Savings advice - ISA or regular saving

angel_nicx

Hi all- Thanks in advance for any help.

I have just finished as a student and will commence employment next month and will not earn enough to pay tax this current financial year. I will be a basic rate tax payer from April 2014.

I currently have:

£4000 in an ISA which pays 0.5% AER
£4000 in a regular savings account at 2.55% AER (2.04% when I start paying tax) - I save between £20-£250 each month.

I know Barclays have a regular savings account which I could feed the ISA money into. Paying 3.25 AER.

Am I best doing this as I am not currently a tax payer? The ISA rate seems SO low!

Please help! It's the first time I've had savings!

Thanks again x

eskbanker

Although individual circumstances do vary, the usual advice on here is to leave ISA funds within the tax sheltering unless you're going to need access to them in the relatively short term. However, 0.5% is very low, look at the Top Cash ISAs article linked above or the sticky post on the ISA subforum for the best cash ISAs accepting transfers and shift the ISA somewhere better!

The decent (well, reasonable!) rate on the regular saver that you currently have will presumably expire at some point next year, so you might choose to use regular savers as a means of building up lump sums to deposit into ISAs rather than the other way round!

thenudeone

From time to time there are regular savings ISAs which give decent rates and also allow you to build up balances which will always generate interest which is tax-free

eg: in April, Saffron BS offered a regular saver ISA paying 4% (no longer available now).
Nottingham are also offering 4% http://www.thenottingham.com/savings/starter-isa-issue-3/ but you must visit a branch to open one.

Vernon BS are offering 2.75% for Stockport are residents only.

(taken from https://forums.moneysavingexpert.com/discussion/401374)

angel_nicx

Thanks so much for the replies.

I was unsure if it would be worth having an ISA as I do not pay tax, and I can get a higher rate in a savings account.

eskbanker

ISAs are generally better for taxpayers but a lot depends on your savings plans for the future. Given the annual cash ISA subscription limit of £5,760 (currently), it essentially comes down to your view about how much of a tax-free pot you'd aim to have by the end of this tax year and the next.

Another option you may wish to consider, especially while you're not paying tax, is one of the interest-paying current accounts (Nationwide @ 5%, Santander/Lloyds/TSB/BoS @ 3%), since you can immediately benefit from those rates on your entire sum (by opening multiple accounts), whereas regular savers only allow the gradual drip-feeding of relatively small monthly amounts.

Shreya_Roy

It depends a lot on each person.Intially start with regular saving.
Thanks

Shreya_Roy

It depends a lot on each person.Intially start with regular saving.
Thanks