please advise

mujipor

Have about 10k in savings in a current account, not sure where to put this money.

It's for a deposit for flat which I have yet to find and buy. Should i put the lump sum in a ISA or a high interest savings account?

ChopperST

If its needed in the short term then those two are your best bets.

Archi_Bald

ChopperST wrote: »

If its needed in the short term then those two are your best bets.

Not so. There are several current accounts that pay better interest, after BR tax, than any cash ISA or "high interest" savings account.

ChopperST

Where does the OP say they are a BR tax payer?

I wasn't implying they should invest in an ISA, simply that an ISA or instant access savings product is the best vehicle if they are saving for the short term.

Perhaps mujipor could elaborate further.

Archi_Bald

ChopperST wrote: »

Where does the OP say they are a BR tax payer?

They didn't.

ChopperST wrote: »

I wasn't implying they should invest in an ISA, simply that an ISA or instant access savings product is the best vehicle if they are saving for the short term.

You weren't implying anything, you said ISAs and high interest savings accounts "are your best bets". Which I disagree with.

I don't know by what criteria you would call them "best" - - but if we use the interest rate, then no ISA or savings account currently available will beat the interest rates of a number of current accounts, after BR tax.

Please feel free to prove me wrong by listing the ISAs and savings accounts that you have found are beating a Flexdirect, 123, Vantages or Enhances.

ChopperST

Im very sorry Archibald I provided a short reply on an internet forum board and my point wasn't clear.

Perhaps rather than trying to score points you could offer the OP some helpful advice.

Mujipor - Archibald is right, the best paying "savings accounts" are actually current accounts.

Nationwide flexdirect offers 5% on balances of up to £2.5k

Gross this works out at 4.89%
A basic rate tax payer will get 3.91% interest after tax
A higher rate tax payer will get 2.93% after tax

A minimum funding of £1000 per month is required (you simply transfer the funds in and straight back out the same day). This account is also only for 12 months before it drops to a lower APR.

There are new products from Yorkshire and Clydesdale banks offering 4% just released this week.

This works out at 3.93% gross
Basic rate taxpayer equivalent rate of 3.14%
Higher rate of 2.36%

This account also requires £1000 per month funding requirement.
The account will expire in March 2015.

You can hold £3000 in one of these accounts.

Santander 123 pays 3% on balances over £3k up to £20k and also pays cashback on your monthly bills (there is a £2 per month charge but most forumites are able to earn this back and more using the DD cashback facility).

This works out at 2.96% gross
Assuming you are a BR tax payer this will pay 2.37% net
If you are a higher rate tax payer this will pay 1.78% net

You need to fund the account with £500 per month.

This all depends on how long you intend to hold the funds. ISA rates are poor as the base rate is low. You get an allowance of £5760 to keep in an ISA tax free for the current tax year, this amount will increase next April. Once you have missed a years subscription you can't add to an ISA at a later date so its a use it or lose it allowance, if you intend to spend the money in the next 12 months, Archibald is right there is no point putting the money there. However if it could be there for longer there is an argument to use your allowance to optimise interest from your ISA into the future when rates (if and when) go up.

To give more constructive advice your tax status and timescales would be helpful.

Archi_Bald

Glad you read up about it now, ChopperST

mujipor

I am hoping to buy in the next 6 months and therefore would like to be 'clever' about this 10k.

I am not sure if that helps at all, but yes I am also BR tax payer.

Don't have an ISA, and only have a current account and a savings.

Any other advice?

Thanks

alanq

It is not possible to put all of £10,000 into a cash ISA (current year limit is £5,760). It would be possible to put it into a Stocks & Shares ISA but unwise with plans for investing for such a short term. Good luck with trying to find a savings account paying "high interest"!

Archi_Bald

You don't have many choices to be clever about with this. Your realistic expectations should be set somewhere between £75 and £160.

The absolute maximum you could make in 6 months is £200 - but this would involve opening 4 current accounts, which doesn't sound a good idea if you want to apply for a mortgage in the next 6 months.

If you go the easy route with a Santander 123, you only need one current account application, and you could net £120 in the same timescale (assuming you have enough qualifying DDs for cashback to pay the monthly fee). You might be able to add some Quidco/TCB cashback (£40ish) if you formally switch your current account. So some £160 possible with one current account.

The best instant access savings account will pay you £75 over 6 months. There could be some notice / limited withdrawal accounts that would be a quid or two more but nothing over £80.

If you split your money and put £5,760 into the best instant access cash ISA and the rest into the best instant access savings account, you would get £81 in 6 months.

All figures above are net after BR tax where applicable.

EDIT: If you were to have a 123, and took out your mortgage with them, you'd also get 1% cashback (but max £10) on your mortgage each month. I know nothing about their mortgage so don't know whether it's a good deal to go for.

ChopperST

Archi_Bald wrote: »

Glad you read up about it now, ChopperST

I wouldn't have known unless you had shown me the light :T