Help – best possible return for six months of saving?

Mr._H_2

I think that you've generally got the right idea. The fact you want highest returns over such a short period of time means that your options are limited. For example, there's no point looking at fixed term accounts or regular savers.

Now that you've gone for the Barclays ISA, perhaps another post reviewing your situation would help. How much do you have and where, what's been/being transferred, how much of this tax year's cash ISA allowance (£5340) have you used and how much more are you planning on saving over the next six months?

Joshua_T

Thank you very much Mr. H - glad to know I'm thinking along the right lines. Just called Barclays and have to go through the same ID process despite having the old ISA with them. I will type up a summary tonight of current arrangements and expected amounts I'll save going forward.

dtsazza

Regarding the rest of your post, the Halifax ISA Direct Reward (issue 4) accepts transfers in and pays 3.0% interest. To my knowledge that's still the best ISA for transferring into.

So - what to do with the rest? At 3.25% interest, you'd need a 4.1% return from a tax-paying account to beat it (that's 3.25 / 0.8, rounded up - assuming basic rate taxpayer). As it's a six-month window, First Direct's 8% regular saver is out (it only pays 0.5% if you withdraw early). However, you could possibly look at Santander's 5% 'First Home Saver', which I believe lets you close early with no loss of interest. £300 a month for 6 months would let you put £1800 away there.

Another alternative is Santander's Preferred Current Account, which pays 5% interest on balances up to £2,500. The customer service can be very patchy, but if you're only using it as a savings account it may be worth it on consideration. If you open the account, you can also qualify for their Super Fixed Rate regular saver (6%).

Other than that I can't think of any short-term savings rates that top 4.1%, so if the above don't apply I'd suggest you'd be best off paying everything into the Barclay's ISA. (Note that you wouldn't be able to pay in £700/month for a whole year as this would exceed the ISA allowance rates, but since you're intending to do it for six months the total contribution would be £4,200, which isn't a problem.)

Joshua_T

Many thanks dtsazza for your detailed post (and research!), much appreciated too. Will digest this and post a full summary tonight.

psychic_teabag

One way to supplement interest is with a Halifax reward current account - they'll give you £5 net per month for paying in and out £1000 per month. (Giving £60 per year - contrast with about £150 for £5000 in a 3% ISA for a year). That's in addition to whatever other interest you can get for the money for the rest of the month. So eg it more than covers the tax you'd pay for £5000 in a non-ISA account.

But you can't use your ISA as a holding account for the money since each time you pay it in it counts towards your annual allowance.

Joshua_T

psychic_teabag wrote: »

One way to supplement interest is with a Halifax reward current account - they'll give you £5 net per month for paying in and out £1000 per month. (Giving £60 per year - contrast with about £150 for £5000 in a 3% ISA for a year). That's in addition to whatever other interest you can get for the money for the rest of the month. So eg it more than covers the tax you'd pay for £5000 in a non-ISA account.

But you can't use your ISA as a holding account for the money since each time you pay it in it counts towards your annual allowance.

My thanks again psychic teabag - an initial look at this and the Santander current accounts show this as the better option I think - Santander have quite a few stipulations on the 5% rate dropping (plus uncertain service) and I'd feel more confident with Halifax on that side too. But it is more to do in switching my current account, salary etc. plus as I end up in overdraft each month already, suffering charges as a result the £1/day Halifax will charge is more than I think I get charged currently by NatWest. Not sure if it's better to stick with NatWest (poor current account but low 'draft charges and long history should I need a loan etc.) or twist. Will post full current situation later.

EDIT: Have since read your posting on another thread about the Halifax current account that you "Need £1000 per month, but it can be the same money in and out several times". Hmm, hence no need to switch everything perhaps, definitely more interesting now.

Joshua_T

Mr._H wrote: »

I think that you've generally got the right idea. The fact you want highest returns over such a short period of time means that your options are limited. For example, there's no point looking at fixed term accounts or regular savers.

Now that you've gone for the Barclays ISA, perhaps another post reviewing your situation would help. How much do you have and where, what's been/being transferred, how much of this tax year's cash ISA allowance (£5340) have you used and how much more are you planning on saving over the next six months?

Update: Tomorrow, will open new Barclay's ISA, will deposit £3000 cheque and then withdraw from ING savings to fill to up to full cash allowance (£5340) and start earning interest.

