Monthly Savings or Yearly ISA

pepsi_max2k

Hi can someone quickly tell me which of these would pay a better amount of interest (assuming no withdrawals). Thanks.

4.86% paid monthly (HSBC Online Saver, Net%)
6.30% paid yearly (NS&I Direct ISA, Gross%)

Kazza242

pepsi_max2k wrote: »

Hi can someone quickly tell me which of these would pay a better amount of interest (assuming no withdrawals). Thanks.

4.86% paid monthly (HSBC Online Saver, Net%)
6.30% paid yearly (NS&I Direct ISA, Gross%)

The NS&I ISA pays the most interest at 6.30% which is tax free. Where as the Online Saver will pay 6.25% AER and 5.00% net AER for a basic rate tax payer.

When comparing accounts look at the AER, which will tell you which one will pay the highest rate of interest. Also, as you've correctly pointed out, the ISA pays tax free interest at the gross rate, which should be taken into account when comparing it to a taxable account, if you are a taxpayer.

pepsi_max2k

Thanks, in that case assuming I had £1500 in either, then without any withdrawals over a year I'd make...

HSBC: 1500 + (1500 * 5%) = £1575
NS&I: 1500 + (1500 * 6.3%) = £1595.50

But assuming two withdrawals were made over that year, with HSBC not paying interest on any month a withdrawal is made, and NS&I allowing a minimum of £250 withdrawal...

HSBC: I guess it'd be a loss around £6.25 a month, so around £1562.5
NS&I: Oh dear. erm... say a withdrawal a 3rd and 6th the way through the year. 1500 + (1500 * 2.1%) = £1531.5, -£250, 1281.5 + (1281.5 * 2.1%) = £1308.41, -£250, 1058.41 + (1058.41 * 2.1%) = £1080.63, which is around £80 interest on the year.

So unless I messed that up, there was little point me doing all those calculations cos they both seem pretty equivalent to each other :rolleyes: oh well... i guess i must've learnt something :j

CLAPTON

no you have worked it out incorrectly.

for the HSBC case you have correctly worked out the loss due to no interest for two months 6.25 per month but you haven't deducted the loss of interest on the 2 x 250 amounts .. comparing like for like.

pepsi_max2k

ah yes... i wasn't considering it as i wasn't planning on taking that much out of either (maybe £50 to £100 in total), but i'd be forced to take out £250 every time with NS&I. i just wanted to make sure i hadn't totally overlooked something and HSBC would actually come out on top, but either way NS&I comes out best. thanks for pointing it out though :T