The demise of 123 Santander Account - Transferring £20,000 into Stocks and Shares ISA a good idea?

David_Drummond

On May 1, the 123 Account from Santander will be downgraded once again and is frankly not worth using for savings anymore. I have £20,000 stashed in this to get the various benefits. When it was offering 3% interest it was great, and even when that halved, it still represented good value with all the other benefits. Now it is going down to 1% and I am contemplating moving this money to a Stocks and Shares ISA. I am wondering if this is a good idea, given the market turmoil at the moment? I have never dabbled in shares and have resisted opening this kind of ISA but having read up on it a lot, I now feel ready to take the jump. What do all you good folks far cleverer than me have to say? Myabe there's a better option? 

eskbanker

A relatively minor reduction in deposit interest rates isn't in itself a valid reason to start investing rather than saving, as the two activities are fundamentally different.  If you're ready to invest for other reasons though, now is as good a time as any....

Alexland

The S&S ISA is just a tax wrapper what matters is how your choice of investment aligns to your medium to long term objectives and volatility tolerance.

Would you still have enough cash somewhere to cover any emergency needs to avoid needing to withdraw from the S&S ISA when markets are low?

If you stop holding a high 123 balance but still value the cashback consider downgrading to 123 Lite.

Ginger123456789

I was doing the same: got the full amount in to get the interest and like you now it is going to 1%  is it worth it? I am risk averse with my money so I am unsure what to do. It is safe enough in the 1 2 3 account. I will be interested to see your replies. 

Alexland

Mickey666 said:

I'm thinking of just changing to the 123 Lite option, unless there are any worthwhile better savings accounts out there.

It's only worth downgrading to 123 Lite @ £1 pm if you are getting the cashback on bills. It's not worth paying £4 less per month to store £20k at 0% interest. Accounts such as Marcus are paying 1.3% instant access with no fee. So if you are only using 123 as a savings account just close it.

David_Drummond

Thanks everyone. I am hoping Martin will write a nice article on this before the May 1 deadline. If I close my 123, I will need to shift to another bank account because all my DDs are on it. So I have to decide which. 

eskbanker

David_Drummond said:

Thanks everyone. I am hoping Martin will write a nice article on this before the May 1 deadline.

MSE did write a nice article on this, back in January when it was announced, featuring ideas in Martin's name about options for what to do next:

https://www.moneysavingexpert.com/news/2020/01/santander-to-slash-savings-rates-and-shake-up-overdrafts---what-/

Alexland

If you downgrade to 123 lite you keep the cashback, same sort code and same account number so no need to move DDs. Then just keep your savings in a proper higher interest savings account and invest the rest just like the old days.