5% Savings Loophole

gazwaldo8

Hi Everyone,
Just joined this forum and am both excited and confused with this whole loop hole that you all seem to have going on here.
I amabout to inherit in the region of £30,000 which I dont really know what to do with, (except spend it all lol) but reading through MSE led me to this forum so here I am.
Anyway, I have read through this and am now even more confused - where do I begin and how long does it take to set it all up?
It seems like it is going to take some time (months even) before i can get all these accounts opened, money in place and SO's set up in right order on right days.
Also, am I right in assuming that I need all the accounts mentioned in place before this maxes out to its potential or will i start benefitting straight away?
Sorry for my numptiness but my head is swirling with all this new information.
Any patient help and advice would be greatly appreciated (hopefully in some kind of simplified format!)
Many Thanks in advance

saintalan

gazwaldo8 wrote: »

Hi Everyone,
Just joined this forum and am both excited and confused with this whole loop hole that you all seem to have going on here.
I amabout to inherit in the region of £30,000 which I dont really know what to do with, (except spend it all lol) but reading through MSE led me to this forum so here I am.
Anyway, I have read through this and am now even more confused - where do I begin and how long does it take to set it all up?
It seems like it is going to take some time (months even) before i can get all these accounts opened, money in place and SO's set up in right order on right days.
Also, am I right in assuming that I need all the accounts mentioned in place before this maxes out to its potential or will i start benefitting straight away?
Sorry for my numptiness but my head is swirling with all this new information.
Any patient help and advice would be greatly appreciated (hopefully in some kind of simplified format!)
Many Thanks in advance

Hi gazwaldo and welcome to the money jungle.

My first response would be do you know why you are saving this money, is it for your retirement, house purchase, family, just earning a bit before you decide?

Having had quite a few accounts over the years, this week I am needing some new accounts and have set up around 10 in the last week all functioning.

The quickest thing I would suggest is to get yourself a coffee and open a Santander 123 a/c and that will earn you 3% on £20k, then set up TSB & Nationwide accounts earning 5%. The number will depend on whether you have someone to open joint accounts with.

Just read through the main topics and you'll be able to tailor things to your own needs such as Pension contributions/ISAs etc.

Good luck.

Alan

gazwaldo8

saintalan wrote: »

Hi gazwaldo and welcome to the money jungle.

My first response would be do you know why you are saving this money, is it for your retirement, house purchase, family, just earning a bit before you decide?

Having had quite a few accounts over the years, this week I am needing some new accounts and have set up around 10 in the last week all functioning.

The quickest thing I would suggest is to get yourself a coffee and open a Santander 123 a/c and that will earn you 3% on £20k, then set up TSB & Nationwide accounts earning 5%. The number will depend on whether you have someone to open joint accounts with.

Just read through the main topics and you'll be able to tailor things to your own needs such as Pension contributions/ISAs etc.

Good luck.

Alan

Hi Alan,
Thank you for your welcome and swift reply.

"My first response would be do you know why you are saving this money, is it for your retirement, house purchase, family, just earning a bit before you decide?"

Well, Firstly its to stop me squandering it all which I would probably do rather quickly if i didnt put it to work. So I guess Im trying to earn a bit until I need it for something else.


"this week I am needing some new accounts and have set up around 10 in the last week all functioning."

See what I mean! :shocked: - that just seems a mind boggling prospect to someone not versed in 'playing' with money! - do you set these all online or do you have to physically go into branches - which would be very time consuming I presume.


"The quickest thing I would suggest is to get yourself a coffee and open a Santander 123 a/c and that will earn you 3% on £20k, then set up TSB & Nationwide accounts earning 5%. The number will depend on whether you have someone to open joint accounts with."

Coffee sounds good and much needed! :coffee:
Yes I pretty much thought my first port of call would be switching my current account with Barclays to the Santander 123 even before reading the loophole . (Been with Barclays for over 20 years now and have been p......d off with them for some time but never got round to switching so this windfall is forcing my hand i guess.
So with my wages going into the new santander too this will automatically cover my minimum monthly deposit so will qualify immediately for the rate.
But with the TSB & Nationwide each also needing minimum deposits of £500 and £1000 respectively, does this need to be over and above the 5% threshold of £2000 and £2500 respectively thereby leaving the threshold untouched at max? (If that makes sense?) and does it mean I just set up a recurring SO from one account to the other month after month - basically moving the same £1000 around and around each month?


"Just read through the main topics and you'll be able to tailor things to your own needs such as Pension contributions/ISAs etc."

I'm hoping I have covered my pension needs with my fairly decent work scheme (as well as a rental property which is intended for any supplementing of pension during retirement) - I have not considered ISA's as I have never before been in a position to set lump sums aside.


This inheritance has forced me to do some looking around at options and this loophole certainly seems to be my best option (even if it does on the face ofit seem somewhat daunting to get set up!)

Sorry again for my dumb questions! :think:

saintalan

gazwaldo8 wrote: »

Hi Alan,
...
"this week I am needing some new accounts and have set up around 10 in the last week all functioning."

See what I mean! :shocked: - that just seems a mind boggling prospect to someone not versed in 'playing' with money! - do you set these all online or do you have to physically go into branches - which would be very time consuming I presume.
...But with the TSB & Nationwide each also needing minimum deposits of £500 and £1000 respectively, does this need to be over and above the 5% threshold of £2000 and £2500 respectively thereby leaving the threshold untouched at max? (If that makes sense?) and does it mean I just set up a recurring SO from one account to the other month after month - basically moving the same £1000 around and around each month?... :think:

Just a quick response, am off out.

