TSB 5% current account: how to exploit it

grandplonker

TSB's new Plus current account opens 31st Mar 2014. Here's MSE's rundown. The interest is 5%, which is mathematically impossible; so well done TSB. The nearest competitor is metaphorically in the minus figures. Here's how to maximise it.

In her article, MSE's Helen Knapman says it's 5% AER. Three of TSB's staff told me it's 5% gross, which works out at 4% in real life for the most people who pay 20% tax on on their interest.

The TSB website, however, rules in favour of customers at 5% AER.

There aren't any loopholes either. Interest is paid monthly and calculated daily (albeit from the same staff who also thought it was 5% gross). So, if your balance is £0, apart from £1,000 between 15-17th Aug, they will pay you 41p on 1 Sept. Closing your account 2nd Sept makes no difference. (5% of £1,000 is £50, divide by 365 is 14p, multiplied by the three days it's there is 41p.)

That even beats the First Direct and HSBC Regular Savers at 6% (ie, 4.8% after 'normal' tax), or even 2.4% because of the monthly lodgement systems a regular saver uses.

There is a minimum £500 deposit a month. Unless your salary is going in, the easiest way to do that is two standing orders; £150 in every Monday and back out again every Thursday. The same trick at £200 meets the £800/m I need for the Halifax Reward Account (free £5).

The max balance is £2,000. Presumably, you can deposit more if you want, but they'll just pay interest on the first £2,000; same way as the first £10,000 you earn a year is tax free (aka personal allowance).

As you're allowed two accounts each, that means you and your better half can save £8,000 a year like this. You could even put the two standing orders between the two TSB Plus accounts you have.

I already have a 3% easy access ISA and a 6% gross Regular Saver. I thought the latter was 4.8% AER until this week, then I realised it's really only 2.4%. Because, the other half of the time my money isn't in the First Direct Regular Saver, it's in the First Direct current account, earning nothing.

TSB's new account justifies shutting them both, at least using them less. TSB is 5% in real life. It outranks the ISA and the Regular Saver.

The only sense in keeping them open would be if I weren't a taxpayer, in which case there would be a monthly standing order from TSB, to the First Direct Current Account, to the First Direct Regular Saver. (Carefully spaced to account for public holidays.) I can only deposit into the First Direct Regular Saver from another First Direct account.

My savings would then end up at 5.5%. It would have been 5.6%, had I not closed my Halifax Regular Saver years ago (which was 7% Gross), or 5.7% had I opened the First Direct Regular Saver when it was 8% Gross.

Keeping the First Direct Regular Saver is, in itself a skill; because to avoid monthly charges or using them as my main bank, I also keep the current account and a dummy saving account with a few pounds in it. And maybe geese.

This is the sort of thing I would only do once in a blue moon - the 5% runs, well, until further notice. Getting the 5.5% Nationwide account would be too much hassle for only a year.

ColdIron

grandplonker wrote: »

The interest is 5%, which is mathematically impossible

Sorry, you'll have run that one by me again

grandplonker

I'm being sarcastic.

zagfles

grandplonker wrote: »

TSB's new Plus current account opens 31st Mar 2014. Here's MSE's rundown. The interest is 5%, which is mathematically impossible; so well done TSB. The nearest competitor is metaphorically in the minus figures. Here's how to maximise it.

In her article, MSE's Helen Knapman says it's 5% AER. Three of TSB's staff told me it's 5% gross, which works out at 4% in real life for the most people who pay 20% tax on on their interest.

The TSB website, however, rules in favour of customers at 5% AER.

AER doesn't mean net! It means that's the annual gross compounded rate. The gross rate is 4.89% as it says at the bottom.

There aren't any loopholes either. Interest is paid monthly and calculated daily (albeit from the same staff who also thought it was 5% gross). So, if your balance is £0, apart from £1,000 between 15-17th Aug, they will pay you 41p on 1 Sept.

40p to be pedantic as they'll use the 4.89% gross rate. Then they'd take 8p tax off (unless you registered for gross interest) leaving you with 32p.

MisterMotivated

grandplonker wrote: »

I already have a 3% easy access ISA and a 6% gross Regular Saver. I thought the latter was 4.8% AER until this week, then I realised it's really only 2.4%. Because, the other half of the time my money isn't in the First Direct Regular Saver, it's in the First Direct current account, earning nothing.

The interest you get on your money while it's not in the FD Regular Saver in no way impacts your Regular Saver interest rate. You (as I and many other people on here do) could keep your money in an interest paying account for most of the month, then move it to your FD current account the day before it goes into the Regular Saver.

grandplonker

Precisely. I have so far kept the money in the First Direct current account, which equals 2.4% in real life.

MisterMotivated

But nobody says you have to do that, so why are you using that example to say the TSB account is better? It's only better if you have £3,600 up front and can't be bothered to move it, ever. That's not what regular savers are for though. Think of it this way.

You start the year with NO MONEY (except your December salary).
On the last day of each month, you get paid.
All your bills (including groceries and petrol) are paid on the first of the month
After the bills, you have £300 spare.
Where do you put that £300 to get the best return?

innovate

AER % is AER %. It doesn't get halved or otherwise modified by the way you deposit funds into the account the AER applies to.

PeacefulWaters

I'd seek professional medical help if I were you.

grandplonker

There's more than one way to skin a cat.

EarthBoy

Are you drunk?