Where can you save a large sum?

piggy bankWorking out where to save a large sum of money is, of course, a very nice problem to have. But it isn't just the preserve of the rich.

There are numerous reasons why the not-so-well-off could also have a big sum to save, even if it's only for a short period of time.%VIRTUAL-SkimlinksPromo%
In the money
Perhaps you have received a large redundancy pay-out or an inheritance, or if you're lucky a big work bonus. In recent years the sale of property has also boosted many people's savings pots. For example, you might sell your home and temporarily move into rented accommodation in order to break the property chain, before planning to buy again.

You might not consider yourself wealthy but for the interim period when you are renting you could have a large sum of money in your bank – all the equity from selling your home. Of course, you'll need to use it as a deposit again at some point but, for now, you should focus on getting a good return.

However, with savings rates having been slashed in recent years it is very hard to find a home for your money that pays a level of interest equal to inflation, let alone helps your money grow.

Bleak picture
According to financial information provider Moneyfacts there are 861 standard savings accounts in the market, but only one non-ISA and six cash ISAs currently beat inflation (2.4%) for basic rate taxpayers.

Sylvia Waycot, editor at Moneyfacts.co.uk, said: "Savers need to get angry. They have been ignored for too long. Taking into account the taxman's share and the cost of living, savers need an account paying a hefty 3% before they earn a real rate of return and yet the average no notice savings account only pays a paltry 0.72%."

If you have a large sum to save you may find you have a slight advantage as some savings accounts use tiered rates of interest that get higher the more you deposit. But even these rates are pretty poor.

Plus, remember that the Financial Services Compensation Scheme only protects the first £85,000 saved with one financial organisation so, if you have more than that, ensure you split it between different companies to protect yourself should any of them go under.

So where do you start if you want to find a decent return on a large lump sum?

Looking for somewhere to stash your money? Check the latest savings rates

When do you need it?
The first thing you should ask yourself is when you will realistically need access to your money. If you don't have a pressing need for the money you may be willing to tie it up for a bit longer, and this could mean you achieve a higher rate of interest, as five-year savings bonds pay higher rates of interest than one-year deals for example.

Below are some of leading fixed term accounts, based on a large lump sum of £50,000 to £100,000, according to Moneyfacts:
1-year fixed rate 2.00% (Julian Hodge Bank)
2-year fixed rate 2.25% (State Bank of India)
3-year fixed rate 2.50% (State Bank of India)
4-year fixed rate 2.55% (Shawbrook Bank)
5-year fixed rate 3.00% (Virgin Money)

What if you need access?
If you can live with having to wait for a short while to get your hands on your money, a notice account might appeal, and United Bank UK has a 90-day notice account paying 2.25%.

But if you literally need instant access to your money the achievable rate drops significantly to just 1.70% (available from Nationwide and Derbyshire BS).

Tax-free savings
By sheltering your cash in a tax-free ISA you can protect your interest from the taxman, and achieve a higher return – but there are annual limits to the amount you can save in cash – £5,760 for this tax year. Cheshire Building Society offers a tax-free interest rate of 2.3% for example, with instant access, and it will also allow you to transfer existing ISAs into the account.

Because you can build your ISA pot by using your allowance each year, it's possible to have tens of thousands of pounds protected from the taxman – and you can choose from fixed term ISAs or instant-access deals.

Could you earn more interest on your money by lending it out?

Think outside the box
Let's face it, savings rates are disappointingly low, so some people have resorted to alternative ways of getting a return. One option is to put your savings into a high interest earning current account. This might sound a little strange but some current accounts offer higher rates of interest than you can achieve on savings – for example you can earn up to 3% with Santander, Lloyds TSB and Bank of Scotland on specific current accounts.

However you will have to jump through a few hoops by managing your account like a current account – setting up direct debits and putting a minimum sum into the account each month. So there's a bit of work involved but for those who are serious about achieving the maximum return on their money, it's worth checking out.

Finally, there is a growing interest in peer-to-peer lending, where those with cash lend it to borrowers for an agreed rate of interest. The achievable rates of return can be much higher than with traditional deposits, but your money is not protected by the FSCS and there is a risk that the person you lend your money to may not pay it back at all.

Sadly, it doesn't matter if you have £100 or £100,000 to save, your options for an inflation-busting return are limited. While the Government continues to lend cheap funds to banks and building societies through its Funding for Lending Scheme, there is no incentive for them to compete for deposits from savers. So it doesn't look like things will improve any time soon. All you can do is make the most of your money to ensure its value isn't eroded by inflation.

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Where can you save a large sum?
Figures from charity Age UK show that 29% of those over 60 feel uncertain or negative about their current financial situation - with millions facing poverty and hardship. Even though saving for retirement is not much fun, the message is therefore that having to rely on dwindling state benefits in retirement is even less so. To avoid ending up in this situation, adviser Hargreaves Lansdown recommends saving a proportion of your salary equal to half your age at the time of starting a pension. In other words, if you are 30 when you start a pension, you should put in 15% throughout your working life. If you start at 24, saving 12% of your salary a year should produce a similar return.
Many older couples rely on the pension income of one person - often the man. Should that person die first, the other person can therefore be left in a difficult position financially.
One way to prevent financial hardship for the surviving person is to take out a joint life annuity that will continue to pay out up to 67% of the original payments to the surviving partner should one of them die.

