Regular Saver vs ISA

sunshowers

Hey everyone,

just wanted to know which gains more interest:

A Halifax Regular Saver (7%)
or
NS&I ISA (5.55%)

and by how much?

Both require £3000 in a year. With the ISA the interest is on the whole £3000, whereas with the regular saver its £250 a month, which eventually totals to £3000. Am I right? That is how I understand it.

Any help would be greatly appreciated

(I'm a non-taxpayer by the way, so wouldnt have anything deducted from the regular saver)

masonic

sunshowers wrote:

Both require £3000 in a year. With the ISA the interest is on the whole £3000, whereas with the regular saver its £250 a month, which eventually totals to £3000. Am I right? That is how I understand it.

Yes, that's right, so for the regular saver you can't earn the full 7% on your £3000 lump sum since the money will not be in the account for a full year. But, if you feed the regular saver from a high interest paying savings account (5%+) then overall you could earn just over 6% gross if you went down the regular saver route.

jem16

Would you be putting the whole £3000 into the ISA as a lump sum or so much each month?

Basically the ISA interest is worked out daily and applied yearly. So if you didn't have the full £3k in from the start, you wouldn't get interest on the full £3k.

sunshowers

Thank you for the quick replies!

I was thinking of putting the whole thing in at once.
Would be starting off with LTSB and was just thinking of a second regular saver, or an ISA.

how would you calculate how much interest you'd get from a regular saver?

jem16

sunshowers wrote:

Thank you for the quick replies!

I was thinking of putting the whole thing in at once.
Would be starting off with LTSB and was just thinking of a second regular saver, or an ISA.

how would you calculate how much interest you'd get from a regular saver?

There's a calculator here;

Regular Saver calculator

Will you be a taxpayer later? If so it could be helpful to build up your ISA as the interest would be tax-free later on.

sunshowers

thanks for the link jem

I'm a student, and will be for another 4 years!

thanks again

jem16

sunshowers wrote:

thanks for the link jem

I'm a student, and will be for another 4 years!

thanks again

Yes but in 4 years you will hopefully get a job and become a taxpayer. At that point you will have a tax-free account worth £12k plus interest if you use your allowance every year.

masonic

jem16 wrote:

Yes but in 4 years you will hopefully get a job and become a taxpayer. At that point you will have a tax-free account worth £12k plus interest if you use your allowance every year.

...of course you can get the best of both worlds if you first use the regular saver, then deposit the lump sum in an ISA when the regular saver comes to an end.

sunshowers

Thanks,

With an ISA the max you can put in each year is £3000. Does that mean in the following years the interest calculation will include what is already in the account from the previous years? (..if that makes sense!)

dan_cup

i think it does yea

jem16

sunshowers wrote:

Thanks,

With an ISA the max you can put in each year is £3000. Does that mean in the following years the interest calculation will include what is already in the account from the previous years? (..if that makes sense!)

Indeed it does.