Best options for shorter term savings?

SPRichards

Thanks all. 

I've just opened a LISA, luckily I'll be able to get the full 1k bonus this tax year. Glad I'm going to essentially be able to get 3 years worth of the bonus and still be in a position to use them in essentially two years. So really thankful for that suggestion! 

I'm with Lloyds, I'm going to apply for club Lloyds to get a savings account (£400/Month at 5.25) and then just maximise the deposits.

And I will open one other account, YBS or Barclays. And leave it at that for savings accounts as to not overcomplicate things. 

And thanks for the pensions advice. I really need to look into this further before I know where I really stand with it all. But will definitely look to maximise my contributions as a priority (vs trying to shuffle things around immediately). 

In the meantime I'm going to continue to read through the forum and try to really get my head around all this stuff. Thanks to everyone for the replies, its been really helpful. 

Daliah

The YBS 5% account is only available if you held an account with them for more than a year. So now might be a good time to open a normal savings account with them, in order to benefit from any future loyalty savers they might be offering. Minimum deposit, just a fiver or a tenner.

There are other nice Regular Savers at Halifax, BOS and Lloyds. £250/mth each @4.5%. Various others exist / come onstream all the time - see https://forums.moneysavingexpert.com/discussion/6106986/regular-savings-accounts-the-best-currently-available-list/p1

If you are indeed saving £24k a year, you might want to look at other ISAs alongside your LISA, as it's possible you'll bust your £1,000 Personal Savings Allowance in year 2.  You didn't say whether you are a BR or HR tax payer but for HR tax payers ISAs are now more attractive again, and even BR tax payers might benefit from ISAs now. Depending on how it works for you, perhaps leave the ISA deposits until mid-late March but consider using at least some of your ISA allowance whilst you can.

SPRichards

Daliah said:

The YBS 5% account is only available if you held an account with them for more than a year. So now might be a good time to open a normal savings account with them, in order to benefit from any future loyalty savers they might be offering. Minimum deposit, just a fiver or a tenner.

There are other nice Regular Savers at Halifax, BOS and Lloyds. £250/mth each @4.5%. Various others exist / come onstream all the time - see https://forums.moneysavingexpert.com/discussion/6106986/regular-savings-accounts-the-best-currently-available-list/p1

If you are indeed saving £24k a year, you might want to look at other ISAs alongside your LISA, as it's possible you'll bust your £1,000 Personal Savings Allowance in year 2.  You didn't say whether you are a BR or HR tax payer but for HR tax payers ISAs are now more attractive again, and even BR tax payers might benefit from ISAs now. Depending on how it works for you, perhaps leave the ISA deposits until mid-late March but consider using at least some of your ISA allowance whilst you can.

Thanks for the info! And yeah, if that's the case I'll see about opening an account with YBS. I've got club lloyds as of a few mins ago so will look at their savings accounts too. 

I am a HR tax payer, so I believe my allowance is only £500 tax free vs the £1000. Would a regular cash ISA be the way forward? If I'm contributing a smaller amount maybe a little risk with an investment ISA could be good? I'm thinking there's a chance I may not need to dip into that if it only forms a smaller part of what will become my eventual deposit. I have zero experience with investing, so would be robo-investing which incurs fees; which makes it hard for me to know if it'll pay off. 

Again maybe Im overthinking it. Once I'm a year in, I can always look to transfer what I've got into a 1 year fixed ISA? 

Daliah

That's right, your PSA is only £500 as an HR tax payer, so using an ISA for the £16,000 remaining after your LISA contribution appears to be the right thing to do - though may be, as I said before, not before mid-late March next year, when you could dump your Regular Saver savings into an ISA.

I wouldn't touch investments with any money I might want to use in the next 5-7 years, and rather stick with cash ISAs. Your risk appetite might be higher than mine but it would give me the creeps if I had to sell on a market dip.

Best easy access ISA is currently 2.25%. You'd need >3.75% in a non-ISA account to beat this rate. Not available outside Regular Savers at this stage, and you'd still run the risk of busting your PSA.

