Q: I’ve recently sold a property and want to keep the money in cash. Where’s the best place to save?
Anna’s answer:
While for many, the logical place to put funds from the sale of a property is in a straightforward, easy access account – often with a bank or building society they already have a relationship with – there are other options to consider, which will potentially make a significant difference to your return in that interim period.
When a property is sold, there is often a substantial amount of money which can be earning interest until a new home is found or even, having found the property, waiting for the process to run its course.
The key here is to make sure that you choose a home for your money that suits you and the way in which you are approaching the process.
Money that needs to be accessed quickly, should be placed in an easy access account. At the moment, the top rate on offer is 1.33% gross/AER from the Post Office, albeit with a substantial introductory bonus included in the rate. Without a bonus, the best rate is 1.30% gross/AER, available from the likes of RCI Bank* and Shawbrook Bank.
For more information and options, take a look at our easy access best buy table.
However, you may not have a need for such quick access to your money, as the process of finding a new home and then it going through to completion can take quite some time.
For higher returns, you may like to consider a notice account for part of the funds – these accounts allow access to your money after giving notice to the provider to make a withdrawal.
This means you will have to wait for the funds for the specified notice period, which varies between accounts – from 30 days to 180 days. The return is usually higher, the longer you are willing to wait.
But, it’s important to note that most accounts will not allow you to take funds early, the notice period is often strictly enforced – so will need to fit in with your plans.
Secure Trust Bank pays 1.77% gross/1.78% AER for a 180 day notice period and at the other end of the scale, Charter Savings Bank pays 1.36% gross/AER for 30 days.
For more information on these accounts and other alternatives, our notice account best buy table features a selection of top rates over a range of different notice periods.
Of course, your search for the perfect home may end up a much longer-term project, in which case you may be able to tie some of the money up in a fixed term account.
The interest rates on offer are generally higher than those accounts that allow access to the funds, but you are essentially tying your money up for between one and five years, with many providers not allowing any access to funds within the term and, if they do, it will eat into your return in the form of a substantial penalty.
For the current top-paying fixed term accounts, visit our fixed rate bond and Sharia account best buy tables.
Another thing to bear in mind is that if you leave the money in cash savings at least initially, you could benefit from the UK Financial Services Compensation Scheme (FSCS) Temporary High Balance protection, which covers life events such as the proceeds from the sale of your main home.
This protection allows up to £1m to be deposited with each provider, per banking licence, for up to six months from when you initially receive the funds, in addition to the usual £85,000.
Refer to our factsheet on Temporary High Balances for more details
This gives you some breathing space and the only decision you need to make then immediately is whether you leave the funds with your bank, often earning minimal interest or move it into a best buy account, which can make a meaningful difference to the interest you earn.
The answer to your question may well be to take a balanced approach – leaving some money accessible and then spreading the rest of the funds between notice accounts and even fixed term accounts to increase your overall return for that interim period.
However long that period is, on a significant lump sum, the higher interest rates on offer can make all the difference to your pocket.
If you would like advice on the best rates and most suitable accounts for you and also assistance with the administration involved in setting them up, our Cash Advice Service could be ideal for you. To find out more, call us on 0800 011 9705 or email info@savingschampion.co.uk.
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