HELP! - What's my best option??

Driff83

Hi, i'm trying to setup a savings account/ISA etc so that i can start putting money aside for a house deposit but, after reading through various 'which', 'this is money' expert websites etc, i'm more confused than when i started... and was wondering if anyone here can maybe point me in the right direction?

We're looking to start saving roughly £750 per month from this month onwards for give or take 12-18 months (ideally we want around £15k deposit). I've no intention of taking the money out within the first year but will (hopefully) be wanting to withdraw in full sometime after the 12 months is over. what is my best option here? I've seen various ISA's, savings accounts, regular savers accounts etc that all give varying rates between 2% to 8% but all have different methods of paying the interest and all have different clauses that basically leave me lost with which option to go for.

I'm hoping someone has had this issue before and could give me some advice! I just want to be able to save the money regularly and would be nice to make as much as possible from interest/tax back etc?

I bank with NatWest, as that was a clause of some of the regular saver accounts that you had to have a standard account with that bank.

Thanks

Eponym

Do you have any ISAs or other savings accounts already?

Driff83

No i'm literally starting from scratch!

Eponym

Well I'm no expert but the simplest option (which given your confusion may be the easiest for you) would be to open the top paying ISA you can find now and start paying into it.

In April when the new tax year starts you can either transfer this year's ISA into a new one (if the new ISA allows it) or leave this year's where it is and open a new one for new contributions. Bear in mind though that most ISAs have a rate which drops significantly after 12 months.

yangptangkipperbang

Open several Regular Savers and feed those every month - IF you are sure you won't need the money for 12 months.

xylophone

Why not just open an ISA for each of you now? You can each put in up to £5640 in this tax year and the interest is tax free.
In the next tax year you can each put in up to £5760 each.
http://bank.marksandspencer.com/save-invest/cash-isa/overview/#summary might do for this year but you need to get in quickly - you could then opt to continue saving in this account in new tax year or open new isa accounts if you can find a better rate.

Be sure to choose an account where you can make regular contributions.

psychic_teabag

I think Coventry BS have a 60-notice ISA which is probably one of the better-paying ones at the moment. I assume that one allows unrestricted contributions (up to the limit) but restricts withdrawals, which suits your needs fine.

You can get a higher overall return using regular savers - even after tax. A useful tactic is to build up a sum in a reg. saver then transfer it to an ISA and start over. But it's a bit more effort than just going straight for the ISA.

innovate

xylophone wrote: »

.....but you need to get in quickly - you could then opt to continue saving in this account in new tax year or open new isa accounts if you can find a better rate.

Be sure to choose an account where you can make regular contributions.

I agree, an instant access ISA might be one of the accounts to open (but see below). However, "M&S ISA" and "quickly" is an oxymoron, going by all the reports I have seen about it.

Also, not sure they offer the best interest rate because they are dropping to 2.25% from 6th March. You can today, and probably still will in March, get more than that (after basic rate tax) in one of the interest-paying current accounts, without having to contend with the seemingly dreadful communication problems with M&S.

The best available ISAs can usually be found in post 1 of this thread: http://forums.moneysavingexpert.com/showthread.php?t=401374

Driff83 wrote:

I bank with NatWest, as that was a clause of some of the regular saver accounts that you had to have a standard account with that bank.

You shouldn't be put off by that. You don't have to close your current account, or move your business. All you need to do is open another current account, from which the Regular Saver gets fed.

The most desirable Regular Saver is the 8% First Direct one, which beats anything else in the market interest-rate wise and is easy to manage. You can avoid the monthly fee for the current account by opening a normal FD savings account with £1. You must, however, lock your money away for 12 months. This is the case with most regular savers, and - from what you say - shouldn't be a problem for the next 12 months.

The FD Regular Saver would take care of £300 per person per month, so £600 if each of you open an account.

This leaves another £150 a month - you could put those into an ISA. Or, for more potential profit, into either a Lloyds/BoS Vantage or a Santander 123 account. You'd need to check out the details, upper limits and T&Cs but if you can manage £3K minimum, you get 3% AER, which is 2.4% net after basic rate tax - more than an ISA gives you.

I would:

1. open a Santander 123 (via Quidco , to grab £55). Get £3K into it asap, make sure £500 gets paid in monthly and 2 DDs (however small) are set up, and watch that the balance doesn't go above £20K. The monthly £500 can go in and out on the same day, and also doesn't have to be £500 in a single sum.
   .
2. when £3K are in Santander, open (each of you) First Direct Current accounts and First Direct Regular Savers, plus First Direct normal savings accounts.
   .
   You can in theory bag £125 for opening a First Direct Current Account, but you have to use their switcher service, transfer 2 DDs (you could use "small ones" as above again if you set them up on your Natwest first), and pay in £1.5K a month until you got the £125. The £1.5K doesn't have to come all in one sum.
   .
   
3. set up an instant access ISA now, just in case the Santander 123 interest rates drops badly. If there's a better ISA rate in April, set up another instant access ISA. No sweat if you don't need the ISAs
   .
   
4. look at whether there is merit in moving your entire current account business to the Santander 123 because of the cashback. No need to close your Natwest one - always good to have a fallback readily available.

You could argue that 1) and 2) should be swapped, so you can be sure you can grab that 8% Reg Saver before they drop the rates. I just put them in this order because you don't get any decent interest at Santander before you get to £3K.

innovate

psychic_teabag wrote: »

I think Coventry BS have a 60-notice ISA which is probably one of the better-paying ones at the moment. I assume that one allows unrestricted contributions (up to the limit) but restricts withdrawals, which suits your needs fine

Can't pay anything into that after April 5 2013.

Driff83

THanks innovate, that's helped me out greatly. really like the idea of the santander 123 and the FD accounts running side by side, maximising return.