ISA or Current Account on £13500

SmithR

Hi All

I have a ISA at the moment with £13,500 in,
I want easy access to my money incase i put a deposit down on a house,

Am i right transferring all my money out of my ISA which is only getting 1.6% and putting it in a 123 Santander Current Account and transfering all my Bills, Direct Debits etc to come out of this account to meet the terms and conditions.
So as well as getting cash back on bills i will get 3% on my balance which will sit at around £13,500 and go up gradually throughout the year.

Is this right what ive worked out
£13,500 in ISA 1.6% Tax Free = £216 Annual
£13,500 in 123 Current 3% Basic Rate = 324 Annual - 24 (£2 Month for account) = £300

I know when i reach £20,000 any extra money wont get the 3% interest so ill transfer that into an ISA to earn 1.6%

First question is this all correct or am i missing something?
Second question is there any other accounts out there that are better with the money i have?

Rob

DominicH

First question: Looks correct to me, leaving aside the difficult-to-estimate cashback that you mention.

SmithR

DominicH wrote: »

First question: Looks correct to me, leaving aside the difficult-to-estimate cashback that you mention.

Using the Santander 123 cashback calculator I've worked out roughly ill earn around £44 cashback over the year on Gas/Electric/Water/Broadband/Phone etc. so that's 324 + 44 -24 = £344 interest on moving my ISA into a 123 current account and moving my bills as well.
Also with NISA coming along in july if interest rates did go up in future years, with the change to £15,000 i can put pretty much all my money back into a NISA in one go

Rob

saintalan

Well if you are looking to maximise your interest, you should also look at the likes of TSB/Lloyds/Nationwide where you can get as much as 5% but on a lower max.

All threads are on here, it comes down to how much you are prepared to set them up and manage.

Cheers

Alan

lazer

I had written a post before about how to maximise the interest on £13,100 using current accounts and regular savers, and working out at £471 a year interest

http://forums.moneysavingexpert.com/showpost.php?p=65162424&postcount=52

Although I would now maybe vary it a bit and use the Nationwide 2.5% regular saver ISA in part instead of the 1,2,3 account as the net interest is higher (2.5% vs 2.4%)

If you do this method just make sure and meet the conditions of all the various accounts to make sure you get the interest

SmithR

lazer wrote: »

I had written a post before about how to maximise the interest on £13,100 using current accounts and regular savers, and working out at £471 a year interest


Although I would now maybe vary it a bit and use the Nationwide 2.5% regular saver ISA in part instead of the 1,2,3 account as the net interest is higher (2.5% vs 2.4%)

If you do this method just make sure and meet the conditions of all the various accounts to make sure you get the interest

So if i get this right..

im not sure i want loads of current accounts but if i have £15,000 in my 123 current account and drip feed it into the nationwide 2.5% regular saver ISA at the maximum of £1250 a month so at the end of the year i have £15000 Maximum ISA limit in the nationwide ISA

Ill be earning roughly from £233 from my 123 current account
and then roughly £174 from drip feeding my nationwide ISA
a total of £407

is this right or am i completely wrong?

Rob

kidmugsy

If you pay income tax at 20%, Santander pays 0.8 x 3% = 2.4%; NWD pays 2.5%. Not much in it. In your shoes, if I were prepared for the fuss of a second account I'd probably go for a second current account rather than the NWD ISA. After all 5% x 0.8 = 4%.

lazer

SmithR wrote: »

So if i get this right..

im not sure i want loads of current accounts but if i have £15,000 in my 123 current account and drip feed it into the nationwide 2.5% regular saver ISA at the maximum of £1250 a month so at the end of the year i have £15000 Maximum ISA limit in the nationwide ISA

Ill be earning roughly from £233 from my 123 current account
and then roughly £174 from drip feeding my nationwide ISA
a total of £407

is this right or am i completely wrong?

Rob

That would definately be better than just leaving it all in the santander account, but you need to make sure you keep over £3k in the santander account - as if it drops below it you will get less average overall.

If you started with £15k and drip fed it, by month 10 your interest will have dropped to 2% and then then to 1% the next month.

The NW ISA would generate roughly £203, and the santander account £162 so that makes £365 so you only be about £5 off than just having it in 1,2,3 account, but your saving would be under the ISA banner so could transfer them to a potentailly higher paying ISA next year.

I think there is other high paying regular sving about, if you look hard enough

I highly recommend you consider at least the TSB current account and dump £4k into these, so you get 5% on it, and this is not a bonus rate, no requirements for direct debits etc, just to need to transfer £500 between the 2 accounts each month - just set up a standing order to do it.

bowlhead99

SmithR wrote: »

So if i get this right..

im not sure i want loads of current accounts but if i have £15,000 in my 123 current account and drip feed it into the nationwide 2.5% regular saver ISA at the maximum of £1250 a month so at the end of the year i have £15000 Maximum ISA limit in the nationwide ISA

Ill be earning roughly from £233 from my 123 current account
and then roughly £174 from drip feeding my nationwide ISA
a total of £407

is this right or am i completely wrong?

