You may be someone among the people who are dreaming of becoming a millionaire. If you have inherited won, or saved up 1 million Pounds, then you must try to do sensible things by investing them in the passive interest rate income.
So, if you are lucky enough to gather 1 million Pounds together then don’t panic. Well, the interest rate on 1 million Pounds is said to be more than enough for most to live off.
If you are interested in knowing how much interest will earn on 1 million Pounds in the UK, then this article is for you.
Here, in this article, I am going to wrap together an understanding UK savings account, The impact of inflation, investment options of one million Pounds, and how much interest you can earn on 1 million Pounds.
So, let’s dive into the deep!
Understanding of UK Savings Account:
Finding the right savings account for you may be a bit challenging. So, to help you out, here, I am going to enlist some of the different types available:
Fixed Rate Savings Account:
If you have got long-term savings goal in mind then fixed-rate savings accounts are your option. here, you can be able to get a higher rate of interest compared to some other types.
But, you will need to lock away your money for a certain period of time such as 1 to 3 years, or more. So, you need to be sure that you will not be required to access your money within this time frame.
Instant Access Savings Account:
Instant access savings accounts can be effective if you need to dip into your savings from time to time. Here, you can get a lower rate of interest compared to a fixed-rate savings account.
However, you are not required to pay any fee for accessing your money. Some instant access savings accounts sometimes offer you a bonus if you do not withdraw money from time to time.
Tax-efficient Savings Accounts:
ISA (Individual Savings Account) can offer you somewhere to keep your money and provide you with tax advantages.
For the present tax year, the ISA limit is 20,000 Pounds and you are not required to pay any tax on the earnings of your ISAs.
The Impact of Inflation on Interest Rate:
Interest rates and inflation tend to move in the same direction because interest rates are the basic tool to manage inflation, used by the US Central Bank.
When inflation is high, there will be a significant increase in the prices of goods and services. Central Bank generally increases their interest rate to manage inflation.
So, this influences the rates of interest charged by commercial banks on your loans.
Higher interest rates are usually a policy response to rising inflation. On the other hand, when inflation is falling and economic growth is falling, the Central Bank may lower the interest rates to manage the economy.
The Investment Options of 1 Million pounds in the UK:
There are plenty of options available to invest 1 million Pounds in the UK.
If you are looking for the best possible investment strategies to apply for 1 million Pounds then check my following list:
Deposit the Cash in a Savings Account:
Nothing can be better and safer to stash your cash than a savings account. You may achieve lower returns in savings accounts compared to other options,
however, you never have to worry about losing your capital. I can not guarantee you the same when you invest your money in other options in stocks, bonds, or a home.
Investment is the option where things are getting tricky.
Before proceeding further in investment, you need to have a place in your present living conditions. Also, you need to think about what is the best asset allocation for you.
Once, you have decided on the right allocation for you, the next step is to look for investment options. You can look for some of the core asset categories including:
1. Stocks & Bonds
2. Real Estate
3. Physical commodities
4. Alternative investment
Lastly, you need to decide whether you are investing to secure your retirement, or a trust fund, or for your children’s education.
When we talk about real estate, the first thing that comes to our mind is buy-to-let property. Especially a home to let out.
Commercial real estate covers office space, stores, hotels, restaurants, storage space, etc. It is a great option to invest your money without having to rely on something else than yourself.
There are various benefits of owning a property and renting it out. Let out property for rent almost always guarantees a steady income for you.
How Much You Can Earn 1 Million Pounds In the UK:
The below table shows an example of how much interest income you can expect from 1 million Pounds based on various interest rates.
|Interest Rate||Monthly Interest||Annual Interest|
|3%||2,500 Pounds||30,000 Pounds|
|3.5%||2,917 Pounds||35,000 Pounds|
|4%||3,333 Pounds||40,000 Pounds|
|4.5%||3,750 Pounds||45,000 Pounds|
|5%||4,167 Pounds||50,000 Pounds|
|5.5%||4,583 Pounds||55,000 Pounds|
|6%||5,000 Pounds||60,000 Pounds|
With the Bank of England’s interest rate, is 5.25%, you can earn 52,500 Pounds in interest on 1 million Pounds. But, if you simply leave your money in a standard Bank account, you may actually be losing your money.
Here, I am going to define why. If you are leaving your 1 million Pounds in your savings account at a 5.25% interest rate then you can earn 52,500 Pounds as interest over the course of 1 year.
However, with an inflation rate of 6.7%, the purchasing power of the money will decrease. So, the real value of your savings will not grow as much as you have expected.
In real terms, if you consider the inflation rate, the return on your investment will be less than the normal interest rate of 5.25%.
It is important when you are expecting the return of your 1 million Pounds, you must consider the inflation rate. This inflation rate can erode the purchasing power of your money.
However, there are investment options available in the UK to beat the inflation but these all come with risk factors.
Where would you invest 1 million Pounds?
Ans: You can invest 1 million Pounds in several ways to earn a lumpsum interest including:
- savings accounts
- stocks and shares
- fixed interest
- alternative investments
What return can I get on 1 million Pounds?
Ans: You can expect different interest rates on different savings accounts. If you are lucky enough then you can earn somewhere between 3 to 5% depending on the current economic environment.
What is the safest investment for 1 million Pounds?
Ans: The safest place to put 1 million Pounds can be in a combination of savings accounts and conservative investments such as bonds and CDs. It will ensure you a balance of stability and liquidity.
with 1 million Pounds, you can earn a potential interest rate if you invest it strategically. Of course, the interest rate that you can achieve depends on where you are putting your money as well as your risk tolerance.
Well, here, I have discussed the interest rate that you may expect from 1 million Pounds. However, if you want to know more regarding this fact then you can consult with a financial advisor. He can help you all the way around.