Your Money: Windfall Special - Make that windfall grow

Planning to put your building society bonanza away for a rainy day? Neil Baker tells you how

The postman has never been more popular, as he brings the news of windfall shares to millions. The billions of pounds involved are enough to make the Bank of England nervous that if too much of the cash went on a spending spree, it could blow the economy off course. So far, however, the indications are that Eddie George, the Governor, does not need to lie awake worrying at night.

That might not be good news for the travel agents, yacht chandlers and DIY store chiefs hoping for a bonanza - but it suggests that the majority of windfall collectors have half an eye to the long term in deciding what to do with the cash.

For many, the money offers an opportunity to kick-start a savings account or start setting aside some cash for the first time. While fund managers and stockbrokers are eager to promote the merits of their personal equity plans, many savers will undoubtedly prefer to stay with savings accounts.

You will get better rates if you are prepared to tie your money up for a while - although you should keep some cash available for instant access.

One of the best instant-access rates on offer is 6.4 per cent gross from Nationwide. The minimum deposit is pounds 500. Cheltenham & Gloucester is paying 6 per cent on deposits of at least pounds 1,000. If you can top your windfall up with other savings, Northern Rock is offering 6.35 per cent on deposits of at least pounds 5,000.

Among the notice accounts, Nottingham Building Society is offering 6.4 per cent on deposits of at least pounds 2,500 with its 30-day account. The Cheltenham & Gloucester 30-day account pays 5.5 per cent on deposits of just pounds 100.

For those who are able to lock away windfall cash for five years, consider a Tax-Exempt Special Savings Account, or Tessa. These pay interest tax- free - as long as you do not withdraw any of your capital and not more than 75 per cent of the interest until the end of the five-year term. You can still get your money if you really need it, but you lose the tax benefits. You can invest up to pounds 3,000 in a Tessa in the first year and up to pounds 1,800 in each of the subsequent four years, to a maximum of pounds 9,000.

Remember that the returns on Tessas are tax-free, whereas the rates on other accounts are normally quoted gross. So for a basic-rate taxpayer, 7.7 per cent from a Tessa would be equivalent to 10 per cent gross from a regular taxable savings account.

Some of the best deals require a high starting deposit - because they are aimed at attracting people who already have a Tessa with another bank or building society. But there are some good deals around for first-timers. The West Bromwich is offering 7 per cent on starting deposits of pounds 3,000. For smaller deposits, Monmouthshire society is offering 7 per cent on pounds 1,000 and Principality is offering 6.8 per cent on pounds 500.

Unfortunately, you are only allowed to have one tax-exempt account. So if you have one already, it might be worth considering other forms of risk-free savings, such as National Savings Certificates.

Index-linked National Savings Certificates currently pay 2.5 per cent tax-free above the rate of inflation when held for five years. The minimum investment is pounds 100. You need to give eight days' notice to get your money back, and lose your interest and index-linking if you want your money back in the first year.

Banks and building societies also offer fixed-rate bonds, which repay your capital plus a fixed amount of interest at the end of a set period or at the end of each year. The Nationwide one-year fixed-rate bond pays 7 per cent on deposits of at least pounds 500. It also offers a two-year bond paying 7.3 per cent. The Halifax is offering 7.4 per cent on its three- year bond with a minimum deposit of pounds 2,000.

Lightning is not supposed to strike twice, but if you fancy your luck you might decide to invest your windfall cash in another building society which could opt to convert from a mutual. That would bring another windfall your way.

A lot of the societies have said that they want to maintain their mutual status, but just for the record, the possibilities would include: Nationwide, Birmingham Midshires, Bradford & Bingley, Britannia, Coventry, Newcastle, Norwich & Peterborough, Skipton, West Bromwich and Yorkshire. Some of these pay good rates on their Tessas and may be worth considering for that reason alonen

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at

peoplePair enliven the Emirates bore-draw
Arts and Entertainment
tvPoldark episode 8, review
Britain's opposition Labour Party leader Ed Miliband (R) and Boris Johnson, mayor of London, talk on the Andrew Marr show in London April 26
General electionAndrew Marr forced to intervene as Boris and Miliband clash on TV
Finacial products from our partners
Property search
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Ashdown Group: Treasury Assistant - Accounts Assistant - London, Old Street

    £24000 - £26000 per annum + benefits : Ashdown Group: A highly successful, glo...

    Ashdown Group: Business Analyst - Financial Services - City, London

    £50000 - £55000 per annum: Ashdown Group: Business Analyst - Financial Service...

    SThree: Trainee Recruitment Consultant

    £18000 - £23000 per annum + OTE £45K: SThree: At SThree, we like to be differe...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + competitive: SThree: Did you know? SThree is the o...

    Day In a Page

    General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband

    Chuka Umunna: A virus of racism runs through Ukip

    The shadow business secretary on the benefits of immigration, humility – and his leader Ed Miliband
    Yemen crisis: This exotic war will soon become Europe's problem

    Yemen's exotic war will soon affect Europe

    Terrorism and boatloads of desperate migrants will be the outcome of the Saudi air campaign, says Patrick Cockburn
    Marginal Streets project aims to document voters in the run-up to the General Election

    Marginal Streets project documents voters

    Independent photographers Joseph Fox and Orlando Gili are uploading two portraits of constituents to their website for each day of the campaign
    Game of Thrones: Visit the real-life kingdom of Westeros to see where violent history ends and telly tourism begins

    The real-life kingdom of Westeros

    Is there something a little uncomfortable about Game of Thrones shooting in Northern Ireland?
    How to survive a social-media mauling, by the tough women of Twitter

    How to survive a Twitter mauling

    Mary Beard, Caroline Criado-Perez, Louise Mensch, Bunny La Roche and Courtney Barrasford reveal how to trounce the trolls
    Gallipoli centenary: At dawn, the young remember the young who perished in one of the First World War's bloodiest battles

    At dawn, the young remember the young

    A century ago, soldiers of the Empire – many no more than boys – spilt on to Gallipoli’s beaches. On this 100th Anzac Day, there are personal, poetic tributes to their sacrifice
    Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves

    Follow the money as never before

    Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves, reports Rupert Cornwell
    Samuel West interview: The actor and director on austerity, unionisation, and not mentioning his famous parents

    Samuel West interview

    The actor and director on austerity, unionisation, and not mentioning his famous parents
    General Election 2015: Imagine if the leading political parties were fashion labels

    Imagine if the leading political parties were fashion labels

    Fashion editor, Alexander Fury, on what the leaders' appearances tell us about them
    Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

    Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

    The architect of the HeForShe movement and head of UN Women on the world's failure to combat domestic violence
    Public relations as 'art'? Surely not

    Confessions of a former PR man

    The 'art' of public relations is being celebrated by the V&A museum, triggering some happy memories for DJ Taylor
    Bill Granger recipes: Our chef succumbs to his sugar cravings with super-luxurious sweet treats

    Bill Granger's luxurious sweet treats

    Our chef loves to stop for 30 minutes to catch up on the day's gossip, while nibbling on something sweet
    London Marathon 2015: Paula Radcliffe and the mother of all goodbyes

    The mother of all goodbyes

    Paula Radcliffe's farewell to the London Marathon will be a family affair
    Everton vs Manchester United: Steven Naismith demands 'better' if Toffees are to upset the odds against United

    Steven Naismith: 'We know we must do better'

    The Everton forward explains the reasons behind club's decline this season
    Arsenal vs Chelsea: Praise to Arsene Wenger for having the courage of his convictions

    Michael Calvin's Last Word

    Praise to Wenger for having the courage of his convictions