Mini cash isa vs A&L 14% 12mth fixed AER

barnishroader

i have a current and a savings account with Alliance & leicester and noticed tis in my offers section:

As an existing Alliance & Leicester Premier customer, you can get the best of both worlds with Save & Protect.
Earn 14% gross p.a./AER, fixed for 12 months, on your savings with
Alliance & Leicester when you take out protection provided by Legal & General to help protect your family's future.
Earn 14% gross p.a./AER fixed for 12 months on fixed monthly payments of £10 to £250
One year term

I was going to change my current life insurance anyway but i am also in the process of stoozing some money from a credit card and was wondering is this option better than putting my money into the 6.3% isa?

They maybe are totally different but i don't know enough to judge!!

I was going to put £3k into the isa and then at the end of 12mths i would have earned £189 interest.
Am i correct in thinking that if i put £250 for 12mths (ie £3k) into the other account i would earn £420?

kingstongold

the monthly saving plans are a con.

Basically the rate looks good but isn't as attractive as you think because you get 12 or 14% on the first months input ie £250, then the same on £500 and the same on 750 and so on, so each so youd get interest each month but it wouldnt be much to write home about

ISAs are actually unbeatable...

Aegis

If you can find a L&G plan that gives you what you need at a decent cost, then the regular saver would be very worthwhile. Due to compounded interest over half a year, you'd be looking at a little over 7% gross on the final amount, but you also have to account for the interest where the rest of the money is sitting before it moves across.

My calculations show that after 1 year of transfering £250 a month from a 6.3% savings account to a 14% regular savings account would net around £3260 from a £3000 investment, or a total of 8.7% net interest.

Of course, from this you have to deduct the cost of the insurance plan above that which you'd be willing to pay for it without this bonus account, and you also have to work out in your own mind how much you will lose by having to pay savings on your interest throuhg not investing your ISA allowance (if you haven't already).

Kingstongold: Regular savers aren't a con, they're a great way of getting extra interest when used properly.

barnishroader

Aegis wrote: »

If you can find a L&G plan that gives you what you need at a decent cost, then the regular saver would be very worthwhile. Due to compounded interest over half a year, you'd be looking at a little over 7% gross on the final amount, but you also have to account for the interest where the rest of the money is sitting before it moves across.

My calculations show that after 1 year of transfering £250 a month from a 6.3% savings account to a 14% regular savings account would net around £3260 from a £3000 investment, or a total of 8.7% net interest.

Of course, from this you have to deduct the cost of the insurance plan above that which you'd be willing to pay for it without this bonus account, and you also have to work out in your own mind how much you will lose by having to pay savings on your interest throuhg not investing your ISA allowance (if you haven't already).

Kingstongold: Regular savers aren't a con, they're a great way of getting extra interest when used properly.

i would actually be transferring it from my current account to the regular savings instead of into the 6.3 savings.
does this change the scenario?

Aegis

barryheffron wrote: »

i would actually be transferring it from my current account to the regular savings instead of into the 6.3 savings.
does this change the scenario?

Yes. But not by much.

Paying into this account for 12 months at that rate will net you £188 of interest at basic rate, or 6.25%.

Paying into an ISA at 6.2% net pa will get you about £102 tax free (about 3.4% net)

In a standard savings account, the total return is £84 for a net of 2.8%.

However, when you consider this with the added benefits of an ISA, you have to decide if the tax-free status for the duration of the account is more tempting to you than the regular saving account. Essentially, a good ISA will get you the same as the regular saver would this year for each year you leave the maximum amount in the account.

Of course, if you've already used your ISA, just compare the standard savings account with the regular savings account and decide for yourself if the difference in return is worth buying a qualifying product for.

barnishroader

Aegis wrote: »

Yes. But not by much.

Paying into this account for 12 months at that rate will net you £188 of interest at basic rate, or 6.25%.

Paying into an ISA at 6.2% net pa will get you about £102 tax free (about 3.4% net)

In a standard savings account, the total return is £84 for a net of 2.8%.

However, when you consider this with the added benefits of an ISA, you have to decide if the tax-free status for the duration of the account is more tempting to you than the regular saving account. Essentially, a good ISA will get you the same as the regular saver would this year for each year you leave the maximum amount in the account.

Of course, if you've already used your ISA, just compare the standard savings account with the regular savings account and decide for yourself if the difference in return is worth buying a qualifying product for.

thanks.

one more question is:
how does 14%aer give 6.25% interest?
i dont understand the difference between aer and the other interest.

Aegis

You get the equivalent of 14% on anything in the account from month to month. As such, in the first month, you get the equivalent of 14% on £250. in the second, you get the equivalent of 14% on £500, plus the previous month's interest, etc.

It basically means that the overall total interest is just over half of the full amount before tax.

barnishroader

Aegis wrote: »

You get the equivalent of 14% on anything in the account from month to month. As such, in the first month, you get the equivalent of 14% on £250. in the second, you get the equivalent of 14% on £500, plus the previous month's interest, etc.

It basically means that the overall total interest is just over half of the full amount before tax.

so is 14% on £250 not £35?
it seems like too much to me!!!

Aegis

£35 would be the gross amount on that £250 for the whole year. The next £250 will earn roughly 1/12 less for the term of the account. Etc.