This leaves old Barclay's ISA with £6000 to transfer somewhere, possibly the Halifax ISA. In addition, I will now save £700 each month to deposit, again possibly into the Halifax ISA. I can also withdraw £1000 from ING and pay it in and out of the Halifax current account, although this would only gain about £30? Probably not worth it. Thoughts welcome

Joshua_T

dtsazza wrote: »

Regarding the rest of your post, the Halifax ISA Direct Reward (issue 4) accepts transfers in and pays 3.0% interest. To my knowledge that's still the best ISA for transferring into.

So - what to do with the rest? At 3.25% interest, you'd need a 4.1% return from a tax-paying account to beat it (that's 3.25 / 0.8, rounded up - assuming basic rate taxpayer). As it's a six-month window, First Direct's 8% regular saver is out (it only pays 0.5% if you withdraw early). However, you could possibly look at Santander's 5% 'First Home Saver', which I believe lets you close early with no loss of interest. £300 a month for 6 months would let you put £1800 away there.

Another alternative is Santander's Preferred Current Account, which pays 5% interest on balances up to £2,500. The customer service can be very patchy, but if you're only using it as a savings account it may be worth it on consideration. If you open the account, you can also qualify for their Super Fixed Rate regular saver (6%).

Other than that I can't think of any short-term savings rates that top 4.1%, so if the above don't apply I'd suggest you'd be best off paying everything into the Barclay's ISA. (Note that you wouldn't be able to pay in £700/month for a whole year as this would exceed the ISA allowance rates, but since you're intending to do it for six months the total contribution would be £4,200, which isn't a problem.)

For summary, please see my last post.

Looked into the Santander's First Home Saver account and unfortunately I would not qualify, as I am not a first time buyer. For the current account, I'd need to do a full switch, plus I'm using my overdraft each month anyway. So not sure I'd maintain the balance to gain the interest if I used it as a working account.

The Halifax ISA however seems more and more like a promising option and would be beating the 3% taxed interest that I'm currently getting with ING. So I think am pretty much there, as you say with the limited time, the options are reduced, and this seems the best combination for my funds.

Mr._H_2

Joshua_T wrote: »

Update: Tomorrow, will open new Barclay's ISA, will deposit £3000 cheque and then withdraw from ING savings to fill to up to full cash allowance (£5340) and start earning interest.

Good.

Joshua_T wrote: »

This leaves old Barclay's ISA with £6000 to transfer somewhere, possibly the Halifax ISA.

Good.

Joshua_T wrote: »

In addition, I will now save £700 each month to deposit, again possibly into the Halifax ISA.

You won't be able to do this as you will already have used up this year's ISA allowance with the new Barclays ISA. You must save your additional cash in a "normal" tax-paying account.

Joshua_T wrote: »

I can also withdraw £1000 from ING and pay it in and out of the Halifax current account, although this would only gain about £30? Probably not worth it. Thoughts welcome

Who do you have your "normal" current account with? To get the Halifax rewards, you don't have to switch, which is nice, but it's useful if your other account supports Faster Payments in and out. Given the short time period over which you're trying to maximise return, £30 is actually fairly significant. You also get 3.2% on the ISA instead of 3% if you have a reward current account.

So, you need an instant-access savings account for the rest of your ING money and your additional monthly amounts. Santander current accounts pay 5% on balances up to £2500, but they must be funded with £1000 a month like the Halifax reward account. Again, this money doesn't have to stay for long in the account, but unlike the Halifax, Santander limit Faster Payments to £300 a day, and you can only make Faster Payments by phone, not with their online banking. Combine this problem with Santander's awful service and it's not worth it.

I'd just go to moneysupermarket or the like and choose the top-paying instant-access account.

Last thing: I'm confused about why you're planning on saving £700 a month, have excess funds in your ING account, have money in ISAs that you're planning in spending all of in 6 months time, but you're still using your overdraft and presumably paying for this? How much does your overdraft cost? Moving enough money from your savings accounts to guarantee you don't go into your overdfraft at any point in the month will almost certainly maximise your return during this 6 month period.

Joshua_T

Mr. H, that was ruddy fast! Many thanks, of course I can't deposit twice for the ISA oops and my normal account is NatWest. That 3.2% on the ISA if I have the rewards account would be very good on the transferred balance so that does seem worth it as well as the £30 I can gain.

Only Nationwide is better than my ING, 3.05% instead of 3% so I can just fill it with my new monthly amounts and I think I'm sorted.