Cash Investment

Published / Last Updated on 15/05/2017

Cash Investment: Cash and Deposit Based Investments Cash Investment

There are literally hundreds of different companies that offer current accounts, deposit accounts and savings accounts.

This page covers cash/bank account investing for adults.  For children, see children's savings.

Which cash deposit account is the best? 

The answer is not easy.  There are so many accounts, they all offer similar things and the fact remains that interest rates change quickly.

You should not select a cash based account on interest rates alone.

Many banks and building societies offer rates that are attractive one day and not competitive the next.

Do not invest more than £85,000 with one bank: Insolvency Compensation Limits:

As the maximum compensation payable due to insolvency is £85,000, this was increased  following the credit crunch crisis. 

Maximum compensation for insolvency £85,000 per person per banking group licence, this was increased from old limits (£31,700 then £35,000 then £50,000)  following financial crisis and credit crunch.

Taxation: Most Bank and Building Society interest is taxable.

1. Bank Accounts

Factfile: Bank Accounts

Lump sum investments: Yes for most accounts

Regular premiums allowed: Yes for most accounts

Flexible payments allowed (stop/start/additional/increase/decrease): Yes for most accounts

Investment Risk Profiles Available:

Changing funds and risk profile allowed: Not applicable

Moving to another company allowed: Yes

Life Insurance Included: No

Personal Tax Benefits:

  • Capital gains tax free
  • Interest subject to Income Tax

Can be held inside Trust: Yes

Suitable For:

  • Children
  • Adults
  • Business
  • Trusts
  • Charities
  • Non Tax Payers
  • Basic Rate Tax Payers
  • High Rate Taxpayers - limit funds as high taxes

Brief Description:

Banks and Building Societies offer a wide range of accounts to suit most people. These range from instant access accounts, to notice accounts and accounts that can be operated by telephone or post. Bank and Building Society Accounts are classed as cash deposits. They are generally safe investments but do not tend to provide much protection against inflation. Interest is paid on the amount you have in a Bank or Building Society Account and, depending on rates at the time, the interest paid may rise and fall. The actual money that you put into the account will stay the same, meaning that its real value may fall over time. The interest you receive will also depend on the type of account you have. Generally, the more notice you can give before taking withdrawals, the better the interest rate. Therefore, notice accounts generally pay more interest than instant access accounts. Because there are so many different accounts on offer it is wise to shop around for an account and interest rate that suit your needs.

2. Building Society Account

Factfile: Building Society Accounts

Lump sum investments: Yes for most accounts

Regular premiums allowed: Yes for most accounts

Flexible payments allowed (stop/start/additional/increase/decrease): Yes for most accounts

Investment Risk Profiles Available:

Changing funds and risk profile allowed: Not applicable

Moving to another company allowed: Yes

Life Insurance Included: No

Personal Tax Benefits:

  • Capital gains tax free
  • Interest subject to Income Tax

Can be held inside Trust: Yes

Suitable For:

  • Children
  • Adults
  • Business
  • Trusts
  • Charities
  • Non Tax Payers
  • Basic Rate Tax Payers
  • High Rate Taxpayers - limit funds as high taxes

Brief Description:

Banks and Building Societies offer a wide range of accounts to suit most people. These range from instant access accounts, to notice accounts and accounts that can be operated by telephone or post. Bank and Building Society Accounts are classed as cash deposits. They are generally safe investments but do not tend to provide much protection against inflation. Interest is paid on the amount you have in a Bank or Building Society Account and, depending on rates at the time, the interest paid may rise and fall. The actual money that you put into the account will stay the same, meaning that its real value may fall over time. The interest you receive will also depend on the type of account you have. Generally, the more notice you can give before taking withdrawals, the better the interest rate. Therefore, notice accounts generally pay more interest than instant access accounts. Because there are so many different accounts on offer it is wise to shop around for an account and interest rate that suit your needs.

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3. TESSA - TOISA

Factfile: TESSA only ISAs - TOISAs (monies from old styles Tax Exempt Special Savings Accounts now converted to an ISA).

You will not come across this term much nowadays as most people (and indeed investment companies only refer to ISAs and never their predecessors).

Lump sum investments: No

Regular premiums allowed: No

Flexible payments allowed (stop/start/additional/increase/decrease): No

Investment Risk Profiles Available:

Changing funds and risk profile allowed: No

Moving to another company allowed: Yes - ISA Transfers

Life Insurance Included: No

Personal Tax Benefits:

  • Capital gains tax free
  • Income tax free

Can be held inside Trust: No

Suitable For:

  • Adults
  • Non Tax Payers
  • Basic Rate Tax Payers
  • High Rate Taxpayers

Brief Description:

If you had a TESSA (Tax Exempt Special Savings Account) it would have been taken out before 6th April 1999 (when they ceased to be available) and could run for five years i.e. they closed and were converted on 5th April 2004 to ISA.  Any interest earned by these accounts was tax free after five years.  If your TESSA was to be cashed in before five years, your tax position would probably be the same as if you had taken out a normal bank or building society savings account. The only thing that was different is the amount of return you receive - TESSAs usually provided a slightly higher return than normal accounts. TESSAs are no longer available and they have either been cashed in or converted to ISAs known as TESSA only ISAs (allowing more than the normal annual allowance to be invested).

4. Bank Notice Account

Factfile: Bank and Building Society Notice Accounts

Lump sum investments: Yes

Regular premiums allowed: Yes

Flexible payments allowed (stop/start/additional/increase/decrease): Yes - but may be penalties by losing interest

Investment Risk Profiles Available:

Changing funds and risk profile allowed: No

Moving to another company allowed: Yes, but may be penalties by losing interest

Life Insurance Included: No

Personal Tax Benefits:

  • Capital gains tax free
  • Interest subject to income tax

Can be held inside Trust: Yes

Suitable For:

  • Children
  • Adults
  • Business
  • Trusts Charities
  • Non Tax Payers
  • Basic Rate Tax Payers
  • High Rate Taxpayers - but limit amounts invested due to high taxes

Brief Description:

Notice accounts pay higher interest than normal bank and building society accounts as they have restrictions on when you can withdraw your money.  Notice accounts can have many different notice periods such as weekly, monthly, 3 monthly, 6 monthly.  You can withdraw your money without notice but you may lose interest.

5. Bank Deposit Bond: Fixed Term Deposit Bond Accounts

Factfile: Bank and Building Society Fixed Term Deposit Bond Accounts

Lump sum investments: Yes

Regular premiums allowed: No

Flexible payments allowed (stop/start/additional/increase/decrease): No

Investment Risk Profiles Available:

Changing funds and risk profile allowed: No

Moving to another company allowed: Yes, but may be penalties by losing interest

Life Insurance Included: No

Personal Tax Benefits:

  • Capital gains tax free
  • Interest subject to income tax

Can be held inside Trust: Yes

Suitable For:

  • Children
  • Adults
  • Business
  • Trusts
  • Charities
  • Non Tax Payers
  • Basic Rate Tax Payers
  • High Rate Taxpayers - but limit amounts invested due to high taxes

Brief Description:

Fixed Term Deposit Bond Accounts pay higher interest than normal bank and building society accounts as they have restrictions on when you can withdraw your money. You can only withdraw your money at the end of the fixed rate period for example a 1 year fixed rate bond or a 2 year fixed rate bond.  You can withdraw your money without notice but you may lose interest.

Cash Investment Section


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