What's the best home for my £130k savings?

Matt Pitcher
12 November 2012


I have about £130,000 of savings that I wish to invest. I want to earn a continued high interest rate over a long period. I'd like to have the option to withdraw or transfer money, maybe with some notice, and I also want to be able to make further deposits.I do not want a "bonus" that expires after one year and reduces the interest, as I don't want to have to keep moving my savings from scheme to scheme in order to get a slightly better deal.I also want to be able to manage it all online. I'd like to earn 3% or above. I'm not sure if there is an account that matches all of the above needs but I'm hoping that you can help.
DA, Hampshire


In the post-banking crisis world, it is perhaps worth starting with the security of this money. You should only deposit £85,000 with any one institution - anything above that amount would not be covered by the Financial Services Compensation Scheme (FSCS) should your bank go bust.

For any joint accounts the sum protected would be twice that amount, so £170,000. Do be careful though, as the sum protected is not per bank but just per "banking licence" - two separate banks such as First Direct and HSBC, for example, could share the same licence.

We all wish for an account that offers a high interest rate and maintains it, but I am afraid that is not how banking works in the UK at the moment. If you want to achieve all of these objectives, you must be prepared to monitor the interest rate you are getting and move the money around.

There are very few accounts that offer 3% plus interest without a fixed term. A few of the smaller building societies such as Melton Mowbray, Kent Reliance and Aldermore offer accounts at this level with 60 to 100-day notice periods and online access.

If you are going to be moving money in and out of these accounts then the key is to look for ones that offer monthly interest, as this will maximise your return.