cash ISA or Regular saver

United10

Could you kindly advise whats a better investment, if I have a lump sum amount which i could afford to keep aside.

opinions4u

Most regular savers don't accept a lump sum. So lump sum in to a cash ISA.

High rate regular savers (e.g. HSBC, First Direct) usually have a 12 month term. Saving there for 12 months, having tax deducted and sticking the accrued lump sum in to a cash ISA in the following tax year can often make sense.

psychic_teabag

It depends what level of tax you pay. If you already have a lump sum, regular saver is probably not the best choice, since you get only the advertised rate on half the balance (since on average only half the balance is in the account).

If you didn't already have the lump sum ready, regular saver would probably be the better way to go. Instant-access ISA is paying up to 3.5% at the moment, so you'd have to get 4.5% if you're a basic-rate taxpayer, or 5.9% if you're a higher-rate taxpayer.

If the regular allows variable monthly payments, you can play games. For example, the best return comes from the first or second payment (since they're in for the longest). So you could put the max payment in initially, then just enough to keep the account going. The rest would go into the ISA.

For example if the First Direct one (8%) allows variable payments, could put in two payments of the max £300, then 10 payments of the min (£25). That would give about £36.80 interest on the first £600, compared with £21 putting it into an ISA. (Oh, a little more since you'd get around 3% on the second £300 while it's waiting to go into the regular saver.) But then of course you lose a little by having to keep £250 back for the remaining payments (unless you can take them out of future savings).

So probably not really worth the fuss. Easier just to open a Halifax reward current account and take the £5 monthly that Halifax are giving away !

But good to open a regular saver for your future savings, to build up the lump sum for next year's ISA allowance.

MoneySaverLog

opinions4u wrote: »

Most regular savers don't accept a lump sum. So lump sum in to a cash ISA.

High rate regular savers (e.g. HSBC, First Direct) usually have a 12 month term. Saving there for 12 months, having tax deducted and sticking the accrued lump sum in to a cash ISA in the following tax year can often make sense.

It's what I'd do

MoneySaverLog

psychic_teabag wrote: »

So probably not really worth the fuss. Easier just to open a Halifax reward current account and take the £5 monthly that Halifax are giving away !

It would be a sin not to do this as well. Money for nothing!

jahalamo

Hi im new to all this, just trying to save my extra cash while being a student and live on as little as possible!
I have £1000 now and could potentially save £100 a month.
However starting next year (September 2012) this could go up to at least £300 a month.
Also I will be getting £4000 from a child bonus in November.

Im with HSBC and so was contemplating getting the regular saver (6%)
From what you guys have said above it seems i should put my £1000 in an ISA and then save £100 in the regular saver as well.
I just don't know how to fit this in with the extra cash ill have towards the end of this year? should i just save the £100 in the ISA each month?
Or Maybe should i scrap the ISA and just save £250 (max allowed) in the regular saver (taking from my £1000) and then when that runs out i should have enough each month to carry that on.

Sorry for all the confusion, hope someone can understand what i mean and offer some advice!??

psychic_teabag

Do you pay income tax ? If not, all accounts are effectively tax-free for you, so don't need to get hung up on ISA. (But for long-term savings, getting started with ISA can be good.)

Will the regular saver give you sufficient access to the cash if you need it (in an emergency, say) ? If not, maybe there's a case for keeping some of the money somewhere accessible. But it depends on your personal circumstances.

xylophone

You could open an instant access cash ISA now and pay in £1000 - and £4000 in November - you can make up the maximum of £5640 by contributing as you wish over the year. This one might suit http://www.thecheshire.co.uk/landingpages/Direct-Cash-ISA/
Don't forget that the bonus ends after 31/10/13 so keep your eye on rates and look for a provider with a better rate - don't forget you must ask the new provider to arrange the transfer.

As for the rest of your savings, you can look for the best rate available compatible with your needs/circumstances.

Try here http://www.moneysupermarket.com/money/

jahalamo

psychic_teabag wrote: »

Do you pay income tax ? If not, all accounts are effectively tax-free for you, so don't need to get hung up on ISA...

No i dont pay any income tax and most likely wont be for the next three years. So does that mean i could earn the full 6% then?

I have been reading a lot of topics now and i think the best thing for me..
Use the £1000 to start saving £250 in a regular saver (or £300 if i open a first direct account) then in November open my ISA for the year and put in my £4000 of child bonus plus any extra cash i have.
Then in 12 months I will put the money from the regular saver and the ISA into a new ISA for 2013 and start a new regular saver and go from there.

In terms of access I can't think of an emergency where i will need the cash as i have no real outgoings (other than rent which i have accounted for) And have a student overdraft which I can use. In an extreme circumstance i can withdraw the regular saver cash and earn no interest, but an emergency is an emergency.

Cyrus

jahalamo wrote: »

No i dont pay any income tax and most likely wont be for the next three years. So does that mean i could earn the full 6% then?

I have been reading a lot of topics now and i think the best thing for me..
Use the £1000 to start saving £250 in a regular saver (or £300 if i open a first direct account) then in November open my ISA for the year and put in my £4000 of child bonus plus any extra cash i have.
Then in 12 months I will put the money from the regular saver and the ISA into a new ISA for 2013 and start a new regular saver and go from there.

In terms of access I can't think of an emergency where i will need the cash as i have no real outgoings (other than rent which i have accounted for) And have a student overdraft which I can use. In an extreme circumstance i can withdraw the regular saver cash and earn no interest, but an emergency is an emergency.

If you your not paying tax then you should go for the First Direct Reg saver. Its only 2% more but its still more.

jahalamo

Cyrus wrote: »

If you your not paying tax then you should go for the First Direct Reg saver. Its only 2% more but its still more.

I have rang them though and been looking at their 1st account, it charges £10 a month. Unless you deposit £1500 a month, which i won't be able to do. This £10 outweighs the benefit of an extra 2%.
Am i right in this or have i missed something?

Unless I am eligible for a credit card, or do you have to actively use the credit card? Saying this I may not even be eligible for the account as i have no real income. Will ring them tomorrow when the correct department is open.