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Cash

07/04/2019

The Basics

What is cash?

Cash is the safe bespectacled librarian to the more flamboyant rock star that is shares. It will keep your money safe but it won't work hard for you over the longer-term.

There's a lot to be said for boring and safe. You know what you're getting. Up to £85,000, your cash is guaranteed in most institutions by the Financial Services Compensation Scheme. But if you have at least a five-year timeframe for saving we think you need to consider the stock market.

In a nutshell

• Interest rates are at a measly 0.75%
• Inflation is higher so your cash savings are actually going backwards in terms of purchasing power
• Savings accounts often have better rates than cash ISAs
• Basic-rate taxpayers now get £1,000 of tax-free interest every year

Is It Right For Me?

Good if you ...

  • Need certainty
  • Need the money in 1 -2 years
  • Want a 'rainy day' fund

Not Good if you ...

  • Are saving for 5 years +
  • Want to beat inflation
  • Could be getting tax relief in a pension

People like you ...

57%

of UK adults hold some form of cash savings account

The Numbers

The Benefits

• You know what you're getting 

• Your easy access choices give you great flexibility

• You won't stress unduly about stock market wobbles

 

BUT we do believe that far too many people sit in cash for the long-term and this means you are going backwards after inflation!

The Detail


Some current deals

Cash is King. Or so they used to say. Of course today it’s more like some distant Baron 5,600th in line to the throne. Interest rates are at lows of 0.75% with no imminent signs of drastic change. Awful times for savers. Good times for borrowers.

Let’s be clear – cash is not risky, you know what you’re getting. We should all ideally have at least 3 months’ salary in a cash emergency fund AND for shorter-term saving it makes sense. But for savers the returns are really dire and may not beat inflation, so your savings account may stay the same, but it will buy less stuff. The most generous easy-access cash savings account is from Marcus by Goldman Sachs, with an interest rate of 1.45%. Then there's Coventry Building Society with 1.46%.

However, with some companies paying dividends of around 3-6%, don’t assume cash is your only option for an income. Consider the stock market too. Most of the interest on your cash should be free from tax. You have a personal savings allowance of £1000 (for a basic rate taxpayer, £500 for a higher rate taxpayer), meaning you can hold £100,000 in an account paying 1% without ever paying tax even if you don’t hold it in an ISA wrapper. These days, many savings accounts will pay better rates than cash ISAs.

If you just pile up cash in your current account, there is only likely to be one winner. And that’s not you and it’s not us – it’s the bank. Do shop around for the best cash deals. As we speak, for example, Nationwide's FlexDirect account pays 5% for the first 12 months, TSB Classic Plus pays 3% if you pay in £500 a month, and both Bank of Scotland Vantage and Lloyds Bank Club Lloyds pay 2%. So you can make your cash work harder than a limp 0.0001%!

If you’re after a fixed term of a year, Al Rayan Bank is offering 1.86% with a minimum deposit of £1,000. If you can keep your mitts off for 3 years that rises to 2.32%. Other good one-year fixed accounts include Gatehouse Bank with 1.85% and Family Building Society with 1.79%.

Rates correct as at November 2019

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