I've just spoken to my mother and found out that they have all of their savings currently with Abbey . Obviously she now wants to go for the maximum safety with their savings, so I've suggested NS&I as a starting point, from which they can safely look at other options.

I've been onto the NS&I site, and to be honest I'm struggling a little with what would be best for them - I figured there must be plenty of people here who've gone heavy on NS&I, so I'd really appreciate some advice based on the following:

[1] Total amount to invest / protect - approx 500k
[2] They already have the max in Premium Bonds each.
[3] They would need an amount readily available for emergencies - say 50k?
[4] In order to convince my father to go for it, the returns need to be decent.
[5] The majority of the capital can be locked away for some years if need be, although it would be good to stagger investments with differing maturity dates to be on the safe side.

So, my thoughts were:

[1] Short term, whack the whole lot into the NS&I instant savings account - possibly leaving 70k with Abbey if need be (personally I don't trust the FSA guarantee anyway so I'd try to advise against that).

[2] Look at bonds issues with a variety of terms.

[3] Consider sticking a wedge in Northern Rock as well.

I think I can convince my father that anything linked to the RPI would be fair, since Merv has already said inflation is going to rise. He's also comfortable with the idea that the higher the rate a bank offers, the less stable they may be. So I just need some decentish rates to get him to see sense.

Their initial request was for me to find a bunch of non linked building societies so that they were "fully" covered by the FSA guarantee. My mother now accepts that the guarantee isn't worth a stuff if more than one bank goes bang, and it also makes management a lot easier if it's all in one (safe) place.

Can anyone give me any advice on what they have done in similar circumstances? I appreciate that this question has been asked before, but since my mother now has the fear of God into her, I'd like to act quickly rather than spending days trawling for older posts - being a bit selfish and asking for some dedicated answers

Cheers.

Abbey (santander) is supposedly one of the safer ones iirc.

Yep, I've got no immediate concerns about them, although with the state of the Spanish property market, you have to wonder just how solid Santander are really.

The main thing is that their savings are for their retirement, so the thought that there is any risk at all is enough to have my mother worried. Plus, I also believe that if any bank or building society here imploded, then bank runs of varying degrees would begin on all the competitors, so what might currently be one of the safer ones could be in a shaky position in the near future.

<edit - sp>

OK, I've spent all afternoon on the NS&I site - any chance of a critique?

What I've got so far is based on the premise that I think interest rates may go up in the short term before falling once we are officially in recession. I am thinking rates may rise due to the appalling inflation figures, and the fact that the BoE are probably less likely to be bullied by a clearly outgoing government. With that in mind, the plan so far is:

[1] Open an NS&I Instant saver account with £100 today. That way, they are only ever a CHAPS payment away from "safety".
[2] Put 70k in Northern Rock at a reasonably good rate of interest - or leave it with Abbey.
[3] Place the rest of the money in Income Bonds at 4.7%. This is no fixed term, so the money is available for quick deployment elsewhere when the time is right.
[4] Wait for the next BoE decision - if it's up, take up the new issue of Fixed Interest Savings Certificates on a two year term. That should yield quite nicely against a likely two year backdrop of falling rates.
[5] If it's down, jump into the Index Linked Savings Certificates on the basis that inflation will rise. Currently I'm looking at the 2 year term, although since they have no need to have all of it available, I reckon the 5 year term is attractive as well.
[6] If it stays where it is, then either leak a little into either of the above options, or just wait for the next movement.


NS&I told me today that you can set up some kind of trust purchase for your spouse, so that you can take up double your 15k allowance at any issue. In other words, if you went heavy on the Index Linked Certs at 2 and 5 years, they could each buy 30k, then do the same again in trust for each other, therefore accounting for 120k. A couple more issues and that would be the job sorted.

I'm seeing this as a two year plan, after which time the banks should have got themselves sorted out, so I'm not looking at NS&I as a long term investment for them. On that basis, I've calculated that over two years, they stand to "lose" ~ 10k in interest against Abbey - balance by the fact that they'll be able to sleep at night, and that it's not money they are losing, just a potential win that they aren't making.

Any comments?

Consider RPI Index-linked Treasury Gilts, bought through a low-cost stockbroker.

If you wish, then for a small fee you can transfer out of the stockbroker's usual nominee holding arrangement and hold a paper certificate at home. The contract is then directly between you and the Treasury, so your counterparty risk is minimal.

Remember that, unlike NS&I Index-linked Certificates, Treasury Gilts are traded securities whose values rise and fall in the market.

In the short term at least a good dose of RPI inflation seems likely, so the issue maturing in August 2011 should be a reasonable punt, though this perception might be priced in already.

The above is not investment advice, just a suggestion for your own research.

Edit: It is worth noting that capital gains on Gilts are tax free.

Thanks Spaniard - I'll have a look at that.

Also, caveat completely understood and accepted - that goes for anyone else with comments as well