Not 'completely wrong', but a couple of things to point out:


1) If you were about to do this for real, you would start off by opening the nationwide ISA as soon as possible (because you are limited in what you can put in per month and want to get the whole 15000 in there before the end of the tax year). So your cashflows put new money into Nationwide at the beginning of the month.

However I think you've done your maths by assuming you had all the £15000 at Santander for a whole month, then 13750 there the next month, 12500 etc. Whereas in reality you'd do that first transfer to Nationwide ASAP and so the first month you would have 13750 Santander, 1250 Nationwide, then 12500, 11250 etc. In the last month you have zero at Santander apart from any accumulated interest, while you have the whole 15000 at Nationwide for a month instead.

This would change the calculation to be a bit less (roughly 207) at Santander and more (roughly 202) at NW. But pretty similar total to what you have.

2) Second major factor is tax. Presumably you are a taxpayer which is why you are considering an ISA. So, Santander will withhold 20% tax off each of the monthly interest payments they send you, leaving only 165 from them and not 207.

This gives you 165+202 = ~367 net across the 2 accounts. If you're a higher rate taxpayer (e.g. 40%+) you would then pay more tax on the Santander income at the end of the tax year.

Finally, I don't think Santander pay the same interest if you have a really low balance, so towards the end of the year they would not still be giving you 3% gross. That's probably a non-issue because if you already have 15k cash savings, presumably you will earn and save more over the next year and by the time most of the 15k has moved over to Nationwide there will be some more from your salary topping the Santander back up to a level that still pays the 3%

SmithR

lazer wrote: »

That would definately be better than just leaving it all in the santander account, but you need to make sure you keep over £3k in the santander account - as if it drops below it you will get less average overall.

If you started with £15k and drip fed it, by month 10 your interest will have dropped to 2% and then then to 1% the next month.

The NW ISA would generate roughly £203, and the santander account £162 so that makes £365 so you only be about £5 off than just having it in 1,2,3 account, but your saving would be under the ISA banner so could transfer them to a potentailly higher paying ISA next year.

I think there is other high paying regular sving about, if you look hard enough

I highly recommend you consider at least the TSB current account and dump £4k into these, so you get 5% on it, and this is not a bonus rate, no requirements for direct debits etc, just to need to transfer £500 between the 2 accounts each month - just set up a standing order to do it.

I intend to keep my 123 santander account above the £3000 mark, as i intend to try and save around at least £400 a month,
i will look into the TSB account

can i ask how you have worked out roughly that ill get
"The NW ISA would generate roughly £203, and the santander account £162" please

Many thanks

Rob

SmithR

bowlhead99 wrote: »

Not 'completely wrong', but a couple of things to point out:


1) If you were about to do this for real, you would start off by opening the nationwide ISA as soon as possible (because you are limited in what you can put in per month and want to get the whole 15000 in there before the end of the tax year). So your cashflows put new money into Nationwide at the beginning of the month.

However I think you've done your maths by assuming you had all the £15000 at Santander for a whole month, then 13750 there the next month, 12500 etc. Whereas in reality you'd do that first transfer to Nationwide ASAP and so the first month you would have 13750 Santander, 1250 Nationwide, then 12500, 11250 etc. In the last month you have zero at Santander apart from any accumulated interest, while you have the whole 15000 at Nationwide for a month instead.

This would change the calculation to be a bit less (roughly 207) at Santander and more (roughly 202) at NW. But pretty similar total to what you have.

2) Second major factor is tax. Presumably you are a taxpayer which is why you are considering an ISA. So, Santander will withhold 20% tax off each of the monthly interest payments they send you, leaving only 165 from them and not 207.

This gives you 165+202 = ~367 net across the 2 accounts. If you're a higher rate taxpayer (e.g. 40%+) you would then pay more tax on the Santander income at the end of the tax year.

Finally, I don't think Santander pay the same interest if you have a really low balance, so towards the end of the year they would not still be giving you 3% gross. That's probably a non-issue because if you already have 15k cash savings, presumably you will earn and save more over the next year and by the time most of the 15k has moved over to Nationwide there will be some more from your salary topping the Santander back up to a level that still pays the 3%

Many thanks i think i understand now, i was using the santader calculator to work out the interest on the 123 current account not realizing they had not took the tax of the interest,
im on the basic rate tax as well and i am a tax payer

Yes i plan to save around £400 a month so that should keep my 123 account above the £3000 3% interest towards the end of the year
Maybe i will do the TSB accounts then, my head hurts but im getting there

Rob