My firm is holding about £550,000 on behalf of an estate. We are not able to make an immediate distribution owing to some disputed issues. We have placed the funds on deposit with our bank where they are earning 0.85% interest.
Our clients the executors have asked (i) whether the funds can be invested somewhere where they can earn a better rate of interest, and (ii) whether they can be invested with several different banks so as to qualify for more than one bite of the government’s deposit protection scheme up to £120,000.
(i) Assuming your firm/partners is/are not the executors, the actual executors are free to put the funds with any (sensible) bank. In practice, they would have to find a bank that will open an executors account for a temporary period and pay an acceptable rate of interest and that may be the obstacle.
(ii) They can but will again come up against the practical issues of actual opening such accounts - but now with smaller sums to deposit in each. Also, I generally believe that if a major bank, particularly a clearing bank, is ever allowed to fail, the whole financial system is at risk (Four horsemen of the apocalypse etc) and the DPS may not be as valuable as you would expect. But that’s just a personal opinion (and it’s not my money!)
Hi Tom, the Flagstone proposition is quite well respected and benefits from spreading funds over several banks but through one provider for ease of your oversight: https://www.flagstoneim.com
A simple solution might be to take a Fixed Term Deposit with Cater Allen for whatever you consider to be a suitable period. I understand the desire to spread risk, but Cater Allen’s deposits are guaranteed by Santander, so one would hope that this would give some comfort. Rates below:
3 months - £5,000+ - 3.86% AER
6 months - £5,000+ - 3.94% AER
9 months - £5,000+ - 3.99% AER
You need to approach a Cater Allen agent to open such an account.