Building Society windfall survey: Safe bets for those with a windfall or two to invest

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The Independent Online
So you've sold your shares - now what to do? You might be tempted to take the windfalls coming from converting building societies and and blow it all on a holiday. On the other hand you might want to put the money away for a rainy day.

There are a range of savings options available but if you've always been a building society saver, you're likely to want to continue with low-risk opportunities, rather than play the stockmarket through a personal equity plan.

If you are happy to lock your cash up for five years you should consider a tax exempt savings account - a Tessa. All returns on Tessas are tax free as long as you keep them for five years.

You can choose a fixed rate deal or opt for a variable rate and suffer the vagaries of the economy. Currently you can get up to 7.5 per cent gross on a fixed rate and up to 7 per cent gross on a variable rate, although all savings rates are set to rise following last week's 0.25 per cent rise in base rates.

Some of the better Tessa deals require minimum balances. Abbey National's market-leading fixed rate Tessa requires an opening balance of pounds 9,000 while West Bromwich building society's variable rate Tessa requires a minimum pounds 3,000. But there are plenty of Tessas which can be opened with as little as pounds 1. You are allowed to put up to pounds 3,000 into a Tessa in the first year so it could be a good home for two or three windfall bonuses if you're lucky enough to qualify.

It may be worth opening a speculative Tessa with a building society you think may go public - which would leave you in line for another windfall bonus. Picking potential winners is difficult, particularly as there have been conversion rumours about most of the remaining societies. The biggest building society following this summer's rash of conversions will be the Nationwide. Its Tessa currently pays 6.5 per cent gross.

Other societies which could convert - and their Tessa rates - are as follows: Birmingham Midshires, 6.5 per cent; Bradford & Bingley, 6.75 per cent; Britannia, 5.5 per cent; Coventry, 6.65 per cent; Newcastle, 6.4 per cent; Norwich & Peterborough, 6.05 per cent; Skipton, 6.25 per cent; West Bromwich, 7 per cent and Yorkshire, 6.35 per cent.

If you don't want to lock your cash away for five years you could consider a higher interest paying account. If you want an instant access account, the Co-operative Bank's Save Direct is paying 4 per cent net while Sainsbury's Instant Access pays 4.6 per cent net.

If you don't mind tying your money up for a short time then consider a notice account. Good deals at present include Cheltenham & Gloucester's Direct 30, which pays 4.4 per cent net, and First National's 90 Day Notice, which pays 4 per cent net.

Many building societies also offer fixed rate bonds and escalator bonds. The latter pay increasing interest rates each year over a five-year term. For instance, the Halifax's Stepped Income Bond pays 4.6 per cent net in the first year and 8.8 per cent in year five. However, for both kinds of products the minimum balance is generally around pounds 5,000 for the best rates.

Away from the building societies you could look at friendly societies - which may appeal to those used to the benefits of mutuality previously enjoyed at their building society. Under recent legislation friendly societies can now offer a range of savings and investment opportunities on top of their traditional pounds 25-a-month regular savings 10-year plans.

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