Restructuring My Savings

m_thomp

Hi All,

Completely new to the forum although I have been using the site for a while. I'm currently in the process of restructuring my savings, following the advice in Martin's Money Savings Tips Column. I currently have an mini cash ISA with a pathetic rate of interest which has accrued approx 3.7k, and have amounted savings, with an equally pathetic rate of interest, which are approximately 27k. Having read the advice on Savings, I am undertaking a complete overhaul to get the best interest and make my money for me a bit better.

Firstly, I have switched over my ISA to one with a better rate of interest, and will fill that up with £3k from my savings per year.

I then want to set up a Regular Savings Account and deposit approximately £1k a month out of my savings to get the maximum out of this.

However, before I set up the Regular Savings Account, I need to find somewhere with a competitve rate of interest to deposit my savings of 27K (less 3k for the ISA yearly top up). Ideally, this account would have been the Alliance & Leicester Internet Saver with an interest rate of 5.35%, however, the maximum amount of funds possible in £25K which is right on my savings limit. This means at best I will have a couple of months grace before I reach the £25k limit, and at worst I won't be able to open the account because I have just over the limit.

This is a dilemma for me. Do I look for a new savings account which will allow me to save more, on the understanding that I need access to transfer money out to my ISA, Regular Savings and Current Accounts, and transfer money in from my wages. Or do I stick with the Alliance and Leicester account, fill it up, and then open another account?

Thanks for any advice you can provide in advance. Please bear in mind that the reason I'm in this position is because I'm a complete numpty at looking after my savings, so I need to be baby-talked through any options.

ReportInvestor

Hi m_thomp,

I'd stick with the best and open another account should you get any more. As long as you don't mind the extra hassle of an additional account it will earn you the most interest.

Some internet instant access accounts pay 5%+ for just 1 pound deposited - so you won't "lose" much money on any second account. You would "lose" more money by accepting a lower rate on your 25K than the A&L account can give.

The Derbyshire Regular Saver at 5.85% looks a good bet for your 1K pm regular savings.

loobs40

Have you got a partner that has not used up their ISA allowance ? Open up an ISA in their name and you can find a home for another £3000 each year. Of course, depends on how much you trust your partner........

With the development of internet banking it is so easy to open up savings accounts, I don't even stop to think about. I have so many now that I maintain a simple spreadsheet with a list of my accounts (e.g savings, ISAs, premium bonds, shares), interest rates, max allowed amount and amount in each account etc and every few months review the situation, move the money round as necessary (always online in most cases, the exception being Abbey Postal ISA).

m_thomp

Thanks Reporter and Loobs40, I guess opening yet another account wouldn't be too much hassle. As I said I'm not the best when dealing with interest rates, but I guess the cumulative interest of the Alliance and Leicester account added to a similar other account would be, the same as if all my savings were in one account?

Yes, Reporter, the Derbyshire Regular Savings account was the one I was going to go for, as I have a lump sum to invest, it would be better to drip feed to the Derbyshire account rather than the Halifax Regular savings account at 7% which only lets you put in a maximum of £250 a month.

Loobs40, I do have a partner but (un)fortunately she already has an ISA account which she is filling up for herself.

I guess the reason that I'm so far behind in structuring my savings is that I'm a little late on the uptake with regard to internet banking and how much flexibility it brings. I was still stuck in the 'account for life' mindset. Oh well, beter late than never.

Pheno

m_thomp wrote:

As I said I'm not the best when dealing with interest rates, but I guess the cumulative interest of the Alliance and Leicester account added to a similar other account would be, the same as if all my savings were in one account?

Yep don't worry, you're not missing any hidden complexity - you don't gain any benefit from keeping everything in 1 place.

(Unless the account has different interest rates depending on how much is in there - most aren't like this though.)

I'm actually doing exactly the same as you at the moment. Putting 25k in an A+L and opening 4 derbyshire accounts between me and my girlfriend so we can put 4k per month into them.

m_thomp

Pheno wrote:

I'm actually doing exactly the same as you at the moment. Putting 25k in an A+L and opening 4 derbyshire accounts between me and my girlfriend so we can put 4k per month into them.

Cheers Pheno, I take it you can open more than one Derbyshire account in your own name then? If that's possible I may open another and dump an extra grand a month from my savings in there.

Kazza242

m_thomp wrote:

Cheers Pheno, I take it you can open more than one Derbyshire account in your own name then? If that's possible I may open another and dump an extra grand a month from my savings in there.

Yes, you can. The Derbyshire currently have a special offer on, whereby they will allow each person to open two regular savings (5.85%) accounts with them instead of one. This offer expires 31st July 2005. I would get in quick though, as they may bring the expiry date forward or withdraw the offer.

I have two of these accounts and I must say I've had no problems at all. You are allowed 1 penalty-free withdrawal (per account) during each account year (1st Aug - 31st July). Interest is paid 31st July.

Hobo_2

Hi All, just used above strategy,as wife is a non-taxpayer , A&L Online saver £25K & drip feed to Derbyshire 2 regular saver accounts hence £2K per mth, handy till next yrs ISA allowance comes around