Scenario 1
A retired couple in their 70s with £100,000 in cash. They are happy to lock up £80,000 for more than a year, but need access to the rest – though not necessarily daily
Claire says: “The retired couple could take advantage of some of longer-term fixed accounts, specifically the National Bank of Egypt 12 month Fixed Term Deposit, which pays 4.97pc.
“They can place £80,000 into this product, earning themselves interest of £3,976 a year. If they are comfortable securing a longer fixed term, and concerned that rates might be significantly lower in 12 months’ time, another option is Hampshire Trust Bank’s 2 Year Fixed Term Deposit, paying 4.75pc, which would generate £3,800 a year in interest.
“For the remaining £20,000, they could opt for the SmartSave market leading Instant Access product, paying 4.95pc gross or 5.07pc AER (which takes account of interest compounding), and so generating interest of £1,014 a year.
“However, if they are willing to forgo instant access, they could choose a 120-day notice product, paying slightly more at 5.03pc gross/5.15pc AER, earning £1,030 in interest. They could also choose both accounts and put £10,000 in each.
“All of these accounts would be covered by the Financial Services Compensation Scheme. This balanced portfolio would meet their near-term liquidity requirements and generate a blended interest rate of 4.81pc to 5pc, equivalent to between £4,814 and £5,006 a year.”
Scenario 2
A working woman in her 50s with £100,000 in cash. She needs ready access to £80,000 but can lock up £20,000 for up to three years
Claire says: “The lady could opt to place £80,000 into the SmartSave market leading Instant Access Account, which pays 4.95pc gross / 5.07pc AER. This account allows unlimited withdrawals without any restrictions and would earn her £4,056 in interest a year.
“If she is willing to restrict access somewhat, she could achieve a slightly higher rate with the SmartSave 120 Day Notice Product, currently paying 5.03pc gross/5.15pc AER, earning £4,120 in interest a year.
“For the remaining £20,000, she could secure the Isbank 3 Year Fixed Term Deposit, currently paying 4.50pc, earning £900 a year in interest. Alternatively, she could lock in for a shorter period and secure a slightly higher rate of 4.95pc with the Al Rayan 12 Month Fixed Term Deposit, earning £990 a year.
“Her selection here would probably be driven by her view on the likelihood of significantly lower savings rates in 12-24 months.
“This balanced portfolio would meet her near-term liquidity requirements and generate a blended interest rate of 4.96pc to 5.11pc, or £4,956 to £5,110, again covered by the FSCS.”