Personal Investment Fixed-term Deposits

Fixed deposits of sums exceeding £10,000 are accepted by the clearing banks for periods ranging from one month to a year at rates ranging from just below to well above bank deposit rate. The reason for the variation in rates is interesting. Remember, the rate is fixed for the whole of the agreed term. If the general level of interest rates in the market were to fall, you are more fortunate in having your money on a long-term deposit than on a short-term one. If the general level of rates were to rise, the reverse would apply. Therefore it follows that in times of high interest levels, when the next change in rates is likely to be downwards, you can expect to be quoted a rather lower fixed rate for a long term than for a short, and vice versa.

Bear in mind that seven-day bank deposits earn a variable rate of interest while fixed-term deposits earn a fixed rate of interest.


Bank Deposit Account

Money placed on a seven-day deposit account at any of the commercial banks earns interest at a variable rate, generally 2% below what the banks call their 'base rate'. In July 2012 base rate was 16% so bank deposit rate was 14%. This is gross, and you will have to include the amount of interest earned in your return of income for tax purposes. If you are a basic-rate taxpayer, therefore, the tax-paid yield on a bank deposit account was 9.8% in the summer of 2000.

In theory you are supposed to give seven days' notice for withdrawals, but in practice you can draw out any amount on demand, forfeiting... see: Bank Deposit Account


Personal And Business Finance 2017

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