Five Great Places To Put Your Dosh

by Kate on December 13, 2013

in Money

With Christmas nearly upon us and thoughts turning to the New Year, what better resolution than to get your money working harder for you and actually getting around to moving it into a better savings account or investment.

With interest rates at an all-time low in the UK, finding the right place to put your savings has never been more important. Bank of England, Mark Carney’s recent announcement that he will not raise interest rates until UK unemployment drops to 7%, has meant every tax break and interest rate percentage point matters, as savers try to squeeze the most out of their money.

Below is a list of the five best places to put your savings.

Fixed Rate Cash ISA
The amount you can deposit in an ISA in any one tax year is set by the UK Government and currently stands at £5,760. There are two main categories of cash ISA; the fixed rate and the regular savings ISA. As the name suggests, fixed rate cash ISAs pay a fixed rate of interest over a period of anything from a year to seven years or more. Withdrawals during this fixed period may be limited or even incur a penalty (usually the reversion to a lower rate of interest over the life of the ISA). The fixed rate ISA being most suited to long term savers who are able to pay in their entire yearly tax free savings allowance in one go and who don’t require access to their funds.

Regular Savings Cash ISA
A regular savings ISA is a more flexible account and as such the interest rates offered by providers will not be as high as fixed rate ISAs. A regular savings cash ISA will typically allow you to deposit funds up to a set limit every month. This is usually your yearly cash ISA limit (currently £5,760) divided by 12 months (£480). This allows savers to drip feed their money into their ISA over the course of a year, after which time they could keep the account running or move it to a fixed rate ISA to get a better rate of interest. It’s important to point out the interest rates on regular savings ISAs will drop every month according to how many months are left in the tax year. So any deposit made in March will only earn 1/12 of the interest of the same deposit made at the start of the tax year.

Stocks and Shares ISA
Stocks and shares ISAs are a pretty broad category of investment and are the only option on this list that involves a degree of risk to your investment. It’s important to note that you can invest up to £11,520 in a Stocks and Shares ISA which will allow you to avoid capital gains tax on any profits you make above the base rate of 10%. When you consider that this 10% only goes up after you make more than £10,600 in a year on your investment the tax free element of this ISA may be irrelevant for smaller savers. It’s almost certainly better to invest £5,760 of your ISA allowance into a cash ISA. How best to invest your money in stocks and shares is well beyond the remit of this article but as a rule spread your investment widely to minimise risk.

Regular Savings Account
Regular savings accounts are savings accounts with high rates of interest that are usually only available to existing a bank or building society’s existing customers. Unlike regular savings cash ISAs these accounts tend to have strict terms and conditions and require a minimum deposit to be made every month. They also tend to put strict limits on withdrawals. The high interest rates tend to be limited to a year or so as well after which time the interest rate will plummet. At this point it’s a good idea to think about moving the money to another high interest account.

Instant Access Savings Account
Some savings accounts attempt to bridge the gap between the accessibility of a current account and the higher interest rates of a savings account. Easy Access Savings Accounts such as those offered by GE Capital Direct, are a good example of these types of account, with free unlimited withdrawals but a typically lower rate of interest compared to a 100 day notice account offered by the same company. Indeed the amount of notice required to make a deposit as well as the period of time over which the interest rate is fixed, are the two major determinants of any savings accounts interest rate.

Author Bio: Joe Cox is a writer for leading Savings and ISA provider GE Capital Direct. He has written extensively about finance and banking related products and issues.

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