Santader 123 better than an ISA?

woodencupboard

If I had an imaginary £19,000, using the isa checker on this site I'd get £342, santander 123 gives £569 (obviously have to pay tax on that) but I'd still be better off?

Then when I reach the limit of £20,000 in Santander, I can start another ISA and add to that?

Foggy saturday logic there maybe... :j

Swafe

Yes and no,

It depends on your tax bracket and long term money plans, what I would do,

If Santander is paying more (after 2 pound a month fee & tax) than the best paying ISA then stick it in there - this depends if you pay 20 or 40% tax, I guess 20% it would work out better as ISA rates are rubbish at the moment, but 40% then a poor ISA deal might be the best bet.

Reassess this at the end of April, do you plan on spending your money soon or can you live without it? Around this time new ISA offers come in for the new year, plus if you dont get in before the tax year click over you lose your allowance, ISA rates are poor at the moment but if interest rates do rise you will be able to transfer this into at a later date, the higher the interest rate the more tax youll pay, and therefore the more beneficial a tax free wrapper for your money will be. You may lose slightly in your first year (as without the fees and 20% tax, youll need to find an ISA around 2.2-2.3% to match its returns which is probably quite difficult at the moment!) but remember, once that 5 grand whatever it is, is in there, its tax free forever (or until the government end it at least), so you might lose out slightly in the first year slightly until interest rates rise, but when they do youll reap the rewards year after year.

If you plan on spending it though within the short term, keep it with Santander, if they are still paying more than a new ISA deal can offer

PennyForThem_2

if you have maxed your annual ISA allowance then this is a holding account for next year's ISA. You are allowed 2 Santander 123 accounts.

woodencupboard

Thanks to both for the insight, appreciate no financial decisions are clear cut, and I need to think semi long term about this.

Swafe

PennyForThem wrote: »

if you have maxed your annual ISA allowance then this is a holding account for next year's ISA. You are allowed 2 Santander 123 accounts.

Are you? Maybe if you have a wife, you can apply for one each instead of a joint one, not sure if you can do if your on your own though

Becky_Boo

Swafe wrote: »

Are you? Maybe if you have a wife, you can apply for one each instead of a joint one, not sure if you can do if your on your own though

You are allowed 2 accounts each.

innovate

Swafe wrote: »

Reassess this at the end of April, do you plan on spending your money soon or can you live without it? Around this time new ISA offers come in for the new year, plus if you dont get in before the tax year click over you lose your allowance

Mid / end March is better since the new tax year starts on April 6.

There may or may not be better rates then, there weren't last year. But there were in previous years, and there's always hope.

ranciduk

I've been looking at the Santander 123 also

But is it true that to get paid any interest - you must have at least two direct debits set up ?

Cos I only have the one

So would I literally get NO interest due to that?

Ximian

ranciduk wrote: »

I've been looking at the Santander 123 also

But is it true that to get paid any interest - you must have at least two direct debits set up ?

Cos I only have the one

So would I literally get NO interest due to that?

Yep:

Pay a monthly account fee of £2
Fund the account with £500 a month (a minimum balance of £1,000 is required to receive interest); and set up a minimum of two Direct Debits. For cashback household bills must be paid by Direct Debit.

http://www.santander-products.co.uk/banking/123campaign/

ranciduk

Ridiculous!

Why do they put obstacles in people's way like this?

What should it matter how may direct debits I have setup?

Spose I could set another one up with the Lotto!

innovate

ranciduk wrote: »

Ridiculous!

Why do they put obstacles in people's way like this?

What should it matter how may direct debits I have setup?

Spose I could set another one up with the Lotto!

They are a business which can decide what their interest rates are. They could decide to pay 0% interest like Natwest, RBS, First Direct, Halifax, Lloyds, TSB, BOS, Santander and just about any bank and building society do on their "default" accounts. But they decided to offer to pay you interest if you meet certain conditions. This is not an alien concept.

For example, if you shop for food you might have to pay £3.29 for a cod fillet. But you can get 2 cod fillets for £5.98 in the same shop because they offer you a lower price in return for you spending more money with them. Similar concept with the banks (disclaimer: I am not saying banks will be selling fish as of Monday)