ISA and savings - help! What to do?

JanineB

Hello all. I have been wondering about this for a few days now. Here's what' s going on.

I have paid off all debts now (HURRAH!) except my student loan which stands at £10,290.83. The interest rate on this os 3% p/a.

Im wanting to give voluntary payments over the next two years to pay this off (Its not comming out my salary as yet as I dont earn over £15,000).

I could pay the student loans company direct each month, but I was thinking it may be wiser to pay my money into an ISA and once that's full a high interest savings account, both with rates above 3% in order to offset the interest on the student loan and maybe even have a few pounds left at the end of it.:think:

I currently have a 60 day ISA with RBS which has £2090.82 in it.

The GROSS and the AER rate on this is 0.70% HOW BAD IS THAT!!! :eek: Anyway its a superseeded account which you can no longer get anymore.

What's ISA's on the market are good at the moment giving out the higest interest? I had Barclays down as the best a few months back but as the finances of the country are all over the place this has most likely changed. Im not interested in shares ISAS. Wanting my money to stay where it is for now.

ISA transfer rates are another thing. Im wanting to get my cash out of that RBS account asap. Is there a certain time of year that is best to transfer an ISA and who charges the least or indeed nothing? Will RBS charge me for leaving them or will the new bank charge me for moving my money there at the wrong time?:spam: lol I need help with that part.

Lastly, looking for the same with savings accounts. What ones give the highest interest (and are secure)?

Im aiming to stow away £100 per week into this paying off project, maximum. Some weeks I wont manage this if I decide to splash out on something etc. But thats my aim for most weeks. Minimum I'd saay I will definetly be paying in is £50 per week.

Any help you can give will be greatfully appreciated!! :A

Thanks

Janine

natman

HI There -
Ok.
Its a really difficult time for people choosing savings accounts at present including ISA's but your ISA interest does sound pretty pathetic anyhow...............here goes.

6 months ago some ISA Accounts where paying around 6.5%
some easy access savings accounts where paying 6.65%

That unfortunatley has changed
My ISA Is with NEWCASTLE Building society and has dropped from 6% to
a rubbish 3%
My easy access has dropped to around 3.75% now

With ISA's i would look at the following link - http://forums.moneysavingexpert.com/showthread.html?t=401374

This highlights curent ISA deals, also i am presuming you would want to look at ISA'S that allow transfers in( in otherwords what allow you RBS Money to be placed into a better paying account)

There should be no costs at all with mving your money - but to bear in mind is this -
1. Open up an ISA That allow transfers in
2. tell the new ISA Provider you want to transfer money in( you normally have to fill in a transfer form)
3. The new ISA provider will obtain your money( whatever you do, do not close the account yourself ) as it is not considered as transferred funds.
4. When the money is in your account - add more if you want.

General accounts -

look at Martins saving pages -
ICICI Offer rates of 4.5% at present, but we beleived that will drop
YORKSHIRE BUILD SOCIETY HAS AN ESVER - 3.75%
Bradford and Bingley issues 6 - has rates of 3.6%

But again remember - interest rates are pretty low at the minute, so is it worth having a look at paying off some of your loan????

good luck!!!
n

Lokolo

First a few things-

• ISA transfers for Cash don't cost anything. You find a new provider which allows transfers in and fill in an ISA transfer form.
• You say your's is a 60 day ISA so I would assume you need to give 60 days notice. On your ISA transfer form put the date as 2 months ahead, and contact RBS to say you are transferring and this is your 60 day notice.
• Current Accounts rarely give any decent interest (there are a few) you may want to instead find an instant access savings accounts as these will likely give you more interest. With internet banking its easy to transfer money between accounts.

For best rates there are numerous sites https://www.moneysupermarket.com/savings is what I use. Baldur will write his usual one later on I suspect.

Also yeh transferring an ISA can take upto 30 days (longer maybe but they can be shorter too) and around April time can be delayed because of the number of ISAs being opened etc.

JanineB

Thanks for these so far guys!

Sorry I typed current accounts when I meant savings accounts. Looking for a good savings acc rate as well, not a current account. My current account is a student /graduate account with 0% interest on my overdeaft so Im keeping that for as long as I can

fullstop

Janine : You might want to have a look at Northern Rock for your ISA, they are offering a fixed rate of 4% , they accept transfers from other providers,

Mikeyorks

Yes your ISA rate is rubbish and yes .... you do need to move it. And I'll leave the sound advice above to stand.

But ... no ..... you positively should not be considering voluntarily paying off your SLC loan. It's a bad idea and quite contrary to most of your positive thought processes from your OP!

Savings and ISA rates have plummeted and have a tad further to go ... but then they will steadily start to recover. But SLC rates will continue to head down for a while yet ..... and even when inflation starts to pick up again (it's got a cliff to fall off yet) you will still only be paying inflation rates to SLC and the savings / ISA market will offer a better return for your money.