Best 1 year fix ISA 3.90%. That would need > 6.5% in a non-ISA 1 years fix - way above what is currently available

Keep watching the ISA rates https://moneyfacts.co.uk/isa/. I reckon that rates will go up another notch or two in the next few months

Albermarle

I am a HR tax payer, so I believe my allowance is only £500 tax free vs the £1000. Would a regular cash ISA be the way forward? If I'm contributing a smaller amount maybe a little risk with an investment ISA could be good? I'm thinking there's a chance I may not need to dip into that if it only forms a smaller part of what will become my eventual deposit. I have zero experience with investing, so would be robo-investing which incurs fees; which makes it hard for me to know if it'll pay off. 

As a HR taxpayer, probably keeping some of the savings accounts within an ISA makes sense. Although the interest rates tend to be lower, you will pay 40% tax on any interest earned outside an ISA above £500.

Also being a HR taxpayer makes contributing more to a pension even more attractive due to higher rate tax relief, which is very generous.

In the meantime I'm going to continue to read through the forum and try to really get my head around all this stuff. 

There is also a Pensions forum, and you will see a lot of the same posters on both as savings, investments and pensions  are all interlinked.

Eco_Miser

jimjames said:

Depending on your bank, Lloyds regular saver takes £400 at 5.25%, YBS pays 5%. You can run multiple bank regular savers, just not more than 1 per bank.

Except Lloyds, which has both a Club Lloyds Monthly Saver and a normal Monthly Saver, and you can have both.

SPRichards

Daliah said:

That's right, your PSA is only £500 as an HR tax payer, so using an ISA for the £16,000 remaining after your LISA contribution appears to be the right thing to do - though may be, as I said before, not before mid-late March next year, when you could dump your Regular Saver savings into an ISA.

I wouldn't touch investments with any money I might want to use in the next 5-7 years, and rather stick with cash ISAs. Your risk appetite might be higher than mine but it would give me the creeps if I had to sell on a market dip.

Best easy access ISA is currently 2.25%. You'd need >3.75% in a non-ISA account to beat this rate. Not available outside Regular Savers at this stage, and you'd still run the risk of busting your PSA.

Best 1 year fix ISA 3.90%. That would need > 6.5% in a non-ISA 1 years fix - way above what is currently available

Keep watching the ISA rates. I reckon that rates will go up another notch or two in the next few months

Ok great, thanks for the details! I will look to get my remaining savings each month into a cash ISA. I can always move it to another one if something with a better rate comes along. I've gone ahead and setup two savings accounts with Lloyds (club monthly, and monthly) as a start for all this. They have really good rates and are instantly accessible to me.

Albermarle said:

As a HR taxpayer, probably keeping some of the savings accounts within an ISA makes sense. Although the interest rates tend to be lower, you will pay 40% tax on any interest earned outside an ISA above £500. Also being a HR taxpayer makes contributing more to a pension even more attractive due to higher rate tax relief, which is very generous. In the meantime I'm going to continue to read through the forum and try to really get my head around all this stuff. There is also a Pensions forum, and you will see a lot of the same posters on both as savings, investments and pensions are all interlinked.

Yeah, good points. An ISA for the bulk of my remaining savings will be the way forward for sure it seems. And thanks for the pension forum link, I will definitely look through that and seeing what I can take advantage of.

Eco_Miser said:

Except Lloyds, which has both a Club Lloyds Monthly Saver and a normal Monthly Saver, and you can have both.

Thanks for this tip! I now have both. Really happy about that. And thanks again all, really appreciate the help/info I've recieved!

Bridlington1

When it comes to LISAs, you will be best off opening a LISA with £1 in it now, then making further lump sum deposits later. This is because you only get the 25% LISA bonus on contributions, not the interest earned. Moreover you can put put £4k in per tax year.

Assuming you will pay tax on your savings interest, the following figures may be of use. By "beat" I mean the account will leave you with more interest even after 40% tax is taken off than the ISA:

At the moment the top paying LISA is at 2%, so any easy access account paying over 3 1/3% will beat the LISA.

The top paying easy access ISA pays 2.25%, so any account paying over 3.75% interest will beat the cash ISA

So I would prioritise any non ISA easy access accounts and regular savers that pay more than 3.75% at the moment. Then if you have any money left over, fill any easy access accounts paying between 3 1/3% and 3.75%. Then any leftover money, put in a LISA now. Keep adjusting these figures as and when rates increase and if by 1st of April you have not paid £4k into the LISA, top it up to £4k. Repeat each tax year.

As an aside if you aren't planning on buying for another couple of years you are also in a position to not worry about hard searches, so you could go after the switching incentives for the next year or so. This would enable you to get some of the higher paying regular savers that require current accounts to open, i.e. Natwest/RBS.

