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Where to put £5k over 6 months for the best return

Where to put £5k over 6 months for the best return

Category: Savings
12/06/2018

With rumours abound that the Bank of England will increase the base rate at least once more this year, and high hopes that savings rates will follow suit, you may not want to commit to a one-year bond or longer. For those with £5,000 who would like to earn a decent rate of interest over the next six months while they wait for the base rate (and savings rates) to rise, we've looked at your best options.

Best flexible deals

Since we last looked at this question almost seven years ago, a lot has changed and it's now unheard of to get a return of 3.0% unless you put small amounts aside in a regular saver each month for a year. That doesn't mean you should leave your savings in an account that pays almost no interest, however.

To get a return from a short-term account without having to wait a whole year, you'll need to look for savings products that offer a monthly interest option. To then be able to get access to your savings after six months, you have two options: a notice account or an easy access deal.

Notice accounts pay slightly higher interest rates, but require a certain amount of warning before you can take your money out again. This means that you'll have to note down in your diary the date – six months minus the amount of notice – when you will need to contact your provider. Be aware also that the best-paying notice accounts tend to pay interest annually rather than monthly.

Easy access accounts offer lower interest rates, but much more freedom, with both withdrawals and additions usually allowed without restriction (although note that some accounts may only allow a certain number of withdrawals per year). Some accounts will come with a bonus that expires after a year, but given the six-month intention of this exercise, this shouldn't matter too much for interested savers.

To help you choose between the two types, we've compiled a table of all the best notice and easy access accounts that pay interest on a monthly basis, and allow deposits of £5,000. We've included the estimated amount of interest you can get over six months and a year, but as all these rates are variable, they can change.

AER Term/ Notice Estimated return over six months (on £5,000) Estimated return over one year (on £5,000)
Paragon Bank 120 Day Notice (Issue 8) 1.55% 120 Day Notice £38.62 £77.55
Milestone Savings 120 Day Notice Account 1.53% 120 Day Notice £38.00 £76.00
Al Rayan Bank 90 Day Notice Account 1.51%* 90 Day Notice £37.50 £75.00
Wyelands Bank 95 Day Notice Account 1.40% 95 Day Notice £34.85 £69.94
ICICI Bank UK HiSAVE Bonus Saver - Series Two 1.35%** None £33.59 £62.55
Virgin Money Double Take E-Saver Issue 4 1.30% None £32.34 £64.88
RCI Bank UK Freedom Savings Account 1.30% None £32.34 £64.88
Source: moneyfacts.co.uk Compiled 22/03/2018

*These accounts are Sharia'a compliant, so the rate mentioned is the expected profit rate. Additionally, interest must be paid away on these accounts, so there is no compound interest possible.

**Bonus of 0.70% only added to the interest rate until 31.01.2019.

Savings taxation

A more welcome change in the last seven years has been the introduction of the personal savings allowance, which means you don't need to worry about paying tax on any savings outside ISAs unless you earn more than £1,000 in interest in a single year. As you can see, you will not come close to this limit with even the best notice or easy access account.

If you would still like to guarantee the tax-free status of your savings and haven't yet used up your annual ISA allowance (£20,000 for both the 2017/18 tax year and the 2018/19 tax year which starts on 6 April), you could consider a cash ISA.

The highest rate you'll currently be able to get on an ISA paying monthly interest is 1.31% AER from Charter Savings Bank (on 95 days' notice), followed by 1.30% AER from Marsden BS (on 120 days' notice). If you don't want to give any notice, there's Paragon Bank's easy access cash ISA with a rate of 1.25% AER to consider.

What next?

Savings rates can change at any time, so by the time you read this, the deals mentioned here may already be gone. To get the most up-to-date list of accounts that pay monthly interest and allow £5,000 deposits as well as flexible access, go to our savings search page and fill in your investment and 'Interest paid' monthly, uncheck the fixed account options and search away.

Alternatively, you could simply go to our monthly interest account chart and ignore those accounts that require a minimum deposit that is above £5,000.

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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