You sound tidy minded ... and I realise it's tidy to get rid of the remaining 'debt'. But put the equivalent into a better paying ISA .... and it will salve your conscience. The gap on 'should I pay it off' has undeniably closed since early Dec ... but it will open up again. Worth reading through this :-

http://www.moneysavingexpert.com/loans/student-loans-repay

JanineB

Hi there, thanks for your replies once again. See this is what Im debating in my head. Im not sure whats best.

Basically Im wanting to pay it of in the cheapest way that will cost me the least money. The best rates for ISAs and fixed rate savings accounts that I can find at the moment are around 4%.

Bearing in mind the interest of 3% is adding onto my loan each year and at the end of this year that means £308.71 interest will be charged to me.

If I transfer my existing ISA balance and also save up £100 a week in an ISA or savings account, after one year I will have £7290.83 of savings and will have made £291.63 interest at a rate of 4% - less that the interest charged to me on my loan (and even less if placed in a savings account due to tax, plus the recent ever falling rates on non fixed accounts) . It's unlikely I will manage the £100 every single week as well as I know some weeks I will want to have a life and maybe go to a gig or something! lol!

Me and my boyfreind are looking to start saving up for the future as well as we've been discussing a house and engagement etc so I want to get these savings on the go asap as well, hence the idea of clearing all outstanding debt first.

During my rooting around online looking for savings accounts I came across the fixed rate for one year savings account type. Ususally the rate paid in must be somewhere between £25 and £500 p/m. Like I've said above Im looking to pay in £400 p/m. Some months though as Ive also said, I wont manage this if something else crops up. So, my questions is this: If I were to pay into such an account each month (by standing order) would I be able to change my pay in amount each month without harming my interest rate?

Some months I may wish to pay less (£200 for example) during Christmas or the summer holiday season for example, and some months more, maybe up to the maximum. So this is quite an important option for me.

Im not looking to withdraw any funds from such an account and understand the penalties associated with this.

Great advice so far folks, please continue!

Thanks

Janine

fullstop

Halifax have a regular saver paying 5%. Maximun per month permitted is £500 , you can vary your S/O payments as you wish.

Barclays have a maximum payment of £250 per month , paying 6% , you can also vary amounts as you wish.

You should get a move on and fix a ISA before the rates fall even further.

anselld

JanineB wrote: »

If I transfer my existing ISA balance and also save up £100 a week in an ISA or savings account, after one year I will have £7290.83 of savings and will have made £291.63 interest at a rate of 4% - less that the interest charged to me on my loan (and even less if placed in a savings account due to tax, plus the recent ever falling rates on non fixed accounts) . It's unlikely I will manage the £100 every single week as well as I know some weeks I will want to have a life and maybe go to a gig or something! lol!

The reason this looks wring is becuase it is taking time to accumulate the regular savings so amounts later in the year earn less interest. To make a fair comparison you need to calculate daily loan interest paying off regular payments (if this is how it works)

Basically if you are borrowing at 3% and saving at 4% tax free it cannot be better to pay off the debt. So long as you can save at greater than 3% tax free or greater than 3.75% taxable keep the loan and save the money.

Principallity BS are still offering 6% fixed for regular savings but probably not for long.

ic

As long as you can keep the savings rate above the rate being charged, keep the savings. Should you ever need them, you'll have access to them - and can view it that if you spend the savings, you're re-borrowing from your student loan (at a rate you're unlikely to ever get on the market again!)

Mikeyorks

JanineB wrote: »

Me and my boyfreind are looking to start saving up for the future as well as we've been discussing a house and engagement etc so I want to get these savings on the go asap as well, hence the idea of clearing all outstanding debt first.

You've got a dilemma! Tidiness of finances v reality!

Re-read Martin's article. I could have written it for him ... so I won't repeat it. But house etc = need for funding and likely a Mortgage. So saving to pay off the SLC (by then say 2%) and then borrowing at say 5% doesn't gel? So - you keep the debt at 2% and thereby reduce the loan at 5%. It's your own internal 'off-set' mortgage/furniture loan/whatever.

So, by all means do your saving ... but then keep it. As by then your accumulated saving of £7290.83 (I like precise ) is - in it's 2nd year - going to earn you more than you are paying to SLC. At which point you put 'tidy' to one side ... and go for pragmatism instead. (You're not comparing like with like when comparing fully established SLC 'debt' with emerging savings?)

And you pay off the SLC via the 9% (?) deduction via PAYE once you're over £15k. Less tidy .... but far more 'moneysaving'

If I were to pay into such an account each month (by standing order) would I be able to change my pay in amount each month without harming my interest rate?

All Regular Savers are different - so check the T&Cs carefully. But the Halifax, for example, allows you to vary absolutely between £25 and £500 per calendar month. So the answer is 'yes'. But do read the threads on the best Reg Savers as there are techniques to running them in order to maximise the interest yield.
In your case you're going to be feeding the RS with 'new money' direct from salary .... which is absolutely the best thing to do. A lot of us re-cycle money from existing savings through a RS (aka drip-feeding) ..... and the current interest rate disparities between the account you drip feed from and the RS - are simply not right to do that at the moment.