So, I am going to move this cash up to Level 3 of the DIY Income Investor Income Pyramid (i.e. from Level 2 'easy access') - managing a chunk of cash that is not needed for day-to-day use or as an Emergency Fund. Inevitably, it is necessary to 'roll over' these cash accounts as they come to the end of their term.
I discussed in a previous post some of the issues and options, including:
- inflation-linked bonds offered by NS&I and other banks
- the outlook for inflation
- the downturn in money market 'swap rates'
Also tax is a key issue - as you want to maximise your after-tax income. In our case, we don't pay any tax on the income from our cash savings accounts, but for those that do the NS&I inflation-linked account looks attractive, as it is tax-free.
Personally, I can't get a good grip on future inflation rates - and I don't believe that NS&I would offer the deal if the Treasury didn't think it was better for them than us.
So the account we decided on was the BM Savings 5-year 5.05% bond, which can be opened online and pays interest annually. As we already have an account with BM Savings, it was easy enough to open the account and transfer in the cash.
I am not a financial advisor and the information provided does not constitute financial advice. You should always do your own research on top of what you learn here to ensure that it's right for your specific circumstances.