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Original poster

What to do with £50 000 for 18 months

16 replies

latrucha · 04/03/2011 14:22

DH and I are abou tto inherit around £50 000. Ultimately, we are going to pay off a chunk of our mortgage and use the money saved on the mortgage to put into ISAs.

We can't do that for 18 months until our present mortgage finishes as it is not worth our while to pay the fine for early repayment (we did the sums a while ago. I can't remember what they were).

What would be best to do with the money in the meantime. I had thought a high-interest savings account. I haven't looked into it much as yet, but the deals don't seem to be that good.

Any ideas would be welcomed.

OP posts:
minipie · 04/03/2011 14:33

Look into fixed term savings bonds (where you can't touch the money for a year or more). These generally pay higher interest than instant access savings accounts. 18 month ones are unusual, so you'd probably need to do a 1 yr one then a 6 month one.

www.moneysupermarket.com and www.moneysavingexpert.com are a couple of good sites.

Rates are pretty low at the moment unfortunately since the base rate is so low (though may go up later in the year).

Of course you could put the money in the stock market or other alternative investments, but that's high risk, especially over a short period like 18 months.

TheAtterySquash · 04/03/2011 14:34

Have you both used your ISA allowance for this year? £10,200 each in a cash ISA before the end of March and the same straight after will account for just over £40k and give you a reasonable rate of interest tax free. Problem is rates are low at the moment and as it's such a short time frame you may not want to risk the stock Market (I wouldn't !)

Greenshadow · 04/03/2011 14:39

We had a fair bit of money to invest for a period while in between houses and ended up putting a chunk in Premium Bonds. Only won about what you would have got from interest in a BS but was that element of fun.

Original poster
latrucha · 04/03/2011 17:11

Thanks.

We haven't used up the ISA allowance, but I'm don't want to risk the money over such a short term, especially at the moment. I hadn't thought about the tax year ending in March though, so thanks for that. We may change our plans in the end.

Thanks for the links. I'll check them out.

I hadn't thought of premium bonds but am reassured so far that I generally know what is out there.

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Chil1234 · 04/03/2011 17:25

I'm going to suggest checking the small print on your mortgage early redemption penalty clause. My lender is C&G, for example, and I can pay back 10% of the capital outstanding at the start of the year with no penalty... but to pay back more than 10% would result in early redemption charges.

TooManyBlossoms · 04/03/2011 17:29

Give it to me! I'll look after it, honest Grin

Original poster
latrucha · 04/03/2011 18:52

Chil1234 - Thanks. We can pay back 10% - this money is beyond that. Our mortgage is not very big!

TooMany - if only I could do the same!

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minipie · 04/03/2011 20:03

Re the ISA allowance - if you haven't used that up, I would definitely do that first. You don't have to do a shares ISA if you don't want risk, just do a cash ISA - no risk and tax free interest. Very likely to beat any normal savings interest (esp if you're a higher rate tax payer).

Donki · 04/03/2011 20:04

Buy gold?

ChasingSquirrels · 04/03/2011 20:06

definitely do the Cash ISA prior to and post 5 April. No risk (well none that you wouldn't have with any other cash account), and you get the interest tax free.
For the rest, look on moneysavingexpert.com for the best rates (although nothing is great atm). Or premium bonds as a pp mentioned - we did that.

crazycatlady · 04/03/2011 20:11

Cash ISAs and premium bonds definitely.

Original poster
latrucha · 04/03/2011 20:56

I hadn't thought of the cash Isa, in fact. Thanks for that.

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Original poster
latrucha · 05/03/2011 21:04

Does anyone know if the cash ISA is still better if you are not a tax payer?

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ChasingSquirrels · 05/03/2011 21:12

makes no difference - the advantage is that interest on cash ISA deposits are tax free, if you don't pay tax you can register to get the interest paid tax free on any cash deposit.

So go for the best rate you can get.

The only thing to consider, is if you will be a tax payer at some point, then by building up your ISA funds you have a tax-sheltered pot at that point (eg if you had been putting the max into a cash ISA since they started (and moving it to maximise interest rates) you would have a pot of £45k (or more, not sure exactly when they started) now, generating tax-free interest.

whomovedmychocolate · 05/03/2011 21:20

Try ftyourmoney.com - they list rates and compare products. Beware annual fees - some of them are very pricey compared the the income. But interest rates will be going up a few times this year IMO so it is a good time to invest.

Original poster
latrucha · 06/03/2011 19:44

I thought I posted last night but it seems to have got lost. Thanks for your advice. I will check out the link.

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