Who can beat 6%?

steve2359_2 · 29 March 2007 at 3:46PM

I have £33k to invest and am not interested in shares. I see Halifax have a 5 year 6.06% fixed rate web saver. Can anyone tell me of a better deal and if you have a chrystal ball should I go for 3,4 or 5 years as they all have the same rate.

DawnW · 29 March 2007 at 4:40PM

I know you can't put all your money in, but Barclays taxbeater cash ISA pays 6.5 AER. You could put in 3K now, and another 3K after 6 April ... and pay no tax on the interest.

dunstonh · 29 March 2007 at 5:21PM

what about unit trusts/oeics? They dont have to invest in shares and have the potential to beat 6%.

harryhound · 29 March 2007 at 5:22PM

Mrs Hound opened a new ISA with Barclays, over a week ago now, and they still have not cashed the cheque; let alone confirmed the transaction.
She was intending to pay some more in to get up to the 3K maximum, when her pay arrives in her account tomorrow.

So get your skates on if you want to beat the end of tax-year deadline.

Steve, you could consider buying fixed interest securities (such as "gilts") inside an ISA, and get the interest payments tax free. M&G (Part of the Prudential now) would hold the ISA for you in exchange for a 0.5% management fee.
You could then shovel in 7K a year. There is a risk that your capital value would fluctuate - if interest rates go up it will go down and vice versa.

If you think Inflation is coming back, you could buy inflation proof gilts, but the same risk of capital fluctuation exists.

I cannot see the point in ordinary modest people, who pay standard rate tax,
buying ordinary shares in an ISA, they cannot get tax back on dividends any more and probably will not exceed the annual Capital Gains Tax zero rate band/allowance; meanwhile the ISA provider will be charging a commission.

Harry

Judwin · 29 March 2007 at 5:30PM

6.06% is actually only 4.85% for a basic rate tax payer, and 3.64% for a higher rate taxpayer. Depending upon which measure of inflation you believe in, this barely keeps your money alive. If it were my 33K I'd do the following.

1a) If you dont currently have any A&L accounts - Get down Alliance and Leicester QUICK (tomorrow!). Open their premier current account (with say £1000), and their linked cash Isa 8.1% with £3000 (2006-2007 tax year).

1a) If you do have A&L accounts - Get down Barclays QUICK (tomorrow!). Open their 6.5% ISA with £3000 (for the 2006-2007 tax year).

2) On April 6th, Get down Barclays, and put £3000 in their 6.5% ISA (for 2007-2008 tax year).

3) Get down Halifax, and open their High interest current account. 6.19% on the first £2500. Set a standing order to pay £1000p/m into the A&L current account (£500 minimum funding requred per month).

4) Go back to A&L, and open their Direct Saver with the remainder of your money. Would pay 5.8% on the remaining £24000 ish.

5) Set a standing order to pay £1000p/m from the A&L current account into the Halifax current account.(£1000 minimum funding requred per month).

Ping-pong-ing the £1000 between the Halifax and A&L accounts allows you to satisfy the minimum deposits each month without having to use 'real' salary. You will lose 4-6 days interest per month on the £1000 though. Time the standing orders so that the money from the A&L arrives in the Halifax acount, sits there for a couple of days, and then goes back to the A&L. That way you keep the Halifax account topped up earning max interest.

Personally, since you're talking about 3-5 year terms, I'd also open a mini stocks and shares ISA with H-L, and stick £4000 in that this tax year (2006-2007) and another £4000 in next tax year (2007-2008). It doesn't have to be directly in shares - I'd buy OEICS into Invesco High Income fund for now, just to get this years £4000 in quick, and then get help/advice about diversifying your S&SISA pot into other low risk funds.

If you do the above you'd have an expected/hoped for return in April 2008 of :

1) A&L ISA - 8.1% on £3000 tax free = £243
2) Barclays ISA - 6.5% on £3000 tax free = £195
3) S&S ISA - 7% on £8000 tax free = £560 (not gauranteed!)
4) Halifax Current Account - 6.19% on £2500 = £123 (154 before tax)
5) A&L Direct Saver - 5.8% on £16000 = £742 (£928 before tax)
6) A&L Current account - a few quid.

I make that about £1850 after tax on £33500 invested/saved - a return of 5.5% after tax. It might be more, or it might be less, depending on how well the S&S ISA performs.

You could also look at monthly savers - YBS allow £500p/m @ 7% up to £20K (but would take nearly 3 years to drip feed the money in from the Halifax High Interest current account)

That's what I would do. Your mileage might vary.

Cheers,
Judwin

Snow_Dog · 29 March 2007 at 7:29PM

Can I have some of what you're on Judwin?:rotfl:

Seriously though, I do agree with you, we have just done a similar thing with the A&L accounts, however we are using the current accounts as DD bill accounts. In mine for example the mortgage money goes in about the 5th of the month and the mortgage is taken out on the 10th, to the penny of what goes in, this covers by far the £500 monthly requirment and we shall soon have between us approaching the full £12K for both years in the ISA's at 8.1%.

Come April next year when A&L drop the rate its then going somewhere else and the current accounts can be changed to high interest current accounts. Better still if A&L are still playing silly beggars trying to attract new customers we may just close them down for three months and rejoin.:T

Play the system.

Mikeyorks · 29 March 2007 at 10:56PM

steve2359 wrote: »

I have £33k to invest ..... I see Halifax have a 5 year 6.06% fixed rate web saver............ if you have a chrystal ball should I go for 3,4 or 5 years as they all have the same rate.

It's a long time to tie up £33k .... with interest rates allegedly further to climb? Needs to be your crystal ball - but personally I'd go for the Birmingham Midshires 1 year fix at 5.95%. But sensible to put £3k urgently into a 06-07 ISA - and top that up after 5th Apr 07 with a further £3k ..... assuming you're not already subscribed on ISAs

Who can beat 6%?

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