If you’re considering savings account options for 1 million pounds, it’s clear that putting seven figures into savings requires careful planning and several important considerations.
For starters, you probably don’t want to put a million eggs in one basket. Splitting your savings across several accounts can help you spread the risk, achieve different goals, and ensure you can access your cash when needed.
Here, we outline savings account options for such a large sum of money and the things you need to consider when choosing between them.
Disclaimer: We’re here to help, but the contents of this article are for informational purposes only. They do not constitute financial advice. For that, you should consult a qualified independent financial adviser.
A Fixed-Rate savings account locks your money away for a set period (called a “term”) to earn a fixed interest rate.
For example, let’s say you put £200,000 of your £1 million into a 5-year fixed-rate account at 5%. If the interest compounds annually (meaning you’ll earn interest on the interest accrued plus the initial £200k), you’ll have £255,256.31 after 5 years.
It’s worth noting that you typically can’t add to your savings pot during this time, and while you can access your cash, you’ll probably be charged an early withdrawal fee. This could offset the interest you earn.
An Easy Access savings account is exactly what it sounds like — a savings account that gives you complete flexibility with your cash, letting you withdraw money as and when needed (often without any penalties or charges, although this can vary depending on the provider).
This flexibility makes Easy Access accounts a popular choice for an emergency fund, as you have quick access to your money should something unexpected happen.
Keep in mind that many Easy Access savings accounts have a variable interest rate, meaning the rate can go up or down. Also, the interest rates attached to these accounts tend to be lower than some of the other options on this list, as your money isn’t locked away to earn higher returns.
A Notice savings account is similar to an Easy Access account, only you have to give the provider notice before you withdraw money. This tends to be between 30 and 90 days, although it can be longer.
As a rule of thumb, the longer the notice period, the higher the interest rate you’ll usually be offered.
Putting money into a Notice account can give you flexibility while benefiting from a higher interest rate. This might work for you if you can plan your withdrawals in advance and time them to cover an upcoming expense.
An ISA (Individual Savings Account) is a tax-efficient way to save or invest money. Each tax year, you get an ISA allowance, letting you save up to a certain amount and earn interest on your cash tax-free (the allowance is £20,000 for the 24/25 tax year).
We don’t typically offer ISAs via the Insignis Platform; however, it’s always helpful to understand your options for £1m in savings, which is why we’ve outlined the different types of ISAs below. And while your ISA allowance represents just 2% of your savings balance, it might still be worth discussing with your financial adviser as part of a broader savings strategy.
There are four types of ISA available:
Note: You can open multiple ISAs each year. However, the total amount deposited across all ISAs cannot exceed your ISA allowance.
No matter how much you’re planning on saving, if you want to maximise your returns, you must track interest rates. This is because the purchasing power of money can decrease over time, thanks to inflation.
If you leave your money untouched in the same account for years, and the interest rate doesn’t keep pace with inflation, your money could lose value.
For a substantial savings portfolio, like £1m, finding the right mix of savings accounts that offer competitive interest rates is vital to maintaining your wealth’s actual value.
The table below gives you an at-a-glance idea of the returns you could make on £1m of savings.
Another critical consideration with such a large sum of cash is keeping it safe. The Financial Services Compensation Scheme (FSCS) is designed to protect savings in the UK if a bank or building society fails. It guarantees up to £85,000 per person, per institution (for the purposes of FSCS protection, banks or building societies in the same group are considered a single institution). If your bank or building society goes bust, you'll be reimbursed up to that amount.
When you have £1m to save, you’ll need to spread the money across several different banks (each with distinct banking licences) to ensure you’re fully protected. By depositing no more than £85,000 in each institution, you can protect the entire amount under FSCS rules, preventing loss should one or more institutions collapse.
While it can be tempting to lock the entire £1m away long-term in pursuit of higher returns, you should also consider how much access you’ll need to your cash in the short and medium term.
For instance, do you have sufficient money in an emergency fund that you can withdraw at short notice? Or are you planning any major life changes in the next few years that might require a lump sum of cash (such as moving house)?
Depending on the provider’s small print, there may be fees associated with opening and maintaining a savings account and charges to consider when withdrawing money (especially if you’re withdrawing early from a Fixed-Term savings account). At Insignis, our only charge is the annual account service fee, which is based on the total deposit, which is due monthly in arrears.
It’s important to discuss this with your financial adviser to ensure that these fees and charges don’t outstrip the interest earned on your savings.
When it comes to saving £1 million, you’ll probably need to pay tax on most of the interest you earn. However, there are a couple of things to keep in mind.
First, almost everyone gets an amount of interest they can earn tax-free each tax year (6 April to 5 April). This is called your Personal Savings Allowance (PSA). It’s based on the Income Tax band you’re in:
If you’re a basic rate taxpayer (20%), you can earn £1,000 in tax-free interest each year
If you’re a higher rate taxpayer (40%), you can earn £500 in tax-free interest each year
Only additional rate taxpayers (45%) don’t get an allowance
You’ll pay tax on any interest you earn over your PSA at your usual rate of Income Tax.
You’ll also have your yearly ISA allowance to take into consideration, meaning you can save £20,000 and earn interest on it tax-free.
To recap, when you have £1 million to save, you may want to consider spreading your cash across several types of accounts. That way, you can keep your savings pots below the UK’s Financial Services Compensation Scheme (FSCS) threshold, which guarantees that your savings will be protected up to £85,000 per person, per institution, if a bank or building society fails.
Diversifying your savings can also help you pursue your short- and long-term savings goals, and ensure easy access to some of your cash in an emergency.
When you add your money to our award-winning savings platform, you get access to over 3,500 savings products from 45+ banks and building societies, competitive interest rates, and effortless savings management.
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