Regular Savings or DirectSavers?

BSingh · 11 December 2006 at 10:29PM

Hello Everyone!

I have discovered this site a couple of weeks ago and I think it such an amazing site!

I was wondering if you could help me out with a dilemma and also to check to make sure my working outs are correct (that I am doing the best thing).

What it is... I got £10k in savings which I will put into the Alliance and Leicster DirectSaver. (I have used up all my ISA allowance). I will be putting about £500-£750 aside for regular savings.

What I want to know is that...

Is it better to put my savings into a regular savings account(s)?
(I can open 2-3 regular savers.... One for A&L, one with barclays and one with Lloyds!)

OR

Is it better to put the £500 to £750 in the Alliance and Leicster DirectSaver account(5.64% AER, 5.5% Gross, 4.4% Net)?

Which option would I get the most interest from?

want to get it sorted asap!

Milarky · 11 December 2006 at 11:31PM

You'll obviously get the most interest from the higher paying accounts - the regular savers: 12%, 10% and 8% but they are for fixed periods. Also you can't use your direct saver as a feeder account so you'll have to make do with (say) a 5% websaver (4% net) instead if you want to do this.

This leaves you with 10K being drip fed into the A&L and Barclays accounts - if you can get them a they both require current accounts to be held and Barclays stipulates you pay in salary/fund to £1k per month too. (So does LTSB come to think of it!)

First year: A&L RS £156 net, Barclays RS £130 net, Lloyds RS £136* and Halifax WS £178. Total £600

This assumes average balances of: £1650 in Barclays A&L and LTSB plus further £500 in LTSB - a total of £5450. Since you have £10,000 in total that leaves £4550 average balance in the Halifax WS and from these the interest earned can be worked out.

Now the Direct Saver is 5.64% but 4.4% net - compounded monthly. That gives 4.49% net or £449. Second year it's £469.

In the second year you must transfer Barclays and A&L to Halifax WS: £6286. The WS starts the year with £678 (£500 plus interest) and averages £6286 + £678 - £1650 (to LTSB) or £5314 and that earns £212 interest. The LTSB has an average balance of £3636 (£3500 paid in plus interest) + £1650 (from WS) or £5286 and that earns £339 interest. The second year total is therefore £551. Plus you have access to both the WS and the LTSB balances - although you cna't replace LTSB money withdrawn

Direct Saver: £449 and £469
RS/WS combo: £600 and £551

Finally remember that you lose a month's money (or at least the difference say between 5.64% and 5% when moving from the DS - about £4!)

*including £500 one-off opening payment

brranger · 11 December 2006 at 11:46PM

Dont forget to open the Halifax regular saver aswell if your going to get the web saver no CA required. 7% Fixed for 12 months.

Good luck

BSingh · 11 December 2006 at 11:56PM

Thanks for the reply Milarky! I think I should clear up some details reagrding my savings and my thoughts on what to do with them.

OK, here is what I am thinking of doing.

I got £10K in savings which I am thinking of putting in the Alliance & Leicster DirectSaver 5.5% Gross (As this is the highest rate I can find for lump sum saving accounts).

Now with my monthly income (saving say £750 a month), I am thinking of setting up 3 Regular savers. The three I am thinking of setting up, starting with the highest interest rate are:
Alliance and Leicster 12% Gross (£250 a month)
Barclays 10% Gross (£250 a month)
HSBC/Lloyds 8% Gross (£250 a month)

I'l dont need savings for a year (barring emergencies) so just looking at 1 year investments.

Milarky, you said I cant make an additions to the DirectSaver... so at the end of the year, when my regular savers expire, I cant put the money into the DirectSaver? (I have read the details on the website and it said you can make deposits into the account)

So from this, Is it good to do this?
OR...

Some other way? (Such as regularly feeding the £750 into the DirectSaver and adding to the £10K every month....as that is the highest interest rate account I can find...higher than the halifax websaver!)

tom188 · 12 December 2006 at 12:14AM

Note for the RS you have chosen you will need a current account and fund it each month.
Barclays only allow you the RS account if you mandate your salary there.
HSBC also wants your salary but are known to be more flexible as long as you dump a fair amount in your Current account each month.
AL require you to fund the current account (the 1.5% paying premier one) with £500 per month or they charge you £5.
A bit problematic unless you already bank with Barclays or HSBC.

I would suggest the "clean" accounts that dont require a funded current ac - Lloyds TSB (need c/a but does not need to be used), Ipswich Target Saver, Halifax Regular Saver and others. Check Moneyfacts.co.uk or Moneysupermarket.com for more.

If you are saving for the longer term consider putting £500 per month in the Yorkshire Building Soc Regular Saver paying 6.75%. although this is not a market leading rate it carries on after one year allowing your accrued balance to continue to earn the high rate.

