Q We have just accepted an offer on our house from a cash buyer and plan to move into rental accommodation until we find a house of our own to buy, hopefully once the market picks up again in the spring.
We hope to have a cash lump sum of around £160,000 after paying off our mortgage. This will form a deposit for the purchase, but may sit for several months until we need it. Do you have any advice for how we can get the best return on this until we find our next home? KL
A Because you are not sure exactly when you’ll need to use your cash lump sum, I would go for a no-notice savings account which doesn’t tie your money in for a fixed amount of time as a notice or term account would. And I would also avoid opening any of the accounts on offer from the high street banks because, according to the Moneyfacts savings comparison tool, you’ll get the best rates from banks you may never have heard of.
For example, the Freedom Savings Account from RCI Bank UK pays 1.3%; the Online Easy Access Account from the Bank of Cyprus pays 1.28%; while the Flexible Saver from Ford Money has a rate of 1.17%.
You needn’t worry that, because you may not have heard of these deposit takers, your money won’t be as safe as it would be with a high street bank: both the Bank of Cyprus and Ford Money belong to the Financial Services Compensation Scheme (FSCS). This means that if a bank goes bust, up to £85,000 of your savings are protected (or £170,000 if they are in a joint account).
Under rules introduced in April 2015, protection of up to £1m is available for up to six months for what are referred to as “temporarily high balances”. To be classed as such the money deposited must have come from things like the proceeds from selling your home (as in your case), compensation payments, redundancy money, an inheritance or a large insurance payout.
RCI Bank UK does not belong to the FSCS but offers similar protection under the
French Depositor Compensation scheme which, like most countries in the European Economic Area, protects the first €100,000 (or sterling equivalent) per person.
