Where to save and protect larger sums now NS&I is less attractive
Savers with large sums of money to keep in cash face a tough decision – either to split it into FSCS-sized chunks or potentially to leave some of their money unprotected.
NS&I can be a really useful place for large cash deposits, as the full amount deposited with them is protected by HM Treasury.
However, what happens if NS&I doesn’t offer an account that suits these savers’ circumstances – or the rate isn’t competitive?
Although NS&I still accepts a maximum deposit of £1m per person into its easy access Income Bonds and £2m per saver into the easy access Direct Saver, the popular Guaranteed Income and Growth Bonds slashed the maximum deposit into each issue, from £1m to just £10,000 in 2018 – and in fact were withdrawn from sale completely in August 2019.
So, those with large sums of money who don’t need easy access and want to earn more face a decision to either split money into FSCS-sized chunks or leave some of their money unprotected.
Many will not have the time or patience to split their money, so will probably leave it residing with their high street provider and therefore earn next to nothing.
Or they could search for a provider that they feel has enough financial strength to leave a larger deposit with.
If the latter is the likely option, you could look at the ratings agencies, such as Moody’s and Fitch, to get a better indication of the providers financial health, although it is no guarantee of the future security of their cash.
The ratings agencies themselves are keen to point out that these ratings are just their opinions of the relative credit risk of fixed income obligations.
They address the possibility that a financial obligation will not be honoured as promised. Such ratings reflect both the likelihood of default and any financial loss suffered in the event of default.
The ratings are classified slightly differently with each agency, but all generally consider that those with an A rating or above are judged to be of a higher quality.
All of the top six high street banks get at least an A rating from Moody’s – but offer really pitiful rates.
Should a saver with a large sum decide that they would prefer to use a provider with a minimum A rating, they could miss out on thousands of pounds if they don’t also consider the rate on offer.
Many of the providers in the best buy tables below choose not to get a credit rating for a variety of reasons. Check with the ratings agencies or providers themselves to confirm. Contact your adviser or Savings Champion if you need to find providers that do have a good rating.
For simple savings accounts that will allow you to withdraw cash without notice, these are the best rates:
Fixed rate bonds
For a fixed interest rate over a set period, these are the top rates on offer at the moment:
For those happy to consider a Sharia account, see the top accounts available below:
Remember, rather than a fixed rate of interest, the return is an expected profit rate, so is not guaranteed.
Apart from scouring the whole UK savings market and opening multiple savings accounts in order to stick within the FSCS limit, with all the paperwork that come with each, there is a simpler way to earn more than the high street banks are offering but keep the paperwork and hassle to a minimum.
Cash Savings Platforms are the latest innovation for savers – and as they develop further could be the answer for savers who are cash rich but time poor.
They are savings supermarkets, allowing savers to buy off the shelf savings products (from those that are available) with one application – giving those with larger amounts to deposit an easier way to split their cash between providers, so that they don’t exceed the £85,000 FSCS limit; helping to achieve a competitive return whilst keeping your cash protected in a simple, easy to use way.
How these platforms work varies from provider to provider, but the premise is the same – one application and then you have access to a variety of accounts.
On the downside, they are not whole of market, so you may not earn the very best rates available.
But if they help to keep your money safe and earning more than it would languishing with your high street bank, but with minimal paperwork – both initially and going forward - then they definitely have their place.
Although NS&I is a trusted and useful institution, recent changes to what is available means that it’s no longer as helpful as it once was. But there are other options that could help to keep larger cash sums safe and earning more than the high street banks.
Despite not offering as promising returns as it once did, NS&I has a history that goes back to the 1800's. It is also seen as a national treasure, learn more about this in our article why is NS&I so popular.
For more information about how to protect and grow your wealth get in touch and arrange a free consultation.