Premium

How to make the highest return on your savings: plans for £50k, £100k or £500k 

A Chinese employee sorting duck eggs at a factory in Nantong
You can build up a nest egg without risky investing Credit:  AFP/ AFP

For those looking to make serious returns, saving is often overlooked in favour of investing – but the former has two major advantages.

First, savings are protected against losses up to £85,000 by the Financial Services Compensation Scheme (FSCS), a lifeboat fund, compared to just £50,000 for investments. 

Second, saved money is easier to access, as investments would have to be sold – potentially at a loss – to free up the cash. 

But money left in savings doesn't have to languish in low rates. Despite recent research showing that more than £1 in every £10 saved is in deals earning nothing at all, decent returns are far from impossible.

The best rate on the market for people with large sums to save is 2.75pc with the Bank of London and The Middle East (BLME), an Islamic finance house. 

However this deal is only available to savers willing to lock their money away for five years – a long enough time frame to invest the money for what could be far higher returns. It also means their cash would not be accessible in case of emergency. 

High savings profits can also be achieved by effectively gambling on lottery-style deals such as National Savings & Investments (NS&I) Premium Bonds, which pay winners up to £1m. Bondholders can win an unlimited number of monthly draws but equally might never get any payouts at all. The average Premium Bond customer gets a 1.4pc return from their deals.

So if you've got money to put aside, what's the best way to save it?

With the help of financial advisers, Telegraph Money has drawn up three risk-averse strategies for those with £50,000, £100,000 or £500,000 to save over five years.

Each maximises savings profits while keeping some cash accessible for emergencies and releasing additional money at intervals over five years. All money saved has full FSCS protection as no more than £85,000 will be put with any one firm.

£50,000

  • £10,000 in a five-year BLME premier deposit account, paying 2.75pc
  • £10,000 in a three-year BLME premier deposit account, paying 2.55pc
  • £20,000 in a Virgin Money easy-access account, paying 1.5pc. Virgin Money only allows two withdrawals a year, though unlike rival best-buy easy-access deals it does not drop to a lower rate after 12 months.
  • £10,000 in a Santander 123 current account paying 1.5pc 

Scott Gallacher, of wealth managers Rowley Turton, said: “This will give an overall return of 1.96pc with full FSCS protection and £30,000 available instantly, £10,000 after three years and £10,000 after five years.”

In money terms, that's £980 paid out in interest over five years. 

Islamic finance deals pay an “expected profit rate”, as they cannot pay interest for religious reasons. However, no such deal has ever failed to pay out the full amount promised, and all are protected by the lifeboat fund.

£100,000

  •  £25,000 in a five-year BLME premier deposit account, paying 2.75pc
  •  £25,000 in in a three-year BLME premier deposit account, paying 2.55pc
  •  £25,000 in a one-year BLME premier deposit account, paying 2.25pc
  •  £15,000 in a Virgin Money easy-access account, paying 1.5pc
  •  £10,000 in a Santander 123 current account paying 1.5pc

This approach will return 2.26pc, or £2,260 over five years. 

  • Reader Service: Get expert investment advice from a local adviser with The Telegraph

It allows £25,000 to be available at any time, with a further £25,000 after one year, £25,000 after three and another £25,000 after five.

£500,000

  •  £85,000 in a five-year BLME premier deposit account, paying 2.75pc
  • £75,000 in a five-year RCI Bank fixed-term savings account, paying 2.4pc
  •  £85,000 in a three-year Zenith Bank fixed-term deposit account, paying 2.3pc
  •  £75,000 in a three-year Axis Bank fixed-term deposit account, paying 2.15pc
  •  £85,000 in a one-year Aldermore bond, paying 1.85pc
  •  £85,000 in a Virgin Money easy-access account, paying 1.5pc
  •  £10,000 in a Santander 123 current account paying 1.5pc

This savings strategy will pay 2.14pc in total, or £10,700 on a pot of this size over five years. 

There will be £95,000 always available, plus £85,000 after one year, £160,000 after three and the remaining £160,000 after five.

Jamie Jenkins, of asset manager Standard Life Aberdeen, said savers should beware of unregulated get-rich-quick investments.

He said: “People should be wary of any investment which seems to offer rates at three or four times what high street banks are offering.

"It will almost certainly carry more risk, and it may not be a regulated firm, meaning you may have no protection from compensation schemes in the event you lose your money.”