Interest rates everywhere are quite low at the moment. But there's a
(legal) method that can get a 5% (pre-tax) return on up to £9,000, and
3% on a further £21,000.
That trick is current accounts: in their attempts to take
customers away from each other, many banks are offering significant
interest rates on balances up to a few thousand pounds. There are
restrictions on how many accounts one has, and most of them are trying
to be one's only account and so require things like a regular salary
deposit, but there are four banks which don't have that latter
restriction.
Nationwide FlexDirect
pays 5% on balances up to £2,500 if you pay in £1,000 a month (but
only for the first year); you can have two accounts there, if one
of them is joint. You will have to present proof of identity, by post
or at a branch; when they say that a passport is enough and you don't
need to bring separate proof of address, they're lying. (They also
supply a PIN entry device; it's a very cheap and nasty piece of kit.)
TSB Classic Plus
pays 5% on balances up to £2,000 if you pay in £500 a month; you can
have two accounts there, if one of them is joint, but their on-line
application system can't cope with joint accounts so you may need to
go in to a branch.
The
Bank of Scotland
pays 3% on balances between £3,000 and £5,000 if you pay in £1,000 a
month; you can have three accounts there. (A quirk: your account has
to be allocated to a specific branch, and they don't have any outside
Scotland, but as far as I can see you'll never need to visit it.)
Tesco Bank pays 3% on
balances up to £3,000 if you pay in £750 a month; you can have two
accounts there. (A catch: a "month" is a statement period, starting on
the date the account was opened, not a calendar month as with the
others.)
All those "pay in" restrictions include transfers from other accounts
(as long as they aren't with the same bank). So all you need to do is
set up standing orders to move money from one to the next each month.
This is slightly fiddly (I have eighteen separate instructions on nine
different accounts) but once set up will simply keep working; all you
have to do after that is transfer out the interest.
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