5% Savings Loophole

lovemunkey187

This is my first post, and I apologise in advance for it being longwinded or having already been asked & answered somewhere in the previous 290 posts.

But I need to ask it this way to get it straight in my head.

I get paid on the 25th of each month. Which means theoretically on the 25th I could;
Send £550 from the Nationwide acc(NW) that my wages are paid into, to Tesco1(T1).
Then on the 26th send that same £550 from T1 to Santander123(SAN).
On the 27th send £500 from SAN to Tesco2(T2) leaving £50 in to cover the mandatory 2 direct debits.
And then on the 28th take it from T2 into a TSB Classic Plus (TSB).
When on the 29th for the final shuffle I return £400 to NW, leaving £100 with TSB to transfer into the linked 5% saving account.

Is my thinking on this correct? If so, would it really be worth my time attempting to apply for these accounts as I am only using a smallish amount, would the hassle out weigh the possible benefit?
I say attempting, as though my credit rating is not terrible, it isn't brilliant and within the last 8mnths I have been refused a credit card.
Thank you for your patience and reading this far.

Archi_Bald

You are over-thinking it, probably because the loophole-article did, too.

You do not need to daisy-chain your payments over a number of days. The payments can all be made on the same day, even within the same hour.

Note that there are some changes that have either already happened or will happen soon:

1. Tesco does not need any monthly deposit now
2. Santander monthly charge will rocket to £5 from Jan

It might be better if you posted some info on how much money you plan to keep in each of the accounts. Someone can then help you construct a sensible portfolio. For instance, it doesn't make much sense to me to use a Santander 123 if you haven't maxed all the better accounts. Why only put £100 into the TSB Monthly Saver ?

jimjames

Unless you have over £15500 I wouldn't bother with Santander at all. You can get 3-5% on £15,500 as below:

£2500 Nationwide
£2000 TSB
£5000 Lloyds
£6000 Tesco


Plus regular savers will give higher rates on monthly deposits.

scheissefuergehirn

As a little bonus, when you open a nationwide account through TopCashback they will give you £75. The Santander account looks like it would suit me but my previous experiences with the bank have put me off for life.

Spidernick

jimjames wrote: »

Unless you have over £15500 I wouldn't bother with Santander at all. You can get 3-5% on £15,500 as below:

£2500 Nationwide
£2000 TSB
£5000 Lloyds
£6000 Tesco


Plus regular savers will give higher rates on monthly deposits.

Except of course, if your monthly cash back is still higher than the new £5 fee, then you might as well have a Santander 123 account with virtually nothing in it (after the £500 transferred in, bills paid and then anything left transferred back out again), as I'm not aware of any other account that gives you cash back on your utility bills, council tax, etc.

jimjames

Spidernick wrote: »

Except of course, if your monthly cash back is still higher than the new £5 fee, then you might as well have a Santander 123 account with virtually nothing in it (after the £500 transferred in, bills paid and then anything left transferred back out again), as I'm not aware of any other account that gives you cash back on your utility bills, council tax, etc.

Very true. Although you'd need to ensure that the account was sufficiently funded to cover all the DDs coming out to pay bills generating the cashback. If it's close to the £5 fee I'm not sure I'd bother with the hassle if I can earn more elsewhere.
For the calculations I've done, I'd get a maximum cashback of £2 per month after the fee. I know it's not MSE but I'd prefer to earn that in other ways.

jambobski123

Hello, first post here.

I have very little experience / knowledge regarding savings and investments, however, i have been thinking about taking advantage of this "5 % savings loophole". I am looking for some advice.

I have around 20k in savings that is basically just sitting in a TSB Classic Plus account and im looking for the best way to spread these funds around. I am single so no joint accounts will apply for me and i also have 2 direct debits.

Is it better to set up standing orders for all the payments to go through at the same time or 1 day at a time for example?

Lloyds require 2 DD's, it seems to me that we are just paying tax on that account as the interest will not cover the DD's?

Maybe this is bad logic but like i said i have little experience with this.

Any advice would be appreciated

Thanks.

bigadaj

You can use bankaccountsavings.co.uk to sort out the best combination of accounts, all fairly self explanatory but they don't include nationwide and things change constantly so you need to check their recommendations, eg Santander fee increase, tesco removing the need for monthly funding etc

savings_my_hobby

jambobski123 wrote: »

Hello, first post here.

I have very little experience / knowledge regarding savings and investments, however, i have been thinking about taking advantage of this "5 % savings loophole". I am looking for some advice.

I have around 20k in savings that is basically just sitting in a TSB Classic Plus account and im looking for the best way to spread these funds around. I am single so no joint accounts will apply for me and i also have 2 direct debits.

Is it better to set up standing orders for all the payments to go through at the same time or 1 day at a time for example?

Lloyds require 2 DD's, it seems to me that we are just paying tax on that account as the interest will not cover the DD's?

Maybe this is bad logic but like i said i have little experience with this.

Any advice would be appreciated

Thanks.

You probably want to reduce your TSB classic balance to £2000 as this is the maximum amount you will earn interest on.
then you want to look for other accounts that offer a good interest rate.

these accounts need to be maxed out.
(by maxed out i mean put in the highest amount of cash into the account that you can earn interest on)

Some good accounts are:
- Nationwide Flexdirect (£2500 x1, ditch after one year, open a new account one year later)
- Club Lloyds (£5000 x1)
- Bank of Scotland Vantage (£5000 x3)
- Tesco Bank current account (£3000 x2)
and Halifax reward which nets you £60 a year (£5 per month) just for meeting the account requirements.

You probably want to set up the standing orders mid month to avoid bank holidays, 17th or 18th of each month perhaps. And yes you may aswel have them on the same day.

oh and another thing, you may want to set up an account (one mentioned above) purely for compounding. the idea is to skim off all the interest you have earned and put it into this "compounding" account. there is no point having, say, £2020 in your TSB account when the extra £20 could be earning interest elsewhere. do it correctly and your interest will be earning interest, ok this is not traditional compounding but better than nothing - Good Luck

Eco_Miser

jambobski123 wrote: »

Lloyds require 2 DD's, it seems to me that we are just paying tax on that account as the interest will not cover the DD's?

I don't understand what you mean here. If the DD's are ones you pay anyway the interest makes a contribution to paying them, otherwise you get a Tesco Internet Saver and a Tesco Easy Access Saver to pull money from the Lloyds account, which appear as Direct Debits.