High Interest Regular or Lower Fixed rate

cookie1975

Hi all...

I was wondering if anyone could advise on the following. I was thinking of opening a high interest regular saver ISA, specifically the 7% cash ISA by Saffron BS. However, it got me thinking that the % rate is AER per year, therefore I am only earning interest slowly on the £300 maximum that is allowed to be put into the account per month.

Does anyone have any advice if it would be better to put into a lower rate fixed ISA at 3.5% for example that allows a bulk transfer of funds in, thus enabling more interest to be accrued from day 1?

Any help greatly appreciated.

alastair_h

Natwest e-isa at 3.51% (over 10K, 3.25% below), how long it will stay there is another thing.
http://www.natwest.com/personal/savings/g2/isas/e-isa.ashx#tabs=section2

See best buys
http://forums.moneysavingexpert.com/showpost.html?p=4603369&postcount=1
or
http://www.moneyfacts.co.uk/money/savings/10/isa-trasfers.aspx

If you can fix the rate you may get a better deal, depends on how long you can leave it there. Personally I have moved my ISA into a fixed rate ISA in these uncertain times.
http://www.moneyfacts.co.uk/money/savings/7/fixed-rates-isa.aspx

Stompa

cookie1975 wrote: »

However, it got me thinking that the % rate is AER per year, therefore I am only earning interest slowly on the £300 maximum that is allowed to be put into the account per month.

Don't forget though that the uninvested funds would still (presumably) be earning some interest in an account elsewhere - so you need to factor that into your calculations.

rb10

A good approximation for calculating Regular Saver interest is monthly savings amount * 6.5 * interest rate, so in this case it's 300 * 6.5 * 0.07 = £136.50 earnt from here.
Then add to this the (taxable) interest that you'll get from the feeder account (remembering that this has to be instant access, allowing at least 11 withdrawals. For this one, do 300 * 5.5 * expected average interest rate (net).

Now, according to the post here, the best fixed ISA is Norwich & Peterborough Fixed Rate Cash ISA - 3.30%, which would give £118.80 on £3600.

So just the interest that you would get on the Regular Saver is way higher than the interest you would get on today's best fixed ISA, even if you totally discount the interest you'd earn before the money goes into the Regular Saver.