SPRichards

Bridlington1 said:

When it comes to LISAs, you will be best off opening a LISA with £1 in it now, then making further lump sum deposits later. This is because you only get the 25% LISA bonus on contributions, not the interest earned. Moreover you can put put £4k in per tax year.

Assuming you will pay tax on your savings interest, the following figures may be of use. By "beat" I mean the account will leave you with more interest even after 40% tax is taken off than the ISA:

At the moment the top paying LISA is at 2%, so any easy access account paying over 3 1/3% will beat the LISA.

The top paying easy access ISA pays 2.25%, so any account paying over 3.75% interest will beat the cash ISA

So I would prioritise any non ISA easy access accounts and regular savers that pay more than 3.75% at the moment. Then if you have any money left over, fill any easy access accounts paying between 3 1/3% and 3.75%. Then any leftover money, put in a LISA now. Keep adjusting these figures as and when rates increase and if by 1st of April you have not paid £4k into the LISA, top it up to £4k. Repeat each tax year.

As an aside if you aren't planning on buying for another couple of years you are also in a position to not worry about hard searches, so you could go after the switching incentives for the next year or so. This would enable you to get some of the higher paying regular savers that require current accounts to open, i.e. Natwest/RBS.

Thanks for the detailed breakdown. I'm going to attempt to spread my savings into multiple regular savers, so far I have two accounts monthly savers with Lloyds (club, regular) and have signed up for a Barclays current account and an RBS current account and will setup their own regular saver accounts. I also setup a monzo account in the hopes of using that to start getting switching offers. Anything left over will be held in an easy access saver or a cash ISA depending on what I have access to in the moment and of course ensuring I pay into the LISA where needed to hit the 4k before tax year end. At least for this first year until I have enough of a lump sum to do something more meaningful with. 

I will also be making boosted contributions to my pension once that's all sorted out.

Thanks again for the advice! 

Bridlington1

SPRichards said:

Bridlington1 said:

When it comes to LISAs, you will be best off opening a LISA with £1 in it now, then making further lump sum deposits later. This is because you only get the 25% LISA bonus on contributions, not the interest earned. Moreover you can put put £4k in per tax year.

Assuming you will pay tax on your savings interest, the following figures may be of use. By "beat" I mean the account will leave you with more interest even after 40% tax is taken off than the ISA:

At the moment the top paying LISA is at 2%, so any easy access account paying over 3 1/3% will beat the LISA.

The top paying easy access ISA pays 2.25%, so any account paying over 3.75% interest will beat the cash ISA

So I would prioritise any non ISA easy access accounts and regular savers that pay more than 3.75% at the moment. Then if you have any money left over, fill any easy access accounts paying between 3 1/3% and 3.75%. Then any leftover money, put in a LISA now. Keep adjusting these figures as and when rates increase and if by 1st of April you have not paid £4k into the LISA, top it up to £4k. Repeat each tax year.

As an aside if you aren't planning on buying for another couple of years you are also in a position to not worry about hard searches, so you could go after the switching incentives for the next year or so. This would enable you to get some of the higher paying regular savers that require current accounts to open, i.e. Natwest/RBS.

Thanks for the detailed breakdown. I'm going to attempt to spread my savings into multiple regular savers, so far I have two accounts monthly savers with Lloyds (club, regular) and have signed up for a Barclays current account and an RBS current account and will setup their own regular saver accounts. I also setup a monzo account in the hopes of using that to start getting switching offers. Anything left over will be held in an easy access saver or a cash ISA depending on what I have access to in the moment and of course ensuring I pay into the LISA where needed to hit the 4k before tax year end. At least for this first year until I have enough of a lump sum to do something more meaningful with. 

I will also be making boosted contributions to my pension once that's all sorted out.

Thanks again for the advice! 

If you are going to go after the switching incentives, a lot of switching offers require you to have x (usually 2) direct debits. I would recommend having a look at this thread for direct debit ideas. Nationwide would be a good one to start with as you get 5% in credit interest on their current account (max £1.5k) for the first year, as well as the £200 for switching to them.

You could also have a go at the reward accounts whilst you're at it i.e Halifax reward (£5/mth for each account, 3 max), Natwest/RBS reward (£3/th after fee) etc. I'm currently getting over £300/year from the reward accounts for essentially moving my money around in circles.