Where to invest a savings lump sum

If your fixed rate account is due to mature soon, it’s time to start thinking about where to move your money.

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If you have money in a fixed rate bond and your account is due to mature in the coming weeks or months, it’s a good idea to start looking around to see where you might want to reinvest your money.

Leaving your money where it is is rarely a good idea as some providers automatically deposit the cash in a default account paying poor rates of interest.

The good news

Although there’s no escaping the fact that savings rates are still at record lows, the good news is they are slowly starting to shift upwards thanks to increases in the Bank of England base rate.

And if you can afford to tie up your money for a further period of time, you are likely to earn more interest by investing in a fixed rate product than if you opt for an easy access account. Just keep in mind you’ll need to be prepared to sacrifice some flexibility, as you cannot usually make withdrawals during the term of the bond.

Seek out the best deals

The right fixed rate savings bond for you will depend on how long you are prepared to leave your money untouched for.

For savers looking for a short-term fixed rate bond, Ford Money’s 1 Year Fixed Saver Account  pays 2.00% AER fixed for 12 months on a minimum investment of £500.

Keep in mind you won’t be able to make any deposits or withdraw money after 14 days of your application being received. You’ll need to be aged 16 or over to open the account.

Savers who want to tie up their money for a bit longer may want to consider Charter Savings Bank’s 18-month bond paying 2.05% AER fixed.

You’ll need to open the account with at least £1,000 and if you open the account online, you have 14 days from the day you apply in which to make deposits into the account. If you apply by post, you have up to 30 days.

You’ll need to leave your money untouched for the term of the account and be a UK resident aged 18 or over to open the account.

Medium term savers

If you’re prepared to leave your lump sum untouched for two years, then you can earn 2.30% AER fixed with Tandem Bank’s 2 Year Fixed Saver.

You’ll need to open the account with at least £1,000 and, as is common with this type of account, you can only make one deposit.

Alternatively, Axis Bank pays 2.26% AER fixed for two years on its Fixed Deposit Account. Again, you’ll need to open the account with at least £1,000 and won’t be able to make any additional deposits or withdrawals during the term.

You’ll need to be a UK resident aged 18 or over to open both of the above accounts.

Three-year fixed term investors can earn a little more. ICICI Bank’s 3 Year HiSAVE Fixed Rate Account, for example, currently pays 2.40% AER fixed on a minimum investment of £1,000.

You won’t be able to make any additional deposits once the account is opened, so again this account is only suitable for lump sum investors. And again, you’ll need to be a UK resident aged 18 or over to open the account.

Longer term savers

The longer you can tie up your money, the higher the rate of interest you will earn, but it is worth bearing in mind that the Bank of England base rate is likely to increase again in the near future.

This means that if you are locking into a fixed rate bond for several years, better deals are likely to become available during the term of your bond.

It’s also worth noting that currently, interest rates on bond with terms ranging from four to five years aren’t significantly higher than those for three years, so think carefully before agreeing to tie up your money for that long.

For example, Vanquis Bank’s 4 Year Fixed Rate Bond pays 2.50% AER on balances of £1,000 or more, while IKANO Bank’s Fixed 4 Year Saver pays 2.45% AER, with the same minimum investment.

Vanquis Bank’s 5 Year Fixed Rate Bond pays 2.62% AER, again on deposits of £1,000 or more, while IKANO Bank’s Fixed 5 Year Saver also pays 2.62% AER on the same minimum investment.

Again, you won’t be able to make withdrawals during the term of these accounts or make additional deposits.

All of the above accounts require you to be a UK resident aged 18 or over to open them.

Don’t forget to switch…

Wherever you decide to invest the proceeds from your maturing fixed rate bond, avoid leaving it where it is unless you have checked you can’t get a higher rate of interest elsewhere.

Switching to a better deal will help to make sure your money is working as hard as possible for you.

Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.

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