Does this sound okay? Savings Newbie

HannaB

Hello all,

I’ve never posted on this board before, but I’ve had an idea that I would really like feedback on. Basically I became debt-free last year, so I’m very new to having money left over at the end of the month.

My and the OH currently saving for a deposit on a house. So far, we currently have around £6,000 in a Nationwide Cash ISA. However, because I was due to go over the ISA limit for this tax year, I opened an “overflow” savings account for the excess, a Nationwide e-Savings Plus (which has about £300 in it so far). Even though my current account is with HSBC, I had to open a Flex Account for the e-Savings Plus. Here are my thoughts:

1.) Transfer the full £6,000 from the Cash ISA into the e-Savings account due to the higher interest.
2.) Make monthly payments into the Cash ISA next tax year, just in case I need easy access to the funds.
3.) At the end of next tax year, transferring the amount from the Cash ISA to the e-Savings account (if the interest is still favourable)
4.) Continue this cycle.

I know common sense probably dictates that I pay into the e-Savings account straight away and ditch the ISA. But I would like to have some instant unlimited access funds in case the worst should happen.

Any thoughts on the above?

Stavros_3

I wouldn't lose the tax free status of the ISA, if the rates are not that good you can transfer the amount to another provider. If the worst came to the worst you could still remove the cash from the Isa but you cannot replace it once withdrawn

mr_fishbulb

You should be able to transfer the ISA to another provider paying more interest. Some are around 3.5% at the moment.

Reaper

I agree. What you suggested only looks appealing because Nationwide pay such a rubbish rate on their variable ISAs (I guess you are getting 0.5% or 0.75% depending which account you have).

If you were to transfer your ISA to Nat West, for example, it would earn 3.25%, and 3.5% when you get the total over £10,000.

Note they will want you to open another pointless account too, but although they often try to persuade people it has to be a current account it doesn't. A savings account with nothing in it is fine.

Dinah93

I'm quite confused by your plan to be honest! If you read the ISA and savings guide on here it will tell you what rate your ISA has to be to beat the savings account. We are saving for a house also, and each have a Barclays regular saver account at 6%, which we pay £250 into each one each month. This does beat the highest paying ISA we currently have access to, although we have also applied for a First Direct account to enable us to get the 7% (equal to just over 11% if we paid tax on it) ISA they offer. We also have a 3% overflow savings account once the ISAs and regular savers are full. Once you withdraw money from an ISA you loose the tax free status for that year, and can never refil that years ISA allowance. I assume you have £6000 in an ISA is either two years worth or one each?

When it comes to savings rates, brand loyallty means nothing, so make sure you get the best rates for your money. See if you can find the rates for your two accounts, and post them up here, you may well be best off moving your ISAs elsewhere to someone else's ISA product rather than loosing the tax free status.