Esme Smith, 46 from Devon, asked moneysupermarket .com for a makeover after she inherited a large sum of money which she currently has sitting in a low-rate current account.

Esme, who works as a learning and development consultant, has always kept a close eye on her finances and has even pondered what she would do if she ever had a large sum to invest. Now she is in that position, she is looking to maximise the returns on her inheritance.

She has already treated herself to a new car and computer but now wants to be sensible with the money she has left over. Esme said: “My financial concerns are more positive than negative at the moment: my only problem is to what to do with my money. I would like to lock some away so I don’t dip into it for daily living costs but I don’t want to lock it all away just in case I decide to buy a larger property.”

Using the tools available on moneysupermarket.com, we managed to make Esme an amazing £4,786 more a year. Read on to see how.

Savings & ISA – saving of £4,220

Esme has recently inherited around £90,000 which is currently sat in her NatWest current account whilst she decides what to do with it. As well as the inheritance funds, Esme also has around £50,000 invested in a Reward Saver account with Alliance & Leicester paying 2.00% and £3,600 stored away in a NatWest Cash ISA Plus account. The rate on that is 2.97%.

Firstly Esme should look to move the money in her current account as she is earning just 0.1% interest on that. When considering where to move it to, it’s worth bearing in mind that under the terms of the Financial Services Compensation Scheme only £50,000 will be covered with any single institution. As Esme has more than that in cash savings, she should look to spread her money around between different providers.    

Longer term options may not be suitable for her as she would like to have some sort of access to the funds in case she wants to move to a bigger property but she may want to consider locking some of her money away for the short term. If Esme deposited £47,500 into a two-year HiSAVE Fixed Rate bond with ICICI Bank, which is currently paying 4.25%, she would earn an extra £2,018.

Next, because Esme requires access to some of her funds for the future she could open an Investec High 5 Account. This is a great account for those with large balances – the minimum investment is £25,000 – as the rate is based on the average of five top savings rates and is set weekly so you have the peace of mind that it will be consistently competitive. It is currently paying 3.32%.

If Esme wants to access money in this account she would need to give 90 days’ notice, otherwise she will be charged a fee of 0.50% of the amount withdrawn with the minimum fee being £50. By investing in this account, Esme will earn £1,577 over the next 12 months on a deposit of £47,500.

With the remainder of the funds, Esme could open a 1st Class Postal Account with Coventry Building Society which pays a rate of 3.15%. This is an easy access account and is therefore more flexible than the ICICI and Investec accounts, although there are still some restrictions she needs to be aware of: the minimum withdrawal amount of £1,000 and also you are held to a maximum of four withdrawals in a year.  The rate also includes a bonus of 1.15% for 12 months so Esme will need to look at moving her money elsewhere at the end of the bonus period. By moving the remainder of her funds to this account, she stands to earn an extra £1,496 in interest.

Finally, Esme has already used her cash ISA allowance this year – she invested the full £3,600 in a NatWest Cash ISA Plus account, which is currently paying a competitive rate 2.97%. The new tax year begins on April 6 at which point she’ll be able to invest a further £5,100 in a cash ISA. She should then look to see what rates are available – it may even be worth transferring the money over from her NatWest ISA as well at that point.

Although Esme wants to keep her savings relatively accessible for the time being, she may want to consider speaking to an independent financial adviser to discuss other options such as equity and bond investments if she decides not to use the money for a new home.

Car Insurance – saving of £227

Esme has just treated herself to a brand new Volvo C30.  Her insurance quote with Volvo direct is £596, however, if she took out a policy with Renew Insurance, she would pay £368.92, making a saving of £227. She may also want to add her partner to the policy which could make her further savings. If she did this, her premium would be £305.98 with Swiftcover, offering a potential saving of £290 over the year.

Utilities – saving of £174

Esme lives in a small house and is a low energy user so her annual bills are well below average. She currently pays around £564 a year for gas and electricity and is on British Gas’ standard tariffs for both. However, despite being a lower user, there is still scope for Esme to cut her bills further. She could save around £174 over the year if she moves her tariff to n-power’s Sign Online 17 tariff.

Current Account – saving of £100

Esme’s current account is held with NatWest and earns her just 0.10% in interest. She pays in around £1,900 per month, if she switches her account to the Alliance & Leicester Premier Current Account she will benefit from £100 cashback if she uses its switching service to transfer all of her direct debits.

Not only will she benefit from the cash reward but this account also comes with the added benefit of free annual multi-trip European travel insurance and a free overdraft facility for the first 12 months. The account also pays 0.5% on balances up to £2,500.

Home Insurance – saving of £65

Esme lives in a 400 year old, one-bedroomed, semi-detached property. Her current policy is with NatWest and she is paying £169, if she moved this to Privilege her annual premium would be fall to £103.95 making an annual saving of £65.

Would you like the opportunity to see if we can make you any savings?  If so, then email makeover@moneysupermarket.com

Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.

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