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Regular savings vs. Isa

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hello all

I have a lloyds monthly saver paying 8% aer (currently at £750), and i am wondering whether it is worth changing this for an isa paying 6.5% (barclays tax beater) any advice is greatly appreciated.... also i signed up for the lloyds account whilst it was still a 2 year term and have noticed now that it has gone back to a single year... does my original agreement still stand or am i only given the high rate for the first year??? (1st year ends july)

thanks in advance

mike... :D

Comments

  • It's a close call really as you are getting 8% (6.4% nett) on you savings in the LTSB R.S. account but you would get 6.5% on a Barclays Tax Beater ISA.

    If you signed an agreement stating a term of 2 years for your LTSB R.S account then that is what it will be. The new 1 year term is for new applicants. I went in my local branch of LTSB yesterday to open a R.S. account & the Personal Accounts Manager told me that a 2 year term was applicable. She was most surprised when I told her that it was only 1 year.
    She went to ask her colleagues who didn't know & I had to point to what it said on the computer screen. Perhaps it's because head office change things so often & don't tell staff at the branches quickly enough but it was onscreen.
  • benood
    benood Posts: 1,398 Forumite
    I would certainly choose the ISA over the regular saver - the ISA is protected from tax long term after the headline rate has dropped as it no doubt will.

    I also expect there are fewer conditions to catch you out on the ISA.

    Furthermore if you're already a top rate tax payer it is a significantly better option now.
  • Judwin
    Judwin Posts: 207 Forumite
    Blans,
    I'd stick with the LLoyds Regular saver.

    The Barclays ISA rate drops to 5.5% after one year when the 1% bonus expires, (assuming base rates don't go up - which they might). It's a little complicated, but you have from now till July 08 when your LTSB would mature - so roughly 15 months.

    You say the 1st aniversary of the LTSB RegSav is in July, and it's currently got about £750 in it. Therefore, the amount you are saving per month appears to be about £100 ish? I'm not sure how you got £750 in a regular saver in 7/8 months? Lets assume you've been paying in £100pm for the past 7 months.

    At the moment, if you include interest, your LTSB is worth approx (100p/m * 7 months * 0.5)) * 8.0% * 7/12) = £16 gross interest, £13 nett so a total pot of £713.

    If you leave the LTSB account as is, then on the first anniversary, it'll be worth (100p/m * 12 months * 0.5)) * 8.0%) = £48 gross interest, £38 nett so a total pot of £1238. Then in the following year, it's (1238 + (100 * 12 * 0.5)) * 8.0%) = £147 interest gross, £117 nett so a total pot of £2555 ish.

    If you open a Barclays ISA today, and pay all the £713 from the LTSB in (assuming there are no early exit penalties!), and continue at 100 per month for the next 15 months, and then you'd end up with approx ((713 + (100 * 12 * 0.5)) * 6.5%) = £85 interest in the first 12 months, so your total pot would be about £2011. Then for the remaining 3 months (til July 2008) you'd effectively get 3 months at 5.5%pa plus your additional sums, so ((2011 + (100 * 3 * 0.5)) * 5.5% * 3/12) = £30 interest in 3 months, making a total pot of £2341 ish in July 2008.

    So I think you'd be over £200 better off by sticking with the LTSB. Once the LTSB account matures, then look around for a good rate ISA home for it.

    Cheers,
    Judwin
  • blans
    blans Posts: 13 Forumite
    Thanks for all the advice guys :)

    jeez people are so nice on here!!!!!

    The reason I have so much over the 8 months is that I had an opening balance of £350 and have been saving £50 a month since...

    again thanks people..
  • Milarky
    Milarky Posts: 6,356 Forumite
    Part of the Furniture 1,000 Posts Photogenic
    Consider this:

    Lloyds regular saver does not require future payments

    Barclays 'Tax Beater' ISA (and most ISAs) permits you to fund it at £250 per month instead of £3000 at once

    Even if you withdrew the Lloyds balance down to fund the ISA, you can continue to pay in at £250 per month for the rest of the term.

    So you could start paying into the ISA and stop paying into the regular saver (assuming you can't manage both) and would be getting 6.5% tax free compared to 6.4% tax paid (at basic) on the extra money. The Barclay rate is not fixed as far as I can see whereas the LTSB rate is.

    I would stick with the regular saver throughout the next tax year. Then, as the tax year came towards an end and the account approached maturity anyway I would have as much saved/interest earned as if I had open the Barclays ISA BUT i) I would then have a natural reason to be looking at ISA alternatives and ii) The alternatives - March of 2008 - might look even better than now. If I used the regular saver money to fully subscribe to the best ISA available at that point I would lock in to the on-going tax free status and lose nothing by doing so.

    So, I would stick with the Lloyds on balance..
    .....under construction.... COVID is a [discontinued] scam
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