Cash ISA 3.2% / HSBC Regular Saver 8%

Carpi10

Hello fellow savers,

Just a quick one, this may seem very silly but i would just like to confirm which i should use first?

Do i use the Cash ISA limit first and then save on the regular saver.

or

Use the regular saver first and then pay towards the cash ISA?

Thank you

Chris

Lokolo_2

Carpi10 wrote: »

Hello fellow savers,

Just a quick one, this may seem very silly but i would just like to confirm which i should use first?

Do i use the Cash ISA limit first and then save on the regular saver.

or

Use the regular saver first and then pay towards the cash ISA?

Thank you

Chris

Well some people suggest depositing into a regular saver, and then at the end of the term of the regular saver you can transfer the lump sum into an ISA and top it up to the annual ISA limit.

It depends on your circumstances really, if you are a taxpayer then it's normally more beneficial to deposit into an ISA to get as much tax-free interest as possible. Do you have a lump sum or are you looking to save regularly? If the latter is the answer for you, then a regular saver would seem more appropriate especially if you can get access to the 8% regular saver!

Ilya_Ilyich

The HSBC saver pays a much better rate, prioritise it over the ISA.

Rob_192

The answer will depend on various factors. Do you have the money available now as a lump sum or will it only be available as an amount each month? Remember with a regular saver account you will only get an average % over the year of approx ½ the rate (so the 8 % becomes approx 4%, 3.2% after tax), this having been said if you have a lump sum you can park it in an instant saver account and draw it down over the year, thereby also getting approx ½ the % rate on the account you are drawing down. So providing you do this it will always be more benifitial to go for the regular saver.

Obviously you can only put £3600 (12 x £300) in the regular saver, compared with £5340 in an Isa (2011). One thing you need to consider however, is that if you start a FD Regular saver now, you will not have the money available for 13 months (if I remember correctly how my FD reg saver account works), this will mean you could not get the money into an Isa before the 2012/2013 year. If you have a lump sum you could still just get it in this year's (2010/2011), if not next year's (2011/2012)

R

opinions4u

If you've got £5,100 sat around waiting for a long term home, and you pay tax, get it in an ISA now.

If you only have £25-£300 a month spare, then the First Direct account is the way to go, and review the situation on maturity (and consider putting the lump sum built up in an ISA then).

King_Weasel

8% is too good to miss. If you've already got the £3600, find the best instant access account and drip feed the saver from it. Anything to spare over the £3600 can go into an ISA.

Solomon_Broad

I may be wrong, but I think that to get the 8% interest rate, you have to have an account that you pay for. That will cut into your interest profits.

Andy7856

I may also be wrong but8% over 12 months equals about 4% overall (eg you never have the full value in until month 12) less your tax on the interest. So works out at about 3%(ish) interest added to your account in month 12.

opinions4u

Solomon_Broad wrote: »

I may be wrong, but I think that to get the 8% interest rate, you have to have an account that you pay for. That will cut into your interest profits.

Pay in £1,500 a month to a First Direct current account and there's no fee. Pay in less than that and hold a qualifying product with FD (e.g. a savings account with £1 in it) and there's no fee.

It's a great rate.

Andy7856 wrote: »

I may also be wrong but8% over 12 months equals about 4% overall (eg you never have the full value in until month 12) less your tax on the interest. So works out at about 3%(ish) interest added to your account in month 12.

I suggest you take a good look at Martin's article on how regular saver accounts work. If you're comparing like with like you should only compare AERs.

If you've got a £5,100 lump sum to save, and a regular saver account only accepts £300 a month, comparing it against a cash ISA is comparing very different beasts.

If you've only got £300 and can add the same monthly, then an 8% regular saver account will return more to a basic rate taxpayer than a 6% cash ISA.