Help with savings overhaul - currently got an old ISA

Cloudane

Current situation: Just over £6000 in a cash ISA with First Direct at 0.85% AER, plus about £2000 more than I need in my current account that could be put into savings.

For some reason FD won't let me transfer into the cash ISA any more (says I've used my maximum subscription for the year even though I've not put anything in for ages) and rather than get it sorted I thought it'd be a good time to look at my savings and get a better deal.

Not currently saving with a house in mind, I can't see it being viable any time soon as a single guy on a relatively low income already dumping about 15% of my annual salary into a pension (that age/2 advice from here a few years ago) in addition to the minuscule auto enrolled thing. And that's even while still living with parents (Leave the judgement at the door please)

I can generally afford to save about £100-200/month... I seem to manage closer to 100 usually.



First Direct have an account called Regular Saver where you can put in up to £300/month for 12 months for 5% AER payable at the end.

Obviously anything can happen in life, my parents aren't getting any younger etc. I don't want to completely tie up all my savings in a way I can't access them.

Would I be right in thinking a good course of action would be:
1. Withdraw the £6k from the ISA and close it
2. Keep £3600 of it in my current account and drip it into the First Direct Regular Saver at £300/month over the course of a year to make the most of that 5%
3. Put the rest into something like a Cynergy Bank 1.5% instant access account (better than the 0.85% I'm getting on the old cash ISA!) and use that for the £100-200/month that I tend to put aside

Or have I missed something


Toying with the idea of scaling back on the pension a bit as well. Whilst I don't want the cold baked bean future we were being fear mongered into about 5 years ago, with everything else going on in the world who knows if we'll even live to that point.

xylophone

For some reason FD won't let me transfer into the cash ISA any more (says I've used my maximum subscription for the year

There appears to be a misunderstanding here - that said, even if you wanted to keep the ISA, why would you want to stick with the miserable rate when there is better available?

https://www.thisismoney.co.uk/money/saving/article-1583864/Best-savings-rates-Isas-Cash-Isa-accounts-fixed-rate-Isas.html

As you have noted FD does offer the 5% RS - I have had one for a number of years now and find it worth having.

Have you ever had a Nationwide Flexdirect current account?

If not, you could open one and get 5% on £2500 for a year.

You could open a TSB Classic Plus account and earn 3% on £1500.

Thus, £2500 in NW, £1500 in TSB (set to paperless), set up same day mid month SO for £1000 from TSB to NW and from NW to TSB.

This would account for £4000 of your £8000.

You could hold the balance at the best rate you can get and drip see £300 a month into the FD RS.

ColdIron

Cloudane wrote: »

Toying with the idea of scaling back on the pension a bit as well.

Foolish idea likely to lead to a cold baked bean retirement

eskbanker

Cloudane wrote: »

For some reason FD won't let me transfer into the cash ISA any more (says I've used my maximum subscription for the year even though I've not put anything in for ages)

It's because you haven't paid in for ages that you can't do so now, although you can if you contact them to reactivate it, a process mandated by ISA rules when no contributions have been made for an entire tax year.

I agree that this isn't worth doing though, and the money can work much better for you as above....

Cloudane

Thanks for the feedback. Didn't realise ISAs deactivated after a while - that would explain that! Still, it's a good prompt to get something better as the rate is rubbish.

Don't think I want to switch current accounts. For the relatively small amounts involved in the grand scheme of things I'd rather stick with the excellent customer service that FD offers along with the good app and efficient online banking system (and not have the upheaval that I remember from switching last time despite how "easy" and "done for you" it's meant to be). Had a Nationwide account a long time ago, and I'm pretty sure it was called Flexsomething at least. Still, all valuable ideas...

Albermarle

Just to be clear for most people a cash ISA is unnecessary anymore, as a basic rate taxpayer can now earn up to a £1000 in interest tax free. Normally cash ISA's have worse interest rates then normal savings accounts .
Only if you have more substantial savings and/or you are a higher rate taxpayer ( the tax free interest is reduced to £500) can a Cash ISA still be a good idea.

xylophone

Don't think I want to switch current accounts

You don't have to switch to open another current account (or two or three).....

B_G_B

Also, a good idea to have a second account regardless, as a backup in case of technical glitches etc.

Cloudane

Fair! I was thinking how last time the one I opened insisted on x amount being paid in every month else they were going to charge a fee (but actually I got around not being rich enough by having a savings account and putting £1 in it).... that happened to be First Direct...

Will have a look. I think one time I had multiple accounts the dormant one somehow had a payment come out and amassed a neat little stack of overdraw fees that I didn't notice for months, but this was a long time ago - will know to be more careful this time.

psychic_teabag

Cloudane wrote: »

I think one time I had multiple accounts the dormant one somehow had a payment come out and amassed a neat little stack of overdraw fees that I didn't notice for months, but this was a long time ago - will know to be more careful this time.

Some accounts provide a facility to send an email / text when the balance goes outside a range you define. So you could have it ping you if it gets below, say, £10

Cloudane

xylophone wrote: »

Thus, £2500 in NW, £1500 in TSB (set to paperless), set up same day mid month SO for £1000 from TSB to NW and from NW to TSB.

Right, I see what you mean now!

Also it was a FlexAccount I had before which is different, so that's good news.

Sorry for probably stupid questions but they wouldn't just pick up on this as an "exploit" (knowing that the offer exists because they really want you to be paying your salary in and using them as a primary account) and invalidate it? And if technically speaking both banks see £1500 and £500 balances for up to 24 hours (if SO is on the same day) they don't reduce the interest?