If you expect rates to rise again soon and don’t want to tie up your money even for a year, you can split it, putting some of it in a one-year bond now and in a few months, put the rest in the last most recent purchase obligation. at the moment.
Make sure though that while your money is waiting, you keep it in the best instant access account. Or see if you can earn a bit more by putting it into a three or six month “notice” account, remembering to give that notice the day after you deposit. It will remind you to be active when it runs out!
If you have more than £85,000 remember that only this amount is guaranteed by the Financial Services Compensation Scheme if the bank or building society goes bankrupt.
So divide your money into slices of about this size. If you have a spouse or partner, you can each safely have £85,000 in the same bank.
The limit applies to unrelated banks. For example, Halifax, Bank of Scotland, Birmingham Midshires and Intelligent Finance are all part of Lloyds Banking Group and the money in each of them comes with a single guarantee of £85,000. Savings Champion makes these links so you know which bank belongs to whom.
You can use Active Cash for savings accounts or for Cash Isas. But the latest figures show that many people are wasting Isas cash.
The only reason to use a cash Isa rather than a regular savings account is that the interest earned is tax-free (see story above). But the interest paid on the best Isa cash is lower than the interest paid on the best savings accounts. So you pay a price for the fiscal invisibility cloak.
For most people, this price is not worth paying. This is because almost everyone receives a savings allowance – exempting some interest from tax anyway. For most taxpayers it’s £1000 a year but if you pay a higher rate of tax 40% it’s halved to £500 and zero if your income is high enough to pay the highest tax rate of 45%.
Isas are simply a costly mistake if the interest you could earn is less than your savings allowance. And even more of a mistake for non-taxpayers.
The latest figures show that more than four million people with a cash Isa had an income well below the tax threshold – at the time £12,500 a year. Placing savings in an Isa costs them the higher interest they could have earned in a non-Isa savings account.
16 million basic rate 20% taxpayers had cash Isas averaging around £11,000. The interest of around £100 on this would be well covered by their savings allowance. Another waste of higher interest money could earn.
However, cash Isas are useful if you pay taxes and have used up all of your tax-free savings allowance with interest on other savings. This is more likely to apply to the highest or highest earning taxpayers. But whether your money is in regular savings accounts or Isa, Active Cash maximizes your returns.
Paul Lewis is BBC Radio 4’s Money Box presenter