A new savings pot in the all-in-one account or an independent instant access account

Rather belatedly I want to set up a savings account for the car and Christmas/Birthdays. How do I work out the best deal? We have a Woolwich all-in-one account were the current and savings account offset the mortgage. My husband says that it is best to set up another savings pot in the account as taking money out of the account will decrease the amount used to offset the mortgage. I was wondering whether this was true and whether a high paying instant access savings account would be better. How do I work out what is best? I don't really understand how the interest works on an all-in-one account.

Comments

  • humfer
    humfer Posts: 1,779 Forumite
    If you want to save money for a purpose other than offsetting your mortgage - i.e. for christmas or a big purchase then I would imagine setting up another account with someone else is going to be the best thing. Although easier if all your accounts are in one place no one company is best at everything. You could go for a no notice account paying just over 5% (ICICIC) or maybe look at a regular saver account which allows you to save up to £250 a month but with a much higher interest rate (between 7-10%). There are some ties in with some, but not others. Who is your current account with? The reason I ask is that several of these regular savers are only available if you have the current account. Assuming you are with Barclays (aren't they part of Woolwich, or other way around) pretty sure they have a 10% regular saver
  • mikael
    mikael Posts: 346
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    From a savings return point of view, offsetting will usually always provide better returns for taxpayers than interest on a savings account. The government tax you on interest earnt, but don't tax you on reducing your mortgage interest bill. The only better returns to be had will be potentially to use a high return regular saver offering 8 to 10% interst. Even after tax, some of these will offer a better return than if you had offset your money. So in short your husband is right, but you can still use a regular saver to potentially get a better deal, but any normal savings account is going to be worse value than if you simply carried on offsetting.
  • EagerLearner
    EagerLearner Posts: 4,976 Forumite
    Hi Rachel,

    My spreadsheet below has been designed for you to be able to track all savings in one 'pot' - allowing you to make the most interest on it all but still see what amount has been allocated to Xmas, what is for holidays etc - I keep all my savings with the great account at ICICI for example, which is also instant access.

    Give the spreadsheet a go before you make any decisions... if you do use it, please leave comments on the message thread below so I know if it's helped... x
    MFW #185
    Mortgage slowly being offset! £86,987 /58,742 virtual balance
    Original mortgage free date 2037/ Now Nov 2034 and counting :T
    YNAB lover :D
  • Thanks for your advice. I'm a non-tax payer. I will definately look into regular savings account. Eagerlearner I will definately look at your spreadsheet and get back to you.
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