not planning on buying for another 12 months so will need access at that point. A lot of products with better interest rates are long term fixed. We have ended up splitting our money between a number of savings accounts with the best interest we could find for a 12 month period. Most of what we found was less that than 2% interest rate. We did manage to find an account at 4% with Lloyds which was a monthly saver starting at zero but you can only have it set for 12 months then it resets to a normal savings account with a far lower rate. It may be worth asking in the Savings forum of moneysavingexpert.com where they can add any further knowledge to this. I am not advocating any financial advice to you at all, just my own experience.

[SparkleSoiree]

Not all of the Santander current account pays at 3% though, does it? It's tired and limited to 3000 I believed?

[lorelei9]

sparkle, you have to have a minimum of £3k in your account and the 3% is payable up to £20k.

The monthly charge is now £5.

[SparkleSoiree]

Ok, thanks. I may be moving things about!

[lorelei9]

OP, you might want to look at Club Lloyds as well - 4% on balances between £4k and £5k - another current account with certain conditions to be met.

it's a funny market at the moment, there's a few current account products offering better returns than fixed savings.

[PastaLaFeasta]

We have a similar sum and I'm trying to figure out a plan to maximise the interest etc. We own but have no chance of buying a decent sized family home here.

At the moment I have a maxed out Santander 123 earning 3%. I also pay out some direct debits for cash back so it earns just under £50 a month - I don't pay tax (but may by the end of the year).

I have the rest in an ISA with a few £k in DH's ISA, both rubbish rates. In April we will take advantage of the new tax free allowance for interest and open a joint Santander 123, although moneysavingexpert suggests its only tax free up to £16,000 at 3%. TSB have a good rate and easy to use current account but only for £2,000, we could cycle the money out of the main account and into the TSB before it moves into the Santander to pay off a few bills. Over £16k in the joint Santander may be better elsewhere and all I've found is the regular saver accounts - e.g. First Direct have 6% for unto £300 per month but you need a current account with them to qualify. HSBC is the same but only allows £250. And Nationwide 5% with £500pcm. They work out similar to the money sitting in a 3% for the whole time but only last 12 months.

I don't know if it's worth getting professional advice and investing another way but I'd only do it if the risk was very low. We are at least earning more in interest than we are paying on the mortgage so we will save the remaining mortgage sum in less time than overpaying the same amount.

[ChalkHearts]

I'd go for a peer to peer lending site. Much better interest than a bank.

[PastaLaFeasta]

And the Santander 123 does pay (not quite) 3% on the whole balance once over £3k - the customer service people tried to tell me otherwise but website showed they were wrong and it does add up.

[lorelei9]

Re peer to peer lending, while it is regulated, it doesn't have the FSA guarantee, so if the company goes bust...

[ChalkHearts]

You haven't lent your money to the peer to peer lending company. So I don't think it matters if it goes bust, in that the company or person you lent your money to would still owe you.

[lorelei9]

Chalk, yes, the person to whom you lent will owe you.
I'm thinking that the OP is hoping to buy property though so just thought I'd highlight the FSA thing.

Then again, the mere mention of peer to peer implies acceptance of certain levels of risk.

[ChalkHearts]

Ratesetter, for example, have paid back 100% so it really is very, very low risk for significantly better interest rate.

[OneEpisode]

Peer to peer lending is considered very high risk, if the borrowers don't repay that's it, you've no come back. No recourse to the arranger and no recovery from the FSCS. Peer to peer would be safer for a small proportion of a large fortune!
Few should consider it for this £ and 18months.
(Not even if one arranger (ratesetter) had one batch of loans that did repay.)

[ChalkHearts]

If the borrowers don't repay the peer to peer lender repays! They have a lot of money put aside for that.

[OneEpisode]

For monthly, ratesetter will pay 3.3%. So 0.3% more than FSCS protected deposits recommended from PP upthread, less than the tier on another recommendation.
Few would risk a house deposit for 0.3%?

[OneEpisode]

Some peer to peer lenders keep some money back to pay for losses. Not all do. RateSetter does keep some back, but that fund isn't FSCS protected.
RateSetter is a trading name for Retail Money Market Limited. Look that company up. Google it, or beta.companieshouse.gov.uk/company/
It's too small a company to have to file accounts. And not FSCS protected.
I'm getting a bit boring...

[Footle]

Boring in a useful way !

[lorelei9]

This stuff is never boring!

I did look very carefully at peer to peer. It's just one view but for me the increased risk wasn't worth the extra return. im interested that the OP mentioned it in the context of waiting to buy but I am guessing that the future purchase will be her only property, maybe it isn't.

[HelpfulChap]

£30k (the Max) in premium bonds. The other £10k in an ISA of some sort.

You will receive a steady flow of £25-£50 wins on the PBs with no risk to your capital and they chance every month of winning £1mn. And get instant access if your circumstances change.

[lorelei9]

Helpful, I've had premium bonds for about seven years and once won £25.

[PirateSmile]

We invested the maximum we could in premium bonds and we won something every month. It was very exciting to receive the envelopes and we made far more than we would've done had we invested in a high interest account.

[HelpfulChap]

Fair enough. Did you run over a black cat . My DS has them (nowhere near the full allowance), he wins on an very regular basis. £125 last month.