[UK] How do you save when you have more than £75,000?
July 17, 2016 11:29 PM   Subscribe

I'm in the fortunate position of having £69,000 in my Casa ISA this year and be able to put the £15,240 maximum allowance in. Unfortunately this will push me over the £75,000 FSA protection limit - so what are my options now and, assuming I plan to save again next year, what are my options then?

At some point I plan to use the money to fund a new house but, for the time being, it's sitting there in my Cash ISA earning interest (about 1.25%). The new house could be next year or it could be the year after - but it definitely has to happen as a new addition to the family means we are rapidly outgrowing the current place.

With that in mind, I'd like a solution that maximises the interest I get, keeps me within the FSA protection limit but doesn't limit my ability to take out the money when I need it ("instant access" or close as possible to that).

The easiest solution would be to just ignore the limit and put the money in the ISA - I don't think that Virgin Money will go under at any point but I am still wary of this, given the current Brexit situation.

The second easiest solution would be to fill the current ISA to, say, £73,000 (allowing £2k for interest) and then next year find a new Cash ISA. Although my concern with that is that the interest rate on the current one will plummet to something pathetic (which doesn't seem like a sensible saving strategy). In addition, at some point the interest payments will still push it over the £75,000 limit.

The third option could be to just put the excess money into the mortgage which would pay it off quicker. The interest rate on that is 1.19%. I'd still need to put something into my ISA for this year and I'd be limited by the amount I could pay off the mortgage - so even if I did that, I'd still have the problem that this year I'll hit the £75,000 FSA limit.

The fourth option is to keep it in my savings account which isn't tax free. That doesn't sound particularly tax efficient.

There is probably other options but I don't know what they are. There may also be gotchas with the options above.

Appreciate you aren't my financial adviser - but any thoughts or pointers you have would be appreciated.
posted by anonymous to Work & Money (5 answers total) 3 users marked this as a favorite
You know you can have multiple ISAs with different providers, right? The rule about one ISA is that you can only have one ISA with one provider per tax year.

I have multiple ISAs with different providers.

Also, you can put your money in fixed term savings ISA. IF you decide that you need it, just take it out of the fixed term savings account. There will be a penalty, like loss of 180 days of interest, but to be honest, it's far better than the dismal instant account saving rates, even with the withdrawal penalty. I took my money out once, from a Virgin 3 year Fixed ISA .
posted by moiraine at 11:42 PM on July 17, 2016 [2 favorites]

Moiraine's answer is probably best. As an unconventional idea, see what odds you can get on Virgin Money going bust in the next two years. Place a bet to hedge the potential loss of your £10000 that's over the FSA limit.
posted by crocomancer at 4:17 AM on July 18, 2016

If it's just the one year, how about a Santander 1 2 3 account? Jump through some hoops and it pays up to 3%.
posted by kadia_a at 5:16 AM on July 18, 2016 [2 favorites]

Since the start of the this tax year, you now (depending on tax band) have an amount of interest you can earn in a conventional savings account without paying tax. As kadia_a suggests, the 123 account is good for this.

posted by JonB at 12:24 PM on July 18, 2016

If it's just the one year, how about a Santander 1 2 3 account? Jump through some hoops and it pays up to 3%.

I was going to suggest this. We're taking advantage of it in order to park a windfall in the short term. As kadia_a says there are hoops to jump through, and there's a £20,000 cap on earning the 3%, but it's a decent rate and provides some peace of mind given current circumstances.
posted by sundaydriver at 4:50 AM on July 20, 2016

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