TSB 5% current account: how to exploit it

bigadaj

OP, we've nothing against you asking questions and learning, that's all well and good.

However, not only do you refuse to take on the comments from many other people but you then argue against everyone else because you don't understand things.

It's probably better if you go off and do some reading up and then come back with some more sensible questions otherwise you're wasting everyone's time including your own.

grandplonker

As I'm comparing normal bank accounts with ISAs, tax needs to be accounted for.

The missing word which nobody in the thread has accounted for (including myself, and other contributors) is 'net'. That's only been mentioned in passing. Rather we've got tied up in a hideous discussion which entirely misses the point of my first post.

guymo

grandplonker wrote: »

As I'm comparing normal bank accounts with ISAs, tax needs to be accounted for.

The missing word which nobody in the thread has accounted for (including myself, and other contributors) is 'net'. That's only been mentioned in passing. Rather we've got tied up in a hideous discussion which entirely misses the point of my first post.

Actually that's exactly what I've been talking about. Sleep well.

DragonQ

All I know is that I'll be netting £200 per year when I grab these accounts (or Lloyds' equivalent if it's the same).

Herbalus

bigadaj wrote: »

OP...
It's probably better if you go off and do some reading up and then come back with some more sensible questions otherwise you're wasting everyone's time including your own.

Actually I think he's done quite a bit of reading. The links in his posts seem to suggest that he's done research. I just don't think he's understood much of it.

For what it's worth, I have a FD Regular Saver and am earning the equivalent of 4.63% on £3600 over the entire year. That's because I start the year with £3600 at 3%, and then I move £300 every month to 6%. That works out at 4.63%.

Herbalus

grandplonker wrote: »

The interest is 5%, which is mathematically impossible

That's not correct.

grandplonker wrote: »

The nearest competitor is metaphorically in the minus figures.

That's not correct.

grandplonker wrote: »

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.

That's actually right. AER is 5%. End of.
[STRIKE]What isn't right is your understanding of AER and gross. AER is the rate, gross means that it is without tax taken off. Ergo, in this case, AER and gross are the same thing. NET of 20% tax is ~4%.[/STRIKE]
Ignore this - I'm confusing myself. See what Zagfles posted below.

grandplonker wrote: »

There aren't any loopholes either. Interest is paid monthly and calculated daily

Correct!!!

grandplonker wrote: »

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.)

Also correct! But your example seems quite random....

grandplonker wrote: »

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.

Not correct.

grandplonker wrote: »

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.

Not correct.
An easier way is one standing order of £500....

grandplonker wrote: »

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).

Correct!

grandplonker wrote: »

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.

Correct!

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%.

Not correct. It's 6% AER. Net is 4.8% after tax.

grandplonker wrote: »

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.

Not correct.

grandplonker wrote: »

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.

Not correct.

grandplonker wrote: »

Keeping the First Direct Regular Saver is, in itself a skill

Not correct. It's quite easy.

grandplonker wrote: »

; 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.

What on earth have geese got to do with anything.

grandplonker wrote: »

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.

Not correct. And there's no 5.5% Nationwide account.

I think that covers most of it?

zagfles

Herbalus wrote: »

That's actually right. AER is 5%. End of.
What isn't right is your understanding of AER and gross. AER is the rate, gross means that it is without tax taken off. Ergo, in this case, AER and gross are the same thing. NET of 20% tax is ~4%.

AER and gross aren't the same - AER accounts for compounding whereas gross doesn't. In this case AER is 5%, gross is 4.89%

grandplonker

Yes, yes... we get the idea.

Herbalus wrote: »

For what it's worth, I have a FD Regular Saver and am earning the equivalent of 4.63% on £3600 over the entire year. That's because I start the year with £3600 at 3%, and then I move £300 every month to 6%. That works out at 4.63%.

That's the bit I had confused, along with the difference between net and AER. Not having had a handle on savings tax would have been more problematic.

sabretoothtigger

You raise a fair few points, at least you are thinking about effective return not headline which is a source of (self) deception often

AER is like APR to me. The credit company will try to tell you monthly interest but they have to quote the compound effect APR which is quite large. So TSB does pay monthly I believe, AER is them giving the assumption you keep interest in there.

However if you max out 2k, your interest wont compound so the devil is in the detail

Halifax interest can be reclaimed as it is net? I think it requires an entire tax return filled out

FD is about half or less in comparison, depends. I had 3k in there and got very little as I put it in late in the year, for the time its in there then its 6%
Is that gross or net Im not sure

grandplonker

Yes, the First Direct Regular Saver is 6% gross.

Herbalus wrote: »

For what it's worth, I have a FD Regular Saver and am earning the equivalent of 4.63% on £3600 over the entire year. That's because I start the year with £3600 at 3%, and then I move £300 every month to 6%. That works out at 4.63%.

That's how to max it - or to improve again, use the TSB account with the FD RS - 4.4% gross after tax.