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Managing a savings portfolio

Getting the most from your accounts

If you have a large sum of money that you want to save, you'll probably not want to put all your eggs in one basket. You'll probably need some flexibility in accessing your funds and possibly some protection against fluctuating interest rates.

Here are some quick tips to help you get the most from our accounts.

Spread your savings

Spreading your savings across a number of different types of account can be a good idea for several reasons:

  • Access - you'll probably not want to lock all your money away. A combination of easy access and fixed term accounts means you can withdraw some of your money when you need it and take advantage of better long term savings rates for the rest
  • Staggered maturity - by using a number of fixed term accounts with different terms, you'll have accounts maturing at different times. This means all of your funds aren't tied in for the long term and you can more regularly take advantage of new savings opportunities as they arise
  • Interest rate volatility - fixed term accounts mean you know exactly how much your savings will earn and over what time period. Interest on easy access accounts will change. The key is to find the balance you're comfortable with.

Use your tax free Cash ISA allowance

No matter what type of saver you are, you shouldn't ignore your Cash ISA allowance. At £5,640 for the 2012/13 tax year it may be a small part of a substantial savings portfolio. But as the years progress you'll be able to shelter more of your savings in ISAs. Over the long term, this can make a real difference to your savings pot.

ISAs >

Watch out for charges

Remember, you could face a charge if you withdraw money early from a fixed term account. As far as possible, try to only save what you can afford to lock away in a fixed term account and only make withdrawals in an emergency. A single withdrawal might have little impact but if you make regular withdrawals the charges could stack up.

Gross is the contractual rate of interest payable before the deduction of income tax at the rate specified by law.

AER stands for Annual Equivalent Rate and illustrates what the interest rate would be if interest was paid and compounded once each year. As every advertisement for a savings product, which quotes an interest rate, will contain an AER you will be able to compare more easily what return you can expect from your savings over time.

NET rates are illustrative only, allowing for the deduction of income tax at 20%. If you are a higher rate tax payer, you may have a further amount to pay. If we deduct more tax than you have to pay this can be reclaimed from HMRC.

Tax free is the contractual rate of interest payable where interest is exempt from income tax.

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