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Regular Savings Accounts - not as good as it seems

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  • LongTermLurker
    LongTermLurker Posts: 1,998 Forumite
    Part of the Furniture 1,000 Posts Combo Breaker
    martinman3 wrote: »
    All true except Milarky had quoted gains in £ and these figures only applied to non-taxpayers. Once tax was taken off, for most people, you can see the actual gain in £.
    You're right, but I don't see your point. At most, I'd concede that Milarky could have said "So, for the £6,000 total you could pay into the Halifax (limited offer) RS for instance that is 6 1/2 12ths x £6,000 x 4% = £3,250 x 4% = £130 (less tax)", but I don't feel it's necessary.

    In my examples above, I've also used gross gains.
    You've never seen me, but I've been here all along - watching and learning...:cool:
  • LongTermLurker
    LongTermLurker Posts: 1,998 Forumite
    Part of the Furniture 1,000 Posts Combo Breaker
    I've been reading through this with intrest,I will soon have around £15,000.

    Is it best to invest this in 1 account or several smaller ones.

    Sorry for hijacking the post.
    I'd suggest you start a new thread, because you'll get more meaningful replies - this thread will attract people who only want to argue their point as to whether or not they think Regular Saver accounts are worthwhile ;)

    However, with a lump sum of £15k, your options are:
    1. Put £3600 into a cash ISA - depends on you having not contributed to a cash ISA since April 6 this year, and haven't put more than £3600 into a Stocks & Shares ISA since then either. Benefits are that all interest earned is tax free, forever. The remaining money could be used for any of the following.
    2. Put some or all of the money into a Fixed Term Deposit account for a suitable length period. Benefits can be higher interest rates than a cash ISA, but you will pay tax on interest at your marginal rate and your money will be tied up for the period. You may be able to get it out but you would lose interest if you did.
    3. Put some or all of your money into a no-notice, high interest account and drip feed that monthly into a Regular Saver account (that's what we're discussing here). Again, all interest is taxable but there's the benefit of increasing your average rate of interest, as RS accounts tend to pay more interest.
    4. Put some or all of your money into Stocks & Shares. This would be a long term option (5 years +), with no capital guarantee. You may get more or less than you would in cash deposit. Unless you put the investments into a S&S ISA, you will pay Income Tax on any income and Capital Gains Tax on any growth (although you can make about £9600 Capital Gains per year without paying CGT)
    As far as cash safety goes, you are protected up to £35000 so long as the bank is FSCS registered, so you would be safe putting it all in one account, but MAY make more interest if you play it canny and put money in specific types of account.
    You've never seen me, but I've been here all along - watching and learning...:cool:
  • jamesd
    jamesd Posts: 26,103 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    OK, what's the relationship of the 6.5 and 5.5 multiples above? Are you saying that the money spends just over half its time in the RS account and just under half in the feeder a/c?

    It's based on the money being paid in at the start of the regular saver account month, so each monthly payment spends more time in the regular saver than in the feeder account. End result is a 6.5 to 5.5 split between the time in each.
  • oldfella
    oldfella Posts: 1,534 Forumite
    Part of the Furniture 1,000 Posts Combo Breaker
    because the Halifax RS allows you to time your first deposit, and thus get 13 deposits in the year, you can end up receiving around £425 gross at 12%, assuming you make the first deposit on the 20th, and the remainder on the 1st.
  • regularsaver1
    regularsaver1 Posts: 4,930 Forumite
    i use this:

    Regular Saver CalculatorPaymentRateGross InterestNet Interest
    Month 1 £ 50.00 1210% £ 5.00 £ 4.00
    Month 2 £ 50.00 1110% £ 4.58 £ 3.67
    Month 3 £ 50.00 1010% £ 4.17 £ 3.33
    Month 4 £ 50.00 910% £ 3.75 £ 3.00
    Month 5 £ 50.00 810% £ 3.33 £ 2.67 Month 6 £ 50.00 710% £ 2.92 £ 2.33 Month 7 £ 50.00 610% £ 2.50 £ 2.00 Month 8 £ 50.00 510% £ 2.08 £ 1.67 Month 9 £ 50.00 410% £ 1.67 £ 1.33 Month 10 £ 50.00 310% £ 1.25 £ 1.00 Month 11 £ 50.00 210% £ 0.83 £ 0.67 Month 12 £ 50.00 110% £ 0.42 £ 0.33 Total £ 600.00 Total £ 32.50 £ 26.00

    Gross rate as a percentage %5.4166667Net Rate as a percentage %4.3333333
  • regularsaver1
    regularsaver1 Posts: 4,930 Forumite
    damn it does not show it as a chART!!
  • FairyElephant_2
    FairyElephant_2 Posts: 1,117 Forumite
    I disagree with the OP!

    I guess it took me all of 15 minutes to read Martin's article on regular & other saverings accounts and then pop the numbers into his various (wonderfully useful!) calculators and work out that I am better off sticking my 3k in my Halifax Websaver (at 5.8%) to drip-feed £250 a month to the 10% reg. saver, and then paying in £250 a month 'new money' from my salary to get to the £500 per month permitted, than I would have been in putting the 3k into an ISA (in DH's name - got mine already fixed at 6.3% for the year) for the year and just saving the 'new' money in any other account.

    Don't know what I could more usefully have done that 15mins???? I also had a cup of tea while I was doing it!!!!!

    Reg. Savers are great for those who want to save monthly from their salary (what they were designed for after all!) as long as you don't need to touch it for a year - the rates are usually much better than you would get in other savings accounts, you just need to understand the (fairly simple) premise behind the interest calculations!

    FE

    PS - Usually I would fund an ISA first, but I'm really pleased I've proved to myself that this is a better way of doing it for this year, as we need the money to pay off part of the mortgage in a year's time!

    Thanks again Martin!
    The best advice you can give your children: "Take responsibility for your own actions...and always Read the Small Print!"
    ..."Mind yer a*se on the step!"
    TTC with FI - RIP my 2 MC Angels - 3rd full ICSI starts May/June 2009 - BFP!!! Please let it be 'third time lucky'..... EDD 7th March 2010.
  • Nick_C
    Nick_C Posts: 7,604 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Home Insurance Hacker!
    Oh no, not this old chestnut again. If you think 10% AER on a savings account is not a good deal, that's fine. Keep your money under the mattress. But don't try and tell those of who understand interest rates that regular savings accounts that they are not a good deal!
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