5% Savings Loophole

Siouxsie32

Okay, so I've been following his thread and it all seems straightforward. There's one thing I can't quite work out though so I'm hoping some of you number crunchers could tell me which is the most efficient way to invest a £7000 lump sum.

£5000 in 4% Club Lloyds
£2000 in TSB 5% Current
Drip feed £1000 over the year from Lloyds to TSB 5% Saver

or is it more efficient to start as above and drip feed the full £5000 via 4%/2%/1% to 6% HSBC savings (£250 per month is required to get this rate) and feed as much as possible to the TSB 5% savings account?

Or is there a better way to do it?

I'm starting to drive myself a bit mad trying to crunch the numbers!!

And do Lloyds ever do a switching incentive? Can't recall seeing one in recent years.....

Eco_Miser

If I've got this right (and assuming equal length months), you first option gets £308, your second option gets £345, and a third option gets £376.

The third option puts
£2000 in TSB current,
£2500 in Nationwide current,
£1500 in Tesco current (3%),
£0500 in Nationwide saver,
£0250 in TSB saver,
£0250 in HSBC saver (6%).

Then
£0500 in Nationwide saver,
£0250 in TSB saver,
£0250 in HSBC saver (6%)
monthly until the Tesco account is empty.

Then
£0025 in Nationwide saver,
£0025 in TSB saver,
£0250 in HSBC saver (6%)
for the rest of the year.
Rate is 5% AER unless stated.

Using more than one 6% saver would get even more.

LXdaddy

To generalise what Eco Miser has said.. and assuming that you can satisfy all the T&Cs for eligibility and you are prepared to do all the setup required...


There are interest paying current accounts paying 5%, 4%, and 3% on sums up to a certain figure each (plus accounts paying less than 3%)


There are regular saver accounts paying 6%, 5%, 4% on sums up to a certain figure each.


The highest interest is earned by using the accounts as follows
1 fill all the 5% current accounts
2 fill all the 4% current accounts
3 fill all the 3% current accounts
4 put any extra somewhere paying less than 3%


Then every month transfer from you lowest paying account with a balance into
all the 6% monthly accounts
all the 5% monthly accounts (unless you lowest paying account is 5% or more)
all the 4% monthly accounts (unless you lowest paying account is 4% or more)


Once you've done the initial setup (which takes time and a methodical approach) all the transfers can be automated with Standing orders or you can do them manually each month)


When each Monthly saver account matures transfer the proceeds into the highest paying accounts as at the start and then open a new monthly saver (rinse and repeat)

KTF

I tried to open an M&S Regular saver today and was told that you have to have used the switching service and have 2x regular DD on the account in order to open one.

I thought this change only came in to place from April 6 but it also says it on the site here so maybe not?

http://bank.marksandspencer.com/banking/current-accounts/existing-customers/#monthly-saver

colsten

LXdaddy wrote: »

Then every month transfer from you lowest paying account with a balance into
all the 6% monthly accounts
all the 5% monthly accounts (unless you lowest paying account is 5% or more)
all the 4% monthly accounts (unless you lowest paying account is 4% or more)

You also have to factor in that the interest rate paid drops on some of the 3% and on the 4% account as your balance drops. I haven't done the detailed numbers for this but would suggest anyone considering the scheme with these accounts should work them out before embarking it.

KTF

I thought I wasn't going crazy. I guess they got fed up with people like me opening an account just to get their hands on the regular saver.

colsten

KTF wrote: »

I tried to open an M&S Regular saver today and was told that you have to have used the switching service and have 2x regular DD on the account in order to open one.

I thought this change only came in to place from April 6 but it also says it on the site here so maybe not?

http://bank.marksandspencer.com/banking/current-accounts/existing-customers/#monthly-saver

It looks to me that they have sneakily changed the date on their Terms and Conditions to January 5 2016. So unless you had their RS before and have a renewal offer from them, it looks you will have to switch and set up the DDs before you can have the RS.

