TSB 5% Interest accounts VS ISA (Interest Question)

kteara

Hi all.

I currently have £6,000 total savings.

I have it split in this following format:

Tsb x2:
2,000 (5% Interest)
2,000 (5% Interest)

Nationwide Flex Direct x1:
2,000 (5% Interest)

This breakdown gives me roughly £15 interest a month. Is that correct?

I then had a thought, Nationwides regular savers ISA gives me 2.59% Interest. If I moved my total savings to the ISA this would give me 2.59% Interest on £6,000 which is £155 a month is this correct? anything I'm missing or I've gotten wrong because it seems as if I am better off putting my total savings into an ISA.

thanks.

Harveys_2

kteara wrote: »

Hi all.

I currently have £6,000 total savings.

I have it split in this following format:

Tsb x2:
2,000 (5% Interest)
2,000 (5% Interest)

Nationwide Flex Direct x1:
2,000 (5% Interest)

This breakdown gives me roughly £15 interest a month. Is that correct?

I then had a thought, Nationwides regular savers ISA gives me 2.59% Interest. If I moved my total savings to the ISA this would give me 2.59% Interest on £6,000 which is £155 a month is this correct? anything I'm missing or I've gotten wrong because it seems as if I am better off putting my total savings into an ISA.

thanks.

Rough sums here. In the bank accounts you will get 20 pounds a month in total. With the isa its 12.95 a month (155 for the year not month)

So better to have it in the 3 accounts.

bsms1147

kteara wrote: »

If I moved my total savings to the ISA this would give me 2.59% Interest on £6,000 which is £155 a month is this correct?

That would be nice.

LittleVoice

Harveys wrote: »

Rough sums here. In the bank accounts you will get 20 pounds a month in total. With the isa its 12.95 a month (155 for the year not month)

So better to have it in the 3 accounts.

To add that the £20/month for the 5% accounts is after tax has been deducted.


OP remember that the Nationwide 5% offer ends at the one-year anniversary of the account opening.

Archi_Bald

The way you can quickly compare interest is by using the AER (Annual Equivalent Rate). AER is designed to allow a like-for-like comparison.

The AER on an ISA is not subject to any tax, whilst the AER on all other accounts is usually subject to at least 20% tax. More if you are a higher rate tax payer, and none if you are not a tax payer.

So you would usually compare ISA AER with non-ISA AER minus 20%. In your case probably 2.59% versus 4%. Even if you were a higher rate tax payer, the non-ISA account AER would still be higher at 3% net. No contest, is there?

Another small flaw in your thinking is that the Nationwide ISA you mention is no longer available to new applicants. Even if it was, or if you already had the account, you could not put the entire £6,000 into the Nationwide ISA now as it allows a max of £1,250 a month to be deposited. Except for next March, when you can deposit the lot - - - but on April 1 2015, it will morph into an Instant ISA Saver which currently has an AER of 1.25%. You can say with absolute certainty that this will not be 3% or 4% next April.

The AER on the TSB Plus is variable, so can change with 2 months notice. The AER on your FlexDirect will drop to 1% at the end of 12 months. So you need to keep an eye on things and move your money to wherever is best at the time of change.

polymaff

kteara wrote: »

Hi all.

I currently have £6,000 total savings.

I have it split in this following format:

Tsb x2:
2,000 (5% Interest)
2,000 (5% Interest)

Nationwide Flex Direct x1:
2,000 (5% Interest)

This breakdown gives me roughly £15 interest a month. Is that correct?

I then had a thought, Nationwides regular savers ISA gives me 2.59% Interest. If I moved my total savings to the ISA this would give me 2.59% Interest on £6,000 which is £155 a month is this correct? anything I'm missing or I've gotten wrong because it seems as if I am better off putting my total savings into an ISA.

thanks.

Forget the Nationwide Regular ISA. They discontinued the account on 1/12/14.

I doubt that you'll beat the 5% accounts for instant deposit and access. For a regular saver, First offer 6%.

When you compare ISAs and non-ISAs I'd suggest that you compare interest rates. It is easier in that all you have to be able to do is one simple multiplication.

For instance, the 5% accounts you have are worth 5% to a non-taxpayer, 4% to a basic rate tax payer and 3% to a 40% rate tax payer. Thus the 2.59% in an ISA would be beaten by your 5% accounts in all three tax circumstances I cited.

Archi_Bald

polymaff wrote: »

For a regular saver, First offer 6%.

Apart from First Direct, HSBC also offer a 6% Regular Saver (£250 max a month).

polymaff

Archi_Bald wrote: »

Apart from First Direct, HSBC also offer a 6% Regular Saver (£250 max a month).

But only to qualifying customers?

Archi_Bald

You need an Advance account - no reason why anybody who is after a Regular Savings account shouldn't be able to get one.