Santander 123 or ISA

janillozo

I have £10,000 in a nationwide isa earning 2.5% till Jan 2014 is it worth me putting it into a Santander 123 account @ 3%? I am a tax payer.

eskbanker

You'd get less interest if you moved it before January so presume you're thinking of what happens after that?

The key issue really is how much use you'll make of ISA allowances and how long you're saving for, in that once you've taken it out of tax-free status that's irreversible. So, if you're looking to grow your tax-free pot over the long term, using all or most of your annual ISA allowances, you'd probably be better continuing to shelter the funds from tax, but if you're likely to need the funds sooner rather than later the 123 interest is outperforming currently available cash ISAs at the moment, even after basic rate tax....

There are various hoops to jump through to get the 3% from a 123, such as minimum monthly funding, plus a couple of direct debits, plus a monthly fee that can be offset by cashback, so it's not a completely like-for-like comparison.

janillozo

Thanks eskbanker, your comments have been very helpful and has given me something to think about.