ISA vs Santander 123 Account

logie48

innovate wrote: »

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.

I see. Are you saying I should ditch and transfer after the 3 months. All good and well. The reason for the £500-£1k is to cover and direct debits/bills which may come off. Saves it going into the overdraft.

Gromitt

You have a choice: ditch and switch and claim the £100 leaving present (valid leaving reasons are quite easy to find on this forum) or leave it open and get the interest from the 6% regular saver.

I wouldn't setup any bills for the account, use an interest bearing account for that, such as BoS, TSB or Santander.

innovate

No, I am not advocating leaving FD because I still consider their Regular Saver as too valuable to pass on it.

I am just advocating to use FD for nothing but the Regular Saver once the joining payment has been credited. DDs are much better done at Santander where you get cashback for a lot of them. Equally, spare money is much better kept in a current account that pays interest - e.g. the 123, or the FlexDirect, or Vantages.

logie48

Advice taken and much appreciated.

Many thanks guys.

MisterMotivated

logie48 wrote: »

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.

Personally, I wouldn't count the £125 FD welcome payment as "interest". Also, I might be missing something, but I calculate the interest on the Regular Saver to be £86.40 after tax (assuming 12 regular £300 payments you'd average half of the 6% of the full £3,600).

Other than that, it sounds like a good plan. Have you considered adding a Nationwide FlexDirect account to the mix, or a Halifax Reward Current account if you can add/transfer 2 Direct Debits to it? It seems you're quite happy shifting money around on a regular basis, so these shouldn't be much hassle to include.

logie48

MisterMotivated wrote: »

Personally, I wouldn't count the £125 FD welcome payment as "interest". Also, I might be missing something, but I calculate the interest on the Regular Saver to be £86.40 after tax (assuming 12 regular £300 payments you'd average half of the 6% of the full £3,600).

Other than that, it sounds like a good plan. Have you considered adding a Nationwide FlexDirect account to the mix, or a Halifax Reward Current account if you can add/transfer 2 Direct Debits to it? It seems you're quite happy shifting money around on a regular basis, so these shouldn't be much hassle to include.

Yes, bit of a typo there. It is still money received. And you're right again, my calcs were a bit off. It is £117 before tax, £93 after. Worked it out myself at 6% AER, 0.4868% monthly equivalent.

Yes, I am considering these options. Might go for the FlexDirect.

imnoexpertbut

Mickygg wrote: »

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.

Hi, I am also looking at the 123 account in conjunction with their credit card, so the cc is free for the year. I understand the 3.0% gross, 2.4% net interest verses ISAs offering the same or higher, however my £3000 (savings plus 1 years interest) is currently in a HSBC 12/13 cash ISA. Please can you answer:

If i withdraw cash from the ISA to fund the 123, is/how is tax applied to my current £3000? I.e. verses an ISA transfer?

MisterMotivated

imnoexpertbut wrote: »

If i withdraw cash from the ISA to fund the 123, is/how is tax applied to my current £3000? I.e. verses an ISA transfer?

All the interest you earn on the money up until the day you withdraw it will be tax free. You will only be taxed on future interest you earn in the 123 account (thus giving you the 2.4% net rate).

logie48

imnoexpertbut wrote: »

Hi, I am also looking at the 123 account in conjunction with their credit card, so the cc is free for the year. I understand the 3.0% gross, 2.4% net interest verses ISAs offering the same or higher, however my £3000 (savings plus 1 years interest) is currently in a HSBC 12/13 cash ISA. Please can you answer:

If i withdraw cash from the ISA to fund the 123, is/how is tax applied to my current £3000? I.e. verses an ISA transfer?

Why don't you move your £3k to Coventry BS poppy ISA, paying 2.6%? Even though the rate is only slightly better than the 123, it allows you to use your allowance for this year, and gives the oppertunity to transfer it over to another ISA next year, when (hopefully) the ISA rates are better. You'll reap the rewards then.

sharpe106

the poppy ISA gives you a slighty better rate and pays a bit to charity as well, so double bonus not great difference but better then nothing. Also as previously puts it uses up your ISA allowance for year so if rates ever get any better your off to a better start