Lump sum and regular weekly saver..what would u do?

nomis21

Hi,

I have 6k in a yorkshire building society internet saver account at 2.1% interest, just been paid my annual interest and i got a return of a misely sum of £40 after tax was paid.
I save on a regular weekly basis min £80 max £280 and i have been investing this in the Yorkshire account.
I have a 3 year saving goal iam aiming for so i will not be touching the savings within this period.
Iam thinking of withdrawing the sum from the YBS and investing in premium bonds and buying bonds on a weekly basis.
Also have a cash isa with the cooperative but the interest rates are even lower than the ybs.

Looking for advice on whether to leave the money sat in the ybs maybe buy premium bonds or possibly the cash isa???

Any ideas?

Ilya_Ilyich

Did you put any new money into your cash ISA this year? If not you can pick up a cash ISA from Santander that pays 3.3% tax-free interest that you can put £5,100 in now and up to £5,340 after april 6th (as lump sums or regulars).

Premium bonds are designed to pay an average 'interest' of 1.5% so although the money will be safe you won't be gaining much on it.

psychic_teabag

If the cash ISA is earning less than 2.1% then you should definitely consider transferring it - you can get 3% on an instant-access ISA from Halifax, for example. You might also consider transferring it to a fixed-term account which pays more interest, since you don't need access to the money for a while. If it's this year's ISA, and you haven't fully-utilised the annual allowance, you could top it up with some of your £6k before transferring it. Note that base rates may increase soon, and some people think it's a bad time to fix a rate.

The £40 interest is presumably because you built up the £6k sum over the year - 2.1% on £6k would normally get £120 per year before tax. You can do better than 2.1% - some internet instant-access savings accounts pay up to 3%

Going forward, you could consider a regular savings account - they tend to pay a higher rate. eg can get 8% from First Direct. Or if you are under 35 and have never owned a home, the Santander First-Home saver pays 5% on a lump sum of up to £5k with up to £300 per month thereafter. See Martin's guide. Note that many on here would advise avoiding Santander.

Or failing that, as Ilya says, open a new instant-access cash ISA next tax year (or now if your existing ISA is an old one) and you can get 3.3%. The best paying ISA's don't accept transfers, so to get the most interest, open a new one with the highest rate you can find. But if you prefer to keep things simple, and have just one ISA, you could transfer the existing one to, say, Halifax, and then continue paying into it next tax year.

kidmugsy

I find that the ability to withdraw cash from an ATM good reason to keep some money in that YBS account. But otherwise, why not look for a chance to (a) get good interest tax-free in an ISA, and perhaps (b) look for a high-paying regular savings account? There are threads on this forum on topics (a) and (b).