Non tax payer - ISA worthwhile?

bundly

OK Edin, I have read enough of that thread about FD now to see what to do. I think!

If I pay into the current account by SO £1500 for six months I qualify for a £100 switching incentive, free banking, and access to the 8% savings account.

I'd SO £1,200 a month back to my other account (or stick it into FD e-savings if the interest rate is the same) and SO £300 a month into the 8% account.

Any holes in this plan?

bundly

The only difficultly I can see is, must this be a salary? The wording on FD website says

"Open a 1st Account and transfer your monthly salary/income of at least £1,500 within three months and we will add £100 to your account."

So they are separating salary from income, seeing them as two different things and accepting both.

I dont see how they could "see" or "prove" that the £1500 isn't a salary anyway. For example, what if I SO £1500 into my boyfriend's account every month and he SO's that into my FD account? As far as FD is concerned, he is my employer paying me £1500 a month!

Or am I missing something?

bundly

More questions

1. If I tell them the £1500 is indeed wages paid to me by an individual person rather than a salary from a huge company paying me by BACS, how can I then ask for a form to sign to say I am a non tax payer?

2. on another forum it says that this 8% isn't really p.a. because you cannot stick the whole £3600 in at one time. In fact, the argument goes, it equates to 4.33% pa. If that is the case, why not just put money into the West Brom which offers a Websave 4 year bond at 4.31% fixed for a year, and the AA offers 5% on a 5 yr bond, that way no need to jump through all those hoops that FD has set up? However, I suppose if I tie up money for 5 years at 5% then see interest rates rise to 7 or even 10% I will lose out, won't I? Are rates going up, does anyone know? Or am I in crystal ball territory here?

oldfella

the £1500 can come from any external source, it doesnt need to be wages/salary

RS interest is 8% on the money in the account each month - it doesnt equate to 4.33%, the point they are making is that you have on average £1950 in the account, which is irrelevant anyway

bundly

oldfella wrote: »

RS interest is 8% on the money in the account each month

That cannot possibly be right oldfella. Can anyone confirm?

Paul_Herring

bundly wrote: »

That cannot possibly be right oldfella. Can anyone confirm?

It's likely to be 8% AER on the amount (i.e. roughly 8%/12 on the increasing amount per month.)

bundly

Paul_Herring wrote: »

It's likely to be 8% AER on the amount (i.e. roughly 8%/12 on the increasing amount per month.)

Yes, that is what I thought. 8% over the year, divided by 12. But you have to remember that the £3,600 isn't in the account for the whole 12 months. There is 300 the first month, 600 the second and so on.

You get £156 in interest over the year if you put in 300/month for 12 months. and that apparently equates to about 4.33% over the year in real terms.

oldfella

You get £156 in interest over the year if you put in 300/month for 12 months. and that apparently equates to about 4.33% over the year in real terms.

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- no its not 4.33%, its 8% - the average amount in the account is £1950
1950 x .08 is £156

if you had £3600 in the account for the whole year it would be 4.33% - the remainder of the money can be in another account earning interest

bundly

I'm getting more and more confused ....

oldfella

after 1 month you have saved £300 - £300 x .08 /12 = £2
after 2 month you have saved £600 - £600 x .08 /12 = £4

if you continue this over the year it will total £156
£156 is 4.33% of £3600 - but you didnt have £3600 in the account for the whole year, you only had an average of £1950 (3600 /12 * 6.5)

so you are getting 8% on the money you are saving