Santander 123 rate’s dropping to 1.5% – should you ditch it?

MSE_Eesha

This is the discussion to link on the back of Martin's blog. Please read the blog first, as this discussion follows it.

Read Martin's "Santander 123 rate’s dropping to 1.5% – should you ditch it?" Blog.

Please click 'post reply' to discuss below.

building_with_lego

I have a little over £16k in my 123 and currently earn around £36pm after fees.

I *think* it's still worth me keeping it, although I'm gradually moving money over to my First Direct bonus saver at 5%, and I always keep £2000 in TSB at 5% too. Isn't it hard work getting money from your money these days?

mrBlue

Having received a kind reminder email from Mr Matt Hall, Santander Director for Banking and Secured Credit, reminding us of the imminent changes which reduce our tax-free income on this account 50%, why don't we all (1,000,000?) reply to Mr Hall, asking when he is going to reduce the monthly fee back to £2 to compensate? After all, loan rates have moved a fraction of a % since Carney et al panicked (wrongly, as it has been proved) by reducing base rate to 0.25%, so what is the justification to reduce savings rates? Inept Mr Carney is going to have to increase rates next March because inflation is going to be 4% +. Let's use the power of the people's internet!

molerat

building_with_lego wrote: »

I have a little over £16k in my 123 and currently earn around £36pm after fees.

I *think* it's still worth me keeping it, although I'm gradually moving money over to my First Direct bonus saver at 5%, and I always keep £2000 in TSB at 5% too. Isn't it hard work getting money from your money these days?

Which is reducing to 3% on £1500.

Consumerist

Santander123 cash-back was only around £35 per year so I opted for a 2yr fixed-rate ISA (1.4%) for some of the cash then opened a Co-operative Bank account (£150 + £4 pm) and saved the balance in a BoS Vantage account.(3% currently). I'm currently scrubbing about to find two DDs to qualify for another BoS Vantage account.

I'm not sure about making my money work hard for me but I certainly seem to be working hard for it ! :rotfl:

icalldibs

The "savings loophole" article is what I'm following to make the most out of it. Dropped the 123 Santander account yesterday and have pushed the money to Tesco, BOS, Lloyds and TSB for the moment.

moneysavingexpert.com/savings/savings-loophole

Knowmanythings

We're keeping it open, but taking the money out and will fund it by the minimum each month, so that we can still get our cashback on bills. Taking your advice Martin to pay down debt - using it to loan to our son to pay off his Skipton mortgage. Its on a high SVR since the Skipton reneged on its mortgage ceiling guarantee in 2010. They have claimed 'exceptional' circumstances. For six years! The insecure workplace and affordability criteria have prevented him remortgaging to competitive rates. We've also taken out low charge cash transfers of credit cards to help. Thus 'ditching' two big financial set ups which are not playing fair with their customers. Its our retirement savings, but what the hell - the young have it so hard!

Sisyphean_Task

Martin,
Maybe you have overlooked an important point? That is security.

People putting a lot of money into a 123 account are exposing it to more risk, than in a saving account fed by a current account. Every time they take their card out of the house or use it for an internet payment etc. it's potentially exposing their current account balance to fraud. I remember reading about a chap who had a fraud via an intercepted Santander SMS message. At the time, not sure if this changed later but Santander had said they would not reimburse him the five figure loss.

So in effect people are gambling what could be a large amount in a current account, for the differential between this rate and that of a safer saving account rate.

Also when suggesting Regular Saver accounts can you always put the total annual rate as well? For example 3% (1.6% in total). Only the deposit in the first month gets the 3%, the deposit in the second month gets 11 x12ths of 3%, the 3rd month gets 10 x 12ths of 3%. So on the total money invested over the year the total return is 1.6%

TAD2016

"I'm currently scrubbing about to find two DDs to qualify for another BoS Vantage account."

For people struggling to find direct debits to meet current account requirements, Tesco offer two online savings accounts that you can pay into by direct debits. (sure somewhere on this site/forums these are mentioned) If you open these savings accounts you can set up 2 direct debits for each current account you have and pay £1 monthly into these savings accounts from the current accoutns by direct debits. This is what I've done, allowing me to have 3x BoS and a Halifax account with two direct debits attached, just by paying in £1 each month to my tesco online savers. It has also allowed me to meet the requirements for switching bonuses (£150, £100 to HSBC, M&S, CO-OP etc), by opening a blank current account, attaching two tesco direct debits on and then switching it to whatever bank has a switching bonuses at the time, just soley for the bonus. (Note: will have to remember to manage the standing orders to meet the min pay-ins for these accounts, also opening an account gets logged on your credit score, so make sure you arn't going to buy a house in the very near future when doing it).

Martin touched apon it at the end of the Santander summary about having multiple current accounts. 3x BoS accounts beats Santander hands down, and with the method above is possible direct debit wise. If you are a mega saver and somehow have 20k, spreading this 20k accross multiple current accounts is better than Santander 123 and thats what I prefer/ trying to do. If however you are very lucky and a crazy saver, a combination of both would be the best.

I'd prefer to ditch and spread however, just takes some management/admin

YorkshireBoy

Sisyphean_Task wrote: »

Also when suggesting Regular Saver accounts can you always put the total annual rate as well? For example 3% (1.6% in total). Only the deposit in the first month gets the 3%, the deposit in the second month gets 11 x12ths of 3%, the 3rd month gets 10 x 12ths of 3%. So on the total money invested over the year the total return is 1.6%

I hope he doesn't do anything like that!

It's explained perfectly well as it is in my opinion. If your request was taken up, many people may compare 1.6% on this account with, say, 1.7% on an ordinary account for savings made from monthly income. And those people taking the 'apparent' better rate of 1.7% would only get around half the interest (pounds not percentage) they could have got by using the regular saver.

It's for this reason that the industry has to always quote an AER, and it's this that should be used to compare accounts...not some average worked out over a year.

In short, a 3% AER regular saver is roughly twice as good as a 1.5% AER 'ordinary' savings account!...for monthly savings made from income.

ra-ra06

I'm 34 an I've been saving money towards a house for quite a while.

Following Martin's advice, I've filled a Santander account with £20K, a TSB classic plus with £2k and a Nationwide current account with £2.5K. Additionally, every month I deposit £200 into a Santander regular saving (5%), £250 into a TSB regular saving (5%), £500 in a Nationwide regular saving (5%) and £200 in my Halifax help to buy Isa (4%).

My main employment is a live-in position and I don't have any bills on my name, other than my mobile phone, therefore my cashback with Santander doesn't match the £5 fee.

Until a month ago I had two employments, plus some freelance work, but I've recently left my second job and I wouldn't mind to leave my live-in position to get a slightly better paid and more mentally rewarding job.

Since two of my current accounts are reverting to a lower interest rate and two of my regular saving accounts are about to reach maturity I was wondering if this is perhaps the best time to start house-hunting. My long-term partner is not interested in buying so I'd be looking on my own and my max deposit would be around 50K.

Knowing that I currently live in central London, should I do the big jump or keep taking advantage of my relatively cost-free accommodation a bit longer and keep saving, perhaps moving my savings elsewhere?