Opening a/c s is very easy I didn't leave the sofa except for coffee, just keep a record of what you have done.

The threshold is what you get paid up to, so no point keeping more than £2k in TSB a/c. If you have an OH you could open 1 each (+ a joint if you want) and cycle the money between them. Once set up no need to revisit except to cream off the interest occasionally.

Another point dont just junk your Barclays use it to switch to a referral bonus tax free offer like Yorkshire/Co-op/First Direct whatever is current. There's £125-£150 in your pocket!

Enjoy!

gazwaldo8

The threshold is what you get paid up to, so no point keeping more than £2k in TSB a/c. If you have an OH you could open 1 each (+ a joint if you want) and cycle the money between them. Once set up no need to revisit except to cream off the interest occasionally.

That sounds a genius and simplistic way to do it. - BUT - Is this allowed? -As the main posting says:

Hang on, you said I can use these as savings accounts if I don't want to actually change my bank account. How would that work? You can, but not with every account. Some of them require you to set up standing orders and direct debits (and, no, you can't usually just pay these to another of your bank accounts) which makes life difficult.

Therefore I thought this is not possible??

Also can you please clarify, if i had all 3 TSB accounts all with the max £2k in each and just continually transfer £500 around the 3 accounts, Does this mean I need £6k PLUS the extra £500 to be moved about - or would I only need to use £500 out of the existing £6k and still attract maximum interest (as I suppose its only going to be in / out of any account for 2 days if the SO is set up to transfer on the next day following deposit until back in the first / original account)??

Another point dont just junk your Barclays use it to switch to a referral bonus tax free offer like Yorkshire/Co-op/First Direct whatever is current. There's £125-£150 in your pocket!

Great idea - thanks for that - does these accounts have a minimum time you need to be using them for, as in theory you could just keep changing your current accounts around too and keep getting the £100+ each time you do it.


I'm loving this forum already - cant wait to get started!!

In_For_A_Penny_2

gazwaldo8 wrote: »

Also can you please clarify, if i had all 3 TSB accounts all with the max £2k in each and just continually transfer £500 around the 3 accounts, Does this mean I need £6k PLUS the extra £500 to be moved about

Other perhaps more simple option is to open x2 Santander 123 accounts (one single, one joint) in the expectation you might have further savings to add to the second one.

masonic

gazwaldo8 wrote: »

Also can you please clarify, if i had all 3 TSB accounts all with the max £2k in each and just continually transfer £500 around the 3 accounts, Does this mean I need £6k PLUS the extra £500 to be moved about - or would I only need to use £500 out of the existing £6k and still attract maximum interest (as I suppose its only going to be in / out of any account for 2 days if the SO is set up to transfer on the next day following deposit until back in the first / original account)??

You only need to move £500 around the accounts each month. If you will have >£500 in each account, then you can set the standing orders to fire off on the same day. You'll not lose out on any interest that way.

Some accounts require funding to come from an account at a different bank, but TSB does not.

Eco_Miser

gazwaldo8 wrote: »

That sounds a genius and simplistic way to do it. - BUT - Is this allowed? -As the main posting says:

Hang on, you said I can use these as savings accounts if I don't want to actually change my bank account. How would that work? You can, but not with every account. Some of them require you to set up standing orders and direct debits (and, no, you can't usually just pay these to another of your bank accounts) which makes life difficult.

Therefore I thought this is not possible??

You can move your money between your accounts by standing order as much as you like.
You can't move your money between your accounts by Direct Debit -- with one exception: Certain savings accounts, notably Tesco Internet Saver, allow you to fund them by pulling money from a current account, which is a Direct Debit as far as the current account is concerned. This is useful only to provide Direct Debits to those current accounts that need them to meet the conditions for getting interest.

gazwaldo8 wrote: »

Also can you please clarify, if i had all 3 TSB accounts all with the max £2k in each and just continually transfer £500 around the 3 accounts, Does this mean I need £6k PLUS the extra £500 to be moved about - or would I only need to use £500 out of the existing £6k and still attract maximum interest (as I suppose its only going to be in / out of any account for 2 days if the SO is set up to transfer on the next day following deposit until back in the first / original account)??

You can do all the SOs on the same day, provided they will have sufficient money in them, which they will if you're keeping the maximum interest earning balance in each.

You can also move your money by Faster Payment, which is usually instantaneous, and you can adjust the amount to also collect up the interest and allow for what will be going out by DD.

gazwaldo8 wrote: »

Great idea - thanks for that - does these accounts have a minimum time you need to be using them for, as in theory you could just keep changing your current accounts around too and keep getting the £100+ each time you do it.

There is a minimum time, read the T&Cs for each. Also, you can have each offer only once, so it's not a perpetual fountain of cash.

Radaday

How did you find setting up these accounts. Anyone using this set up with the four banks suggested .

Only found out about it today and am interested in giving it a go as the IAS rates are no good at the moment and don't like the idea of tying the money up for 5 years.

Also how dose a joint account with my wife work, when she dose not pay tax but i do.

Any help welcome
Steve k

Lungboy

As far as I know, tax is paid at the lower rate for joint accounts, but i could well be wrong.

e: maybe I'm misremembering and I was thinking that you should put all savings into the lower tax payers name?