End Of Year Savings Advice for Asipiring First Time Buyer

althecook

Hi all,

I'm in the fortunate situation that I've just started a new job which has come with a pay increase, putting me in the position of being able to increase the amount of money I'm saving, but am not really sure where to put it, and with the end of the 18/19 tax year coming up, I feel under a bit of pressure to act quickly.

Current situation:

• No debt (except student loan)
• contributing 3% (about to increase to 5% matched by employer) to workplace pension
• £4500 in NatWest HTB ISA (paying 2.5%), paying in the full £200/month allowance
• £3000 lump sum in no interest current account
• Want to increase savings to around £400/month total

I'd like to put that lump sum somewhere it is going to work a little harder, and to contribute another £200/month (on top of the £200/month going into the HTB ISA, totalling £400/month savings) to savings/investment.

I've been looking at LISAs, but I'd like to be buying a house in the next 2-3 years, and given that the government bonus is only on either the HTB or LISA, would I be 'shooting myself in the foot' by going this route, as the bonus from the HTB would be wiped out by the LISA?

I've essentially written off any S&S options right now as I don't want to lock money aways for too long, and with Brexit round the corner, I'm not convinced on the returns from that option right now.

Are there any other options that I should be considering?

Thanks in advance for the advice!

YorkshireBoy

althecook wrote: »

• £3000 lump sum in no interest current account
• Want to increase savings to around £400/month total

I'd like to put that lump sum somewhere it is going to work a little harder, and to contribute another £200/month to savings/investment.

Is it £200/mth or is it £400/mth?

You should be able to get all of it making 5% AER for the foreseeable using Nationwide FlexDirect and TSB Classic Plus current accounts, and a Nationwide regular saver, which together will take a £4K lump sum and £250/mth.

Zorillo

Take £4k out of the HTB ISA and put it in a LISA before April 5th, put the other £3.5k into a LISA after April 6th, then add a further £500 to it, then build another £4k pot before next April, etc. etc.

Actually doing it the other way round makes more sense, make the HTB money the final LISA deposit, as it earns more interest in HTB than it would elsewhere. But the point remains, you ultimately want it to earn a LISA bonus rather than a HTB bonus due to the higher limit.

althecook

YorkshireBoy wrote: »

Is it £200/mth or is it £400/mth?

You should be able to get all of it making 5% AER for the foreseeable using Nationwide FlexDirect and TSB Classic Plus current accounts, and a Nationwide regular saver, which together will take a £4K lump sum and £250/mth.

Apologies, on re-reading it wasn't very clear. I've edited to hopefully clarify better.

I'm able to save a total of £400/month, so whether that is the original £200/month in the HTB ISA with another £200/month elsewhere, or putting the entire £400/month into a different account, I'm open to all advice.

althecook

Would I be able to add money into the HTB ISA as well as the LISA in the same tax year?

It's clear to me now that a LISA is a good option because of no monthly contribution limit and the gov't bonus despite lower interest rates, but given the high interest of the HTB ISA I'd like to keep adding to that until such a time as I do get on the ladder and then transfer across to the LISA when I need to (as long as it keeps under the £4k annual limit)? Is this a viable strategy?

darkidoe

althecook wrote: »

Would I be able to add money into the HTB ISA as well as the LISA in the same tax year?

It's clear to me now that a LISA is a good option because of no monthly contribution limit and the gov't bonus despite lower interest rates, but given the high interest of the HTB ISA I'd like to keep adding to that until such a time as I do get on the ladder and then transfer across to the LISA when I need to (as long as it keeps under the £4k annual limit)? Is this a viable strategy?

I would transfer 4k from HTB ISA to LISA before this tax year ends, and transfer the rest across after April.

At the end of the day when you purchase you can only use one or the other so using the LISA makes more sense with the 25% bonus. Any excess savings should go into highest paying interest accounts, eg Nationwide FlexDirect, First Direct Regular saver. and redirected to LISA at the end of each tax year.