The disadvantage of this approach, however, is that the rate you receive will be lower. Again, the Pensions Advisory Service on 0845 601 2923 is a useful first port of call if you are unsure what to do.

Around 427,000 households in the over-70 age groups are either three months behind with a debt repayment or subject to some form of debt action such as insolvency, according to the Consumer Credit Counselling Service (CCCS).

Its figures also show that those aged 60 or older who came to the CCCS for help last year owed an average of £22,330. Whether you are retired or not, the best way to tackle debt problems is head on.

Free counselling services from the likes of CCCS and Citizens Advice can help with budgeting and dealing with creditors.

Importantly, they can also conduct a welfare benefits check to make sure you are receiving the pension credit, housing and council tax benefits, attendance and disability living allowances you are entitled to.

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The average UK pensioner household faces a £111,400 tax bill in retirement as increasing longevity means pensioners are living on average up to 19 years past the age of 65, according to figures from MetLife. And every year in retirement adds an extra £5,864 in direct and indirect taxes based on current tax rates to the costs for the average pensioner household. You can be forced to go bankrupt if you fail to pay your taxes, so it is vital to factor these costs into your retirement planning.It is also important to check that you are receiving all the benefits and tax breaks you are entitled to if you want to make the most of your retirement cash.

The cost of a room in a care home in many parts of the country is now over £30,000 a year, according to figures from Prestige Nursing and Care. So even if the prime minister announces a cap on care costs - last year the economist Andrew Dilnot called for a new system of funding which would mean that no one would pay more than £35,000 for lifetime care - families will still face huge accommodation costs. Ways to cut this cost include opting for home care rather than a care home. Jonathan Bruce, managing director of Prestige Nursing and Care, said: "For older people who may need care in the shorter term, home care is an option which allows people to maintain their independence for longer while living in their own home and should be included in the cap." However, the only other answer is to save more while you can.
Older Britons are often targeted by unscrupulous criminals - especially if they have a bit of money put away. For example, many over 50s were victims of the so-called courier scam that tricked into keying their pin numbers into their phones and handing their cards to "couriers" who visited their homes. It parted consumers from £1.5 million in under two years. Detective Chief Inspector Paul Barnard, head of the bank sponsored dedicated cheque and plastic crime unit (DCPCU), said: "Many of us feel confident that we can spot fraudsters, but this type of crime can be sophisticated and could happen to anyone." The same is true of boiler room scams that target wealthier Britons with money to invest, offering "once-in-a-lifetime" opportunities to snap up shares at bargain prices. Tactics to watch out for include cold calling, putting you under pressure to pay up or lose the opportunity for good, and claiming to have insider information that they are prepared to share with you.
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Where can you save a large sum?

If, like many Britons, you have failed to save the cash you need to maintain a comfortable standard of living in retirement, one option is to sell your home and downsize to a smaller property, using the money leftover to cover your living costs.
If moving out of the family home is too much of a wrench, however, the good news is that equity release schemes allow you to stay in your house or flat while still using the equity built up in it to provide some extra cash. The downside of the schemes, which work a bit like mortgages, is that you may not have much left to pass on to any children or other relatives.
But that's a small price to pay for a reasonable standard of living. For more information, try Age UK on 0800 169 6565.

Choosing the right annuity can have a significant impact on your retirement income. And as with most pensions, you automatically have what's called an 'open-market option' (OMO), you can scour the market for the highest annuity rate.
It is worth checking what your pension provider is offering first, though, as some companies offer guaranteed rates for existing customers that are likely to beat those available elsewhere. The Pensions Advisory Service on 0300 123 1047 is a good place to get some free advice.

On retirement, most people convert their pension fund into a guaranteed income annuity that pays out the same amount every month for the rest of their lives.
However, you can also choose an increasing annuity that pays out smaller amounts in the first few years but offers larger payments further down the line. This may prove a wise move if the rate of inflation remains at over 2%.

It is now easier to work later in life because the "default retirement age" has been scrapped.
People approaching retirement age and worrying about money can therefore choose to work for a few years longer - potentially transforming their financial situation. Other than the extra income from working, these people can look forward to higher state pensions, and higher annuity rates due to their greater age.
They can also benefit from bigger tax allowances and the fact that they no longer have to pay National Insurance contributions. Check out this nidirect website for more details.

You could get a much better rate with an impaired-life annuity if you have a medical condition that is likely to reduce your life expectancy.
Incredibly, even snoring, which is a common symptom of Sleep Apnoea could have an impact.
According to figures from MGM Advantage, a man with this condition could receive an extra £12,000 retirement income over the course of their retirement - or £571.44 extra money each year. Click here to find out more.

To maximise your retirement income, it is vital to ensure that you are receiving all the benefits to which you are entitled. These include the basic State Pension, and in some cases, the additional State Pension.
If you are on a low income, you could also qualify for the guaranteed element of Pension Credit, while those with some savings may get the savings element of this benefit. For more information about these and other benefits such as the Winter Fuel Payment, click here.

Many older couples rely on the pension income of one person - often the man. Should that person die first, the other person can therefore be left in a difficult position financially.
One way to prevent financial hardship for the surviving person is to take out a joint life annuity that will continue to pay out up to 67% of the original payments to the surviving partner should one of them die.
The disadvantage of this approach, however, is that the rate you receive will be lower. Again, the Pensions Advisory Service on 0845 601 2923 is a useful first port of call if you are unsure what to do.

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