ISA vs Santander 123 Account

ZoomInZoomOut

Hello,

I've tried to get my head around ISA's. But tbh I'm still not the wiser.

• I am saving as much cash as possible over the next 18 months to finally leave the parents house.
  
• I am aiming at sticking away £750 a month.
  
• I already have £2500. So far it is sat in my Santander 123 account which I am told is a good account.
  
• Would my money be better off in an ISA? Would I see a noticeable difference in interest over 18 months?
  
• What other options do I have?

I hope I've not missed stickies or FAO, it's a bloody minefield this stuff!

Thanks in advance.

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Mickygg

Assuming you are a taxpayer basic rate you will only be better off if you put funds into an isa paying more than 2.4%.As you want access I'd stick with the 123 account as you can get 3% max in an isa but it is locked away for over 2 years and you can't add to it.As long as your 123 is over £3k you will not have hardly any extra interest by using an Isa over 18 months.

Gromitt

If you have £2500 then I'd open a Nationwide FlexDirect account, which pays 5% on upto £2500.

then keep the rest in your Santander account.

You may also want to take advantage of regular savers. For example:

£300/month to First Direct (Regular Saver 6%)
£250/month to N&P (4%)

There are others. If you don't need the money for 12 months or more, they make better sense for putting away a fixed amount every month than a bog standard savings account and provide a higher rate of interest.

Setup SOs to ensure you don't spend the cash! (the FD one requires it)

ZoomInZoomOut

I've used the Interest Savings Calculator, it suggested £400+ interest over the term I stated, is that roughly correct?

At the moment on my 123 account I'm seeing very little.

Cheers for the replies guys!

Hominu

Month Balance Interest (gross)
M0 £2,500.00 £6.25
M1 £3,256.25 £8.14
M2 £4,014.39 £10.04
M3 £4,774.43 £11.94
M4 £5,536.36 £13.84
M5 £6,300.20 £15.75
M6 £7,065.95 £17.66
M7 £7,833.62 £19.58
M8 £8,603.20 £21.51
M9 £9,374.71 £23.44
M10 £10,148.15 £25.37
M11 £10,923.52 £27.31
M12 £11,700.83 £29.25
End Balance £11,730.08
Savings £11,500.00
Interest £230.08

logie48

I'm in a similar situation to the OP. My savings plan is this.

I have £5640 in a Santander ISA from 12/13, which was at 3.3%. I plan on opening up the best rate easy access ISA (at 2.6% just now, no transfers), and firing my yearly allowance in it from my Santander ISA. It would not be a direct transfer, as it doesn't allow, so I will max out my 13/14 allowance on day one. Guaranteed £150 interest per year from that.

Then open a First Direct 1st account, which gives me a £125 sweetener. Transfer £1k balance from my current Halifax savings bank account to this and treat it as my main account (£1k min pay in per month). My salary will go in here. I'll then apply for the First Direct regular savings account and fire in the maximum £300 each month @ 6%, earning £117 interest per year. If the balance from my First Direct 1st account grows (where it will generate no interest), I may open a Santander 123 and use this as a secondary account to transfer to, and make interest on the money I have. Need to remember though that there is a min £500 pay in per month and a £2 monthly fee (may be possible to recover the fee through Quidco). So depending on the money I put in the Santander 123 account, I can earn interest on this 'excess' money transferred from my First Direct 1st account.

I stand to make at least £392 in interest for £9360 of working money (5760+(300*12)), plus any interest I can make from transferring from the First Direct account to the Santander 123. I'd need to have over £16k (@ 3%, 2.4% net) sitting for a full year in a Santander 123 account, on it's own, to make that return.

logie48

Gromitt wrote: »

If you have £2500 then I'd open a Nationwide FlexDirect account, which pays 5% on upto £2500.

then keep the rest in your Santander account.

You may also want to take advantage of regular savers. For example:

£300/month to First Direct (Regular Saver 6%)
£250/month to N&P (4%)

There are others. If you don't need the money for 12 months or more, they make better sense for putting away a fixed amount every month than a bog standard savings account and provide a higher rate of interest.

Setup SOs to ensure you don't spend the cash! (the FD one requires it)

Need to remember the FlexDirect required £1k min pay in per month and Santander 123 is £500. So you can't effectively sit £2.5k in the Flex and expect it just to gain interest. They will charge if conditions aren't met.

Gordon_the_Moron

logie48 wrote: »

Need to remember the FlexDirect required £1k min pay in per month and Santander 123 is £500. So you can't effectively sit £2.5k in the Flex and expect it just to gain interest. They will charge if conditions aren't met.

I don't think they charge if conditions aren't met, don't they just pay zero interest for that month?

It takes all of about a minute to transfer £1k from 1 to the other then back, worth the effort :money:

innovate

Gordon_the_Moron wrote: »

I don't think they charge if conditions aren't met, don't they just pay zero interest for that month?

Yes that's right. Also, you must have at least £3K in the 123 before you get any decent interest.

I haven't fully read the logie48 posts, but I think there's a misunderstanding on how you operate an FD account in an optimum manner. May be they should read other posts about FD.

logie48

innovate wrote: »

Yes that's right. Also, you must have at least £3K in the 123 before you get any decent interest.

I haven't fully read the logie48 posts, but I think there's a misunderstanding on how you operate an FD account in an optimum manner. May be they should read other posts about FD.

Don't see why it is not. Open a FD 1st account, and receive £125 after 3 months. Use their generous 6% regular savings account along with the 1st account. Transfer any excess money your balance (but always have say £500-£1k sitting) on your FD 1st to another which pays interest, i.e. FlexDirect or Santander 123.

Your aim is to use the FD 1st account for the £125 and the regular savings account 6%. The balance of the FD 1st account does not generate any interest so transfer onto one that does.

innovate

logie48 wrote: »

Don't see why it is not. Open a FD 1st account, and receive £125 after 3 months. Use their generous 6% regular savings account along with the 1st account. Transfer any excess money your balance (but always have say £500-£1k sitting) on your FD 1st to another which pays interest, i.e. FlexDirect or Santander 123.

Your aim is to use the FD 1st account for the £125 and the regular savings account 6%. The balance of the FD 1st account does not generate any interest so transfer onto one that does.

There is nothing wrong with going after the £125 and the FD Reg Saver. But as I suspected, you haven't quite sussed out how to optimally go about this. Find the threads about FD, you only need to pay £1K in just once within (not for) 3 months, and you do not have to keep £500-£1K sitting in there earning no interest. If you do it right.