ISA or Regular Saver?

Cyrus

Hey guys, this had been annoying me and I don't know if i'm missing something totally obvious, hoping some one can clear it up.


Currently saving for a holiday with my girlfriend, we want to save about £3500 for April/May 2013. I opened an ISA with the AA, interest rate is 3.05%. I have £950 in that at the mo. I then saw the Internet saver with BOS who I bank with, its interest rate for 1 year is 5.5% so after tax 4.4% (am I right?). This is obviously better than the ISA even after tax, am I being an idiot and missing something here or should I save my money in the Internet saver account? I m a basic rate tax payer it makes a difference. Cheers for any help and sorry if theres any spelling mistakes, damn iPhone touch screen.

psychic_teabag

No, you're not missing anything. If you are saving for something specific in the short term, go with whichever vehicle gives the highest interest after all deductions. For longer-term savings, the year-on-year tax savings tend to favour ISAs, but in the short term, there are all sorts of bonuses that you can exploit.

A possible strategy is to exploit bonuses / regular savers for a year at a time, and move into an ISA just before the end of the financial year.

I didn't immediately see an account paying 5.5% when I had a quick look at the BOS site..? Ah, internet saver is offering 2.8% including a 2.7% bonus. So that's 0.1% + 2.7%, not 2.8% + 2.7%. But there are monthly regular savings accounts out there offering 5%.

RoxRoxBling

I'd say save in the BOS account. Higher interest and higher returns, espcially if it's monthly interest you earn - I think that's better for the short term. ISA's don't always offer the highest interest, there are regular savings accounts that give more for the first 12 months.

Trentenders

As above, there is no 5.5% rate for a one year fix. Go with a one year fixed ISA, at three and a half-ish %

Cyrus

Haha, feel like a total idiot now. Thanks guys, that would of been an annoying mistake to learn from after a year.