Santander 123 rate to be cut to 1.5%

colsten

Nick_C wrote: »

I disagree. Savings accounts have never been a good way to generate income. In the past, people often looked at headline interest rates and ignored inflation, but I would say a real rate of return of 1% after tax has been typical for the last 40 years.

We currently have savings giving us 4% tax free, and RPIx inflation is 1.7%. We've never had it so good.

OK, you have to work for it. Our money is spread between 10 accounts at 6 different banks. But thanks to the internet, it's never been so easy to open and manage a bank account.

As well as a real return on savings, we are getting cashback of between 0.5% and 5% on all our payment cards.

If you have so much in savings accounts that you are exceeding the £1K tax limit, and you don't need the money in the short term, then you really should be thinking of investing.

I agree with all you say, with the exception of the last paragraph.

Earning over £1K in interest should not be the decisive trigger for switching any 'excess' money from savings to investments. You should never go into investments unless you can stick with them for at least 5-7 years, preferably longer. So if you know that you want to, or might want to, spend the money e.g. on a house deposit or a round-the-world holiday in the next 5-7 years, stick with savings and pay your tax on the interest.

If investments are the right option for you, put as much as you can into either S&S ISAs or pensions, or both.

Nick_C

colsten wrote: »

I agree with all you say, with the exception of the last paragraph.

Earning over £1K in interest should not be the decisive trigger for switching any 'excess' money from savings to investments. You should never go into investments unless you can stick with them for at least 5-7 years, preferably longer. So if you know that you want to, or might want to, spend the money e.g. on a house deposit or a round-the-world holiday in the next 5-7 years, stick with savings and pay your tax on the interest.

If investments are the right option for you, put as much as you can into either S&S ISAs or pensions, or both.

I completely agree with you, and by short term I was thinking 5 years minimum. I would also say don't invest if you need your money out at a particular time, even if that time is 10 years from now. If you want to cash in your investments, you obviously want to do it when the markets are high and not be forced into selling when the markets are low.

As to the cut off point, it will also depend on your total amount of capital. But I would have thought £40K to £50K in easy access cash would be enough to satisfy most couples, and that is the point at which your interest is likely to stay tax free if you are basic rate taxpayer.

As to S&S ISAs, I didn't see the benefit of them (as a basic rate taxpayer) until I almost reached a capital gain of £10K in one year and had to stop trading. Nice problem to have of course. I've now put my non ISA shares into joint names with my OH so I've doubled the capital gains allowance, and all new buys are in an ISA wrapper.

Pincher

and expect near zero by the end of the year.

I'm turning Japanese, turning Japanese, I really think so.

ffacoffipawb

Pincher wrote: »

and expect near zero by the end of the year.

I'm turning Japanese, turning Japanese, I really think so.

No sex, no drugs, no wine no women?

schiff

brewerdave wrote: »

Be interesting to see what the capital outflows for Santander are like, if they cut the 123 interest rate.With the £5 fee,a cut to 2% (or worse!) is going to make the case for some to move all their money elsewhere. We have 3 full accounts ,so will need to look around for alternative homes.:(

I am allowed two and I have some other higher interest current accounts, all maxed. Though it will be a pity if the Santander rate goes down to 2% it will feel like cutting my nose off to spite my face if I even consider leaving them as some sort of angry protest, as some have suggested doing.

2%, against the background of the rest, seems too good to give up.

Might be enough to bring me below £1000 for the year too!

Pincher

ffacoffipawb wrote: »

No sex, no drugs, no wine no women?

Have you seen those love hotels?

I just meant the low interest rate must be driving me into making the same decisions as the Japanese, who are ahead of us in ultra low interest rates.

colsten

schiff wrote: »

Might be enough to bring me below £1000 for the year too!

Whilst I would be extremely happy to get loads more than £1,000, even if I could only keep 60% or 80% of the amount above £1,000.

fromtheshires

All the speculation may be true, however much I was ignoring it as rumour until I heard there being a possibility from the horses mouth. From the Santander website:

Given changing conditions in the market, including lower market interest rates generally, we'll also be reviewing our current accounts. If your account is affected, we'll notify you of any changes in advance so you can take appropriate action if you need to.

Link: http://www.santander.co.uk/uk/base-rate-change

schiff

It's understandable. 3% on large limits and multiple accounts is/was too good.

robin58

So explain to me?

The BoE drops base rate by .25% but Santander cut the rate to us by another .75%.

But mortgage holders will only get the .25% off.

Sounds a classic bank ripoff to me.