Help – best possible return for six months of saving?

Joshua_T

Greetings all, hope you can advise on my best options in my current confused state…

I had £4,000 dormant in an old Barclays TaxBeater ISA earning monthly interest, to benefit from when I topped it up as and when. I also have an ING savings account opened a few months ago due to the 3% AER paid monthly with a view to depositing monthly and accessing when I need cash; this has £3,000 currently.

Last week I added £2,000 to the ISA as I knew I was about to have to sort my savings out to make the maximum return I can in the next six months before I will need to use all the money. So the ISA now stands at £6,000 and from tomorrow I’ll have the full allowance available again, hence the deposit last week.

I have £3,000 now available to deposit, plus I plan to save £700 per month for this period. My question is what the best mix of ISAs/Savings would be to gain the most money in the next six months before having to use all the money.

As I have some lump sums plus will increase my savings each month for six months till I will want the cash, I’m thinking monthly interest is still the way to go. Based on this my head is filled with so many ways to “bake my cake” :mad: with various mixes, including:

- Transfer old ISA to Intelligent Finance ISA (2.5% AER paid monthly).Open Barclays ISA (3.25% AER paid monthly) and pay in £3,000, then top up and remainder into ING.
- Transfer old ISA to Intelligent Finance, plus pay £3,000 and withdraw from ING to pay full allowance for the most ISA interest.
- Close the ISA and stick everything in the ING account for maximum balance but interest taxed.

I have chosen Intelligent Finance as the best ISA option paying monthly, allowing transfer in and not requiring a current account to be opened plus transfer salary, debits etc. before being able to apply for the ISA as I need to get the savings working quickly. Perhaps there are better options available? I’m going to try my own sums now but hope some experienced savers can help/advise too. Thanks.

psychic_teabag

You are specifying that you need the interest to be paid monthly. Are you aware that even if you have an account which pays interest annually, if you close the account you will receive all the interest immediately.

Joshua_T

In short, no but reading the forums in the last hour I was gathering that impression too. Thank you for replying; I guess this widens the ISA account options I can look at. So if I close the ISA after six months I would receive half the annual interest amount?

Mr._H_2

You don't need the interest to be paid monthly. Just compare the AER numbers and whichever is higher, will earn you the most, regardless of whether it's paid annually or monthly*. As psychic teabag says, if you have an instant-access account that pays interest annually and you close it before a full year is complete, you get the current balance plus interest owed to you up to that date.

To compare a non-ISA account to an ISA, multiply the non-ISA AER by 0.8, assuming you are a basic-rate tax payer.

* It should be noted this is only true if interest is calculated daily, but I'm not aware of any accounts where interest is not calculated daily.

Joshua_T

Many thanks for that, much clearer now with the interest being paid anyway and I can do the accounts comparison with the factor you gave. Appreciate the help and any thoughts on how to spread my deposits for maximum return also gratefully received.

Joshua_T

Update: think I will plump for the Barclays ISA and fill the allowance with funds from my ING account to start accruing interest at a higher rate than the ING (plus not taxed) and that will get me going for now. Next step is to find the best option to transfer my old ISA into before closing it in six months, should still be better than ING as I think that 3% taxed interest equates to 2.3% nett. Any other ideas on the best split of funds very welcome!

psychic_teabag

Mr._H wrote: »

Just compare the AER numbers and whichever is higher, will earn you the most, regardless of whether it's paid annually or monthly*.

To be pedantic, I think the AER applies only if you compound monthly interest over a whole year. A very quick sum suggests that you're very very very slightly better off going for an account that pays annually if you're going to close early. But only a tiny fraction of a percent.

Joshua_T

Morning psychic teabag and thanks again - found the 3.25% higher than any monthly interest option anyway so I will apply for that. If you have any views on the rest of my OP I'd be most interested.

opinions4u

Joshua_T wrote: »

Morning psychic teabag and thanks again - found the 3.25% higher than any monthly interest option anyway so I will apply for that. If you have any views on the rest of my OP I'd be most interested.

Given your username, I thought you were going to come back and say "I still haven't found what I'm looking for"!

chezmck

opinions4u wrote: »

Given your username, I thought you were going to come back and say "I still haven't found what I'm looking for"!

1st thing to make me smile today!!:rotfl:

Joshua_T

Made me smile too at least I left the 'ree' part off the end..!

Come on peeps, some suggestions needed otherwise that excellent song will remain very appropriate!