You can pay into the AL Direct Saver, its just you dont earn any interest in the month you make a withdrawal.

Milarky · 12 December 2006 at 12:40AM

tom188 wrote:

You can pay into the AL Direct Saver, its just you dont earn any interest in the month you make a withdrawal.

That's what I meant to say: - you can't use the Direct Saver as a 'feeder account' because doing so would nullify any interest from it.

Having the above accounts myself I would suggest going for the LTSB for the excellent two-year/easy access plus to take advantage of the 'save the change' promotion next Feb/March (earn upto £100)

After this the A&L looks good since you get the highest rate plus £50 if an current account opening is referred (really straightforward). I don't rate the A&L current account but it does come with 12 months interest-free overdraft for 'mini-stoozing' however.

In fact all these accounts are good - it's just the managing involved!

tomstickland · 12 December 2006 at 12:43AM

I use monthly/reg savers and think they're great. The LTSB offer is a good one. £500 start up and £250 per month in, take it out whenever you want.
The principle is as simple as getting as much money as possible onto the highest rate possible.
A 5% feeder into a 10% account at £250 pcm gives around 7.5% interest over the year on £3K, even after tax this is ahead of most ISAs.

to take advantage of the 'save the change' promotion next Feb/March (earn upto £100)

What's that then?

tom188 · 12 December 2006 at 12:46AM

Im currently running at 25 RS's and have to say its the ones with a linked current ac funding requirement that are the ones that are the greatest headache to make sure you meet their requirements on funding whilst minimising lost interest through transfers. The rest you can more or less forget about for 10 months of the year (or more in some cases).

tom188 · 12 December 2006 at 12:47AM

tomstickland wrote:

I use monthly/reg savers and think they're great. The LTSB offer is a good one. £500 start up and £250 per month in, take it out whenever you want.
The principle is as simple as getting as much money as possible onto the highest rate possible.
A 5% feeder into a 10% account at £250 pcm gives around 7.5% interest over the year on £3K, even after tax this is ahead of most ISAs.

What's that then?

http://forums.moneysavingexpert.com/showthread.html?t=318523

BSingh · 12 December 2006 at 1:35AM

Ok, so it is better to add to the regular savers as opposed to the DirectSaver account then as the regular savers give you more interest over the year.
Thanks for that guys, really helped me out!

Two things I would like to mention:
1. One of the reasons why I was asking this was that I went into to HSBC today and asked one of the advisors, which should I put my money into, the regular saver or the online saver (their equivalent to the A&L DirectSaver). The advisor told me to put it in the online saver (which I was slightly confused about as the Regular Saver gives a net interest of 6.4% whereas the online saver was about 4.5% net (approx).) Obviously, you need to take into account that the regular saver starts with £0 or £250 so I wont get the 6.4% interest on the whole £3K I will be putting in there.
This leads to my second point....

2. When I came home, I then started to compare the two options that I had and tried to come up with something on Microsoft Excel. Has anyone else done something like this or is there anything like this on the internet somewhere? Where you can compare what interest you would receive on a regular savings account compared with a lump-sum account (such as the A&L DirectSaver?

Just out of interest, also went to see Barclays and Alliance and Leicster financial advisors too. Barclays was good, we sat down and talked about different options available. Whereas Alliance and Leicster didnt do anything at all! They just asked... "what did you want to talk about?" I said "you organised a time to go over some financial information and about my options" then she just said "you got some booklets outside, you know our rates... is there anything else I can help you with?" I was about to laugh at the crap service. Now I know how alliance and leicster get such good rates... its because they make cut-backs on customer service training!!!

BSingh · 12 December 2006 at 1:54AM

Just forgot to add...

With the managing of the accounts, isnt it a simple case of setting up standing orders on certain days of the month to move money around from one account to the other? I'm gonna try to do this.

Also, you right in saying there are requirements to be met with currrent accounts. Barclays are the only ones asking for wages to come to straight into the current account. HSBC said it should be ok if the £500 they require comes from elsewhere, which is also what Alliance and Leicster said too.

But yeah, that spreadsheet/savings calculator would be so useful! Did a little rough one myself, but not sure how accurate it is. You know with Regular savers, they require £250 every month... so what about the interest that you are getting in that month, is that included in the deposit or are they saying it has to be £250 from outside the savings account?
As the savings build up then, am I also correct in saying you will have more than £3k (12 *£250) in the regular saver because you will have all that compound interest>? is that right?

So many questions, I know, but just want to make sure I am maximising my interest and then I can forget about it for a year.. until next xmas!

Thanks a lot for your help guys.

Regular Savings or DirectSavers?

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