I am into my 2nd RS with them now, and I have now switched and set up the 2 DDs so I can meet the T&Cs when I come to apply for my 3rd RS. They paid me for the switch, so it was worth the effort in any case - though the current switch offer ends on the 5th so you may or may not be able to still benefit from it.

Siouxsie32

Thanks Eco Miser and LXdaddy. It all makes perfect sense.

So far I have a TSB Plus and HSBC Premier accounts. I have a Nationwide FlexDirect that's more than 12 months old so only get 1% interest there unless I can open a second one? (I read the criteria but found it a little ambiguous! I know I can open a second account, but think I won't get 5%?). Also, I tried to open a M+S account a few months ago and was declined.

So, with the above info, my plan is:

Day 1: Open a Tesco Current Account and deposit £5000
Deposit £2000 to TSB Current Account
Pay £500/£250/£250 to Nationwide/HSBC/TSB savers accordingly from Tesco
Find a home for the excess £1000 that's not earning interest in Tesco

Month 2: Move the spare £1000 back to Tesco
Pay monthly savings as month 1

etc

I think (and please correct me if I'm wrong) that a constant 3% in Tesco is better than 1 month at 4% then the rest of the year at 2%/1% that Lloyds would earn. And I think it's not worth opening a Lloyds account for the short time it'll earn 4%.

I love challenges like this and am super happy that I'll earn over £300 in interest!

colsten

Siouxsie32 wrote: »

I have a Nationwide FlexDirect that's more than 12 months old so only get 1% interest there unless I can open a second one? (I read the criteria but found it a little ambiguous! I know I can open a second account, but think I won't get 5%?).

that's right. you can open a 2nd (3rd/4th etc) FlexDirect account but you won't get 5% if you held a FlexDirect in the last 12 months.

Siouxsie32 wrote: »

So, with the above info, my plan is:

Day 1: Open a Tesco Current Account and deposit £5000

it would be better to have 2 Tesco accounts (max you can have) for £5,000 as they don't pay interest above £3,000 in each

Siouxsie32 wrote: »

Find a home for the excess £1000 that's not earning interest in Tesco

see above. 2nd Tesco.

Siouxsie32 wrote: »

Month 2: Move the spare £1000 back to Tesco
Pay monthly savings as month 1

not sure why you need to wait a month and why there's a spare £1,000.

Siouxsie32 wrote: »

I think (and please correct me if I'm wrong) that a constant 3% in Tesco is better than 1 month at 4% then the rest of the year at 2%/1% that Lloyds would earn. And I think it's not worth opening a Lloyds account for the short time it'll earn 4%.

Agree. 2 Tescos instead.

Siouxsie32

Fab news re the 2 Tesco accounts coltsten! So, in theory, I can earn 3% on up to £6000 over both accounts. That's everything in place then

Is it okay to open both accounts at once, or should I stagger it?

The spare £1000 came because, of the initial £7000, £2000 was going to TSB, £3000 was to Tesco, £1000 was making up £250/£500/£250 to the three savings accounts so there was £1000 that didn't fit anywhere so I was going to just put it in my Nationwide account for the month to earn a small 1% interest until it was needed in month 2 to keep everything at it's maximum. Having a spare Tesco current account will help when there's a switching bonus from another account too :money:

One last thing, the Nationwide Saver seemed to suggest a maximum of £500 per month, but I didn't see a minimum anywhere. If this is the case, the monthly shuffle would look like...

Months 1-3: £250 HSBC, £500 Nationwide, £250 TSB
Months 4-7: £250 HSBC, £500 Nationwide, £25 TSB
Month 8: £250 HSBC, £25 Nationwide, £25 TSB (because capital is running out and TSB require a minimum of £25 per month)
Months 9-12: £250 HSBC, £25 TSB

Thanks again for giving up your time to share what you know.