Alternatives to zero rate savings accounts online
March 7, 2009
Government bonds Online (Gilts)
Gilts involve lending money to the Government. This is generally seen as a safe investment option as the Government is unlikely to be unable to pay your money back.
Index-linked savings certificates
Another offering from National Savings & Investments, these are effectively 3 or 5 year bonds paying interest of a full percentage point above the retail prices index. All returns are tax-free and are guaranteed by the UK Treasury.
Zopa.com is a popular peer-to-peer lending website puts people with money to invest in touch with borrowers who need a personal loan.
As a lender, the interest rate that you obtain on your cash varies depending on the category of borrower you lend to – A* being the lowest risk, offering the lowest returns, and Y offering the highest returns – and whether you lend for three or five years. The longer you are prepared to lock away your money, the higher the return, ranging from an average of 7 per cent for the lowest-risk three-year loan to as much as 12 per cent for high-risk five-year loans.
Corporate bonds
Corporate bonds offer the most attractive risk/reward characteristics of any asset class, however investors should remember that corporate bonds are much riskier than cash, due to the possibility of companies going bust and defaulting on payments.