Loss of potential interest

w00519772

I currently have a current account with HSBC and a current account with Halifax. I have about 30k in them combined. I discovered recently that I do not earn any interest on these. I have a mini cash isa and a mini stocks and shares isa, which I add money to every monthly.

I am trying to figure out what I have lost over the last few years by not investing more wisely? Say my balance was 30k for the three years and the sandander 123 interest rate is 3% the have I lost 900 for 3 years? A financial advisor quoted a loss of 750 per year?

ColdIron

Roughly £720 per year, you may not have taken basic rate tax into account

Archi_Bald

The financial advisor was closer than you but also not correct.

Assuming you are a basic rate tax payer, 3% AER yields £720 a year after basic rate tax. Less if you are on higher rate. But that's only part of the story.

If you wanted to get interest for all your cash in a Santander 123, you needed 2 of them because you won't get any interest on anything above £20K. So you'd probably have 2 accounts with £15K each in them. Each of these accounts would cost £2 a month, thus your annual interest would be down to £672. You can get a tad more if you leave the interest you get in the accounts because you get interest on the interest.

And you would have to deposit £500 from a non-Santander account once a month into each of the 123. But that can easily be achieved.

You could also get extra, non-taxable, money if you have any qualifying cashback DDs. People have reported they get some £100 - £120 cashback a year, some even more.

There are other alternatives to the 123, also with 3% AER and no monthly charge. Check out Lloyds and BOS Vantage and TSB Enhance.

Archi_Bald

w00519772 wrote: »

I have a mini cash isa and a mini stocks and shares isa,

"mini" ISAs haven't existed for a long time now. It might be worth posting some more info about your ISAs, such as what is the interest rate on your cash ISA, who do you have your S&S ISA with, what are the investments in your S&S ISA, how long have you had the S&S ISA, how much do you pay in charges. It might well be that people here could suggest better versions of ISAs.

Gromitt

If you only had 30K and no appropriate DDs to pay the £2 monthly charge, then you would have been better off with 3 Lloyds TSB Vantage accounts and 3 BOS accounts, giving you 3% on 30K, thus £720 after basic rate tax.

You would of then deposited the interest from those 6 accounts into another 3% account, giving you a further £80 after 3 years.

So you'd end up with £2,240, or an equivalent loss of £746 per year, assuming basic rate tax.

If your thinking of starting now, Lloyds TSB has split into two different banks, and you can hold 3 accounts with each, so you can have 9 accounts with £5K in at 3%.

Archi_Bald

Gromitt wrote: »

You would of then deposited the interest from those 6 accounts into another 3% account, giving you a further £80 after 3 years.

You could have done so indeed, if there was an account that paid 3% for low amounts. All the currently available 3% accounts either require a minimum balance of £3,000, or there is a £10/mth account that pays 3% on anything up to £2,500.

You could still achieve what you are suggesting if you started out with at least 7 of the Vantages/Enhances - - with 6 x £4,500 and 1 x £3000. Or you could have some other combinations with 4% and/or 5% AER accounts and/or 4% or 6% Regular Savers. It all depends how much of your time you want to invest to set it all up in the first instance, and then service all the accounts each month.

It might be just easier for the OP to settle with 2 123 accounts, and may be make, effectively, more than 3% AER if there are DDs that qualify for cashbacks.

Gromitt

Whilst I agree with you, I was thinking 3 years ago, when it was a bit easier to get a savings account @ 3% or a regular saver paying the same or more. Remember you'll only be paying in about £60 per month. When did the FD 8% regular saver start? Maybe we could have broken the £750 target by the FA.

Of course, these days, it's a tad more difficult, but still possible to get 3% on 85K (more if you can open 4 FlexDirects)