Newbie: advice required

FunLovinCriminal

Hi all

I'm a newbie at all this savings, and looking for some advice.

We have a young daughter and want our money to work as hard as possible.

Currently we have:
TSB: £2000
Nationwide: £2500
Santander: £6000
ISA: £1000 (1%)

Am I doing the right thing here? I think I read I should move the money across into the ISA before april, but I'm not sure if I should, or why.

Many thanks
FLC

mgarl10024

Moving the money across before April would mean that it would count as this year's tax allowance (you can put just over £15k in an ISA each year) - so this would allow you to save more in an ISA next year.

The benefit you get from the ISA is that it is tax free. However with ISA rates so low and current accounts so high (and with a planned tax free interest allowance coming soon), I'd be amazed if you would benefit from moving it.

Bradlad9

Going on the basis that Santander is 3%, the ISA money would be better in the Santander account up to 20k, I remember reading the Santander account only breaks even with interest at 8.5k or something close?

psychic_teabag

In a rational world, an ISA would be an obvious first port of call, since you don't have to pay tax on the interest. But here in the real world, you currently get more from your other accounts after tax, than from your tax-free ISA. Since the ISA annual allowance is now relatively high, there's not such a rush to beat the annual deadline as there was.

One caveat is that with the Santander monthy fee going up from 2 to 5 per month, that might dent your plan a bit. If the D/D cashback still covers the monthly fee, then you're good. (I'm assuming it's the 123 account here.)

But eg Club Lloyds would pay you 4% on 5k, rather than the 3% you're getting from Santander. So you could keep the 123 account if the cashback covers the fee, else close it, and shift the balance to Lloyds.

Or move 5k to a new Lloyds account, then switch the 123 account to someone who will pay you a switching bonus. (But opening too many current accounts in close succession can hit credit score.)

Eco_Miser

No, that's out-of-date advice and inappropriate for your amounts - unless you are looking at a Help To Buy ISA - in which case Halifax at 4% is the one to have.
Santander isn't the best rate either - about 2.7% after fees when full, even less at £6000.
You say we so the pair of you can have 3 TSB accounts between you - that's an extra £4000 getting 5% rather than less than 3%. Then Nationwide again.
Then there's the regular savers you can get - £250 pm each from TSB and £500 pm each from Nationwide. When they mature, dump the proceeds into Lloyds Club, assuming it's still around.

https://forums.moneysavingexpert.com/discussion/5374614 - Highest rates and amounts.

FunLovinCriminal

Bradlad9 wrote: »

Going on the basis that Santander is 3%, the ISA money would be better in the Santander account up to 20k, I remember reading the Santander account only breaks even with interest at 8.5k or something close?

Only breaks even at 8.5k? Is that due to the account fee?

So would people think that I just move the £1k ISA in to the Santander?

psychic_teabag

Eco_Miser wrote: »

Santander isn't the best rate either - about 2.7% after fees when full, even less at £6000.

Assuming you are treating it purely as a savings account, and ignoring extra income from cashback on bills.

Bradlad9

FunLovinCriminal wrote: »

Only breaks even at 8.5k? Is that due to the account fee?

So would people think that I just move the £1k ISA in to the Santander?

See the post above, much better than the info I gave, but yes, because of fees, and not factoring any bills into the equation, break even is circa £8.5k also depends on what tax rate. But I don't think Santander is the best option, as you can get multiple lower limits with higher interest. With the new interest free amounts coming in to play soon ISA's are even less effective than before.

eskbanker

Bradlad9 wrote: »

because of fees, and not factoring any bills into the equation, break even is circa £8.5k also depends on what tax rate

£8.5K earns a basic rate taxpayer £204 and a higher rate taxpayer £153 in net interest.

Since the account charges are £24 this year and £60 next year, a 123 account holder will be in net profit well below £8.5K.

Effective net interest rate on £8.5K for a basic taxpayer is therefore 2.1% this year and 1.7% next year, equivalent figures for a higher rate payer would be 1.5% and 1.1%. With fixed charges to offset, these percentages will naturally start lower with smaller amounts and increase linearly up to the £20K cap (a bit lower if allowing for compounding), but on what basis is a breakeven figure being mentioned, i.e. breaking even against what?

FunLovinCriminal

Many thanks for all your advice.

I will look into opening another TSB account in my wife's name. Santander is paying £12 per interest, that's the interest and the cashback on the council tax, Sky tv, and mobile phone payments (123 account).

Just found out another mouth to feed will be due to arrive next June, so I am going through finances with a great deal of detail.

AlanP_2

FunLovinCriminal wrote: »

Many thanks for all your advice.


Just found out another mouth to feed will be due to arrive next June, so I am going through finances with a great deal of detail.

Congratulations.

As said above look to maximise the interest paying current accounts and associated regular savers.