ISA to help fund new PC

edited 31 March 2011 at 6:53PM in ISAs & Tax-free Savings
7 replies 847 views
Rogue_SaverRogue_Saver Forumite
4 Posts
edited 31 March 2011 at 6:53PM in ISAs & Tax-free Savings
Hi all,

Every 2-4 years I upgrade parts and or build a new PC spending between £600-£1300 in that time.

I have money sitting in my HSBC bank account and it's earning a very low interest rate over the last 3+ years. If its sitting there for another 2-3 years its a waste. I want the money work and help fund my new upgrade/build. So I've been looking at ISA over this week.

I tried to post a link (Santander Fixed Rate Postal ISA 3.7%)but as a new user I can't :spam: warning.



This ISA pays 3.7% fixed for 2 years and I can have the interest paid in to another account. (details via website)

What I would like to do is open this ISA with £5,100 (2010/2011) and have the interest paid directly into my HSBC current account (yearly). Over the 2 years 3.7% should pay a total of £377.40. At the end of the 2 years I would transfer out the £5,100 to a better rate ISA. Keeping the 2010/2011 allowance going, the total money pot doesn't increase over the term (started with £5,100 and end with £5,100). But I could use the interest for part funding the PC.

For 2011/2012 I would like use my £5340 allowance to do the same. May be with different provider and rates etc. With both tax years allowances I'm aiming for £700+ all tax free I hope

Is this feasible?

Thanks
:money:

Replies

  • david78david78 Forumite
    1.7K Posts
    It would be better to just let the interest build up in the account, then withdraw what you need to spend when you need it.
  • blueberrypieblueberrypie Forumite
    2.4K Posts
    Part of the Furniture 1,000 Posts Combo Breaker Name Dropper
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    david78 wrote: »
    It would be better to just let the interest build up in the account, then withdraw what you need to spend when you need it.

    He's looking at a fixed-rate ISA which doesn't allow withdrawals - you can only close the account or move the full balance to another ISA, and like most fixed-rate ISAs, there's a penalty for doing so.
  • edited 31 March 2011 at 10:10PM
    Rogue_SaverRogue_Saver Forumite
    4 Posts
    edited 31 March 2011 at 10:10PM
    Thanks for the replies:
    david78 wrote: »
    It would be better to just let the interest build up in the account, then withdraw what you need to spend when you need it.

    Its about £6 extra in year 2 and if I wait it mite be considered a withdrawal ?
    He's looking at a fixed-rate ISA which doesn't allow withdrawals - you can only close the account or move the full balance to another ISA, and like most fixed-rate ISAs, there's a penalty for doing so.

    Indeed Its fixed rate with 120 loss if removed before the 2 years, I'm happy to leave the money (£5,100) in for 2 years if the return is 3.7%
    Withdrawals

    - If you need to access your money you will need to close your account or transfer your whole ISA balance to another cash ISA, subject to an early closure charge of 120 days’ interest. - All withdrawals requests must be made by post and cheques will be in the name of the account holder




    End of Fixed Term

    - At the end of the fixed rate term this ISA will become a variable cash ISA, for which the rates are currently 0.10% AER tax free for balances of £1+, 0.30% AER tax free for balances of £27,000+ and 0.50% AER tax free for balances of £40,000+.
    - This ISA will continue to be managed by post.
    - Annual cash ISA subscriptions and rules will apply

    My understanding that this (see below) allows me to have the interest paid directly into my HSBC bank account. Its not considered closing/withdrawing/transferring funds? Thus keeping the 2010/2011 allowance in place but benefiting from the interest and having available to spend when its paid yearly
    Interest is paid annually only. - Interest is payable on the 1st of the month following account opening and annually thereafter
    - Interest can be credited to:
    • The account
    • A suitable Santander savings or bank account or
    • Another external account
    :money:
  • david78david78 Forumite
    1.7K Posts
    Ahh I see. I didn't realise it was a fixed rate account. Sorry for the confusion.
  • Just an update,

    I opened the ISA today and wanted the interest to be paid in to my HSBC account. Which is clearly stated on the website but we were unable to set it up :mad: even after spending 20+min on the phone with their help-desk.



    In the end I opened an "PREFERRED ACCOUNT" with Santander which needs to be funded with £1000.00 per month. This offers 5% (AER) for the first year on balances up-to £2500.00 (over £2500.00 no extra interest will be paid). After the first year its 1% (variable) up-to £2500.00, which is better than my saving accounts with HSBC.

    I've go no problem with £1000.00 per month because I can just transfer, back to my HSBC account. My plan is

    12*£1000 set on via monthly standing order and will transfer some back out to HSBC after 2 weeks. Only leaving a max of £2500 with the "PREFERRED ACCOUNT" (I love internet banking).

    £188.7 (once a year from from the ISA) + any interest paid on the "PREFERRED ACCOUNT" I can leave their. Once the 2 years is up I can close the account.
    :money:
  • blueberrypieblueberrypie Forumite
    2.4K Posts
    Part of the Furniture 1,000 Posts Combo Breaker Name Dropper
    ✭✭✭✭
    In the end I opened an "PREFERRED ACCOUNT" with Santander which needs to be funded with £1000.00 per month.
    I've go no problem with £1000.00 per month because I can just transfer, back to my HSBC account. My plan is

    12*£1000 set on via monthly standing order and will transfer some back out to HSBC after 2 weeks. Only leaving a max of £2500 with the "PREFERRED ACCOUNT" (I love internet banking).

    I love internet banking too. I love it far more when Faster Payments work properly though - and they don't with Santander, so be warned.
  • DerivativeDerivative Forumite
    1.7K Posts
    I would be wary of fixed rate ISA's as it is looking likely interest rates will go up this year.

    Current 3.3% ISA tracking the base rate will be 3.7% if the rate raises by 0.5.

    If you have an instant access account it also neatly sidesteps your issues.
    Said Aristippus, “If you would learn to be subservient to the king you would not have to live on lentils.”
    Said Diogenes, “Learn to live on lentils and you will not have to be subservient to the king.”[FONT=Verdana, Arial, Helvetica][/FONT]
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