Best options for shorter term savings?

SPRichards

Bridlington1 said:

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.

That would be an excellent place for me to start thanks for the tip. I've read through their terms and I have a few DDs I could switch over, no shortage of them. But it says "active" direct debit. Does this mean it will have had to have taken at least once in the account? Or will simple setting one up be enough? Thanks again for the info! 

Albermarle

and of course ensuring I pay into the LISA where needed to hit the 4k before tax year end

Do not leave it to the last minute. The end of the tax year is a busy time and some providers set  a deadline before April 5th, for adding/withdrawing money, or making any changes. Also is something goes wrong online, you will struggle to get through to them. Mid March at the latest .

Bridlington1

SPRichards said:

Bridlington1 said:

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.

That would be an excellent place for me to start thanks for the tip. I've read through their terms and I have a few DDs I could switch over, no shortage of them. But it says "active" direct debit. Does this mean it will have had to have taken at least once in the account? Or will simple setting one up be enough? Thanks again for the info! 

As long as the direct debit is showing under the direct debits section of your current account it is considered "active". I would be tempted to use mainly savings accounts and credit cards as direct debits for switching offers though, purely because you get cashback on bills with Santander's 123 lite account if you pay them by direct debit. 

SPRichards

Albermarle said:

and of course ensuring I pay into the LISA where needed to hit the 4k before tax year end

Do not leave it to the last minute. The end of the tax year is a busy time and some providers set  a deadline before April 5th, for adding/withdrawing money, or making any changes. Also is something goes wrong online, you will struggle to get through to them. Mid March at the latest .

Good advice, will not leave it any later than mid-march. 

Bridlington1 said:

As long as the direct debit is showing under the direct debits section of your current account it is considered "active". I would be tempted to use mainly savings accounts and credit cards as direct debits for switching offers though, purely because you get cashback on bills with Santander's 123 lite account if you pay them by direct debit. 

Ok great! Hooked up two (plum and a CC) just gotta wait for them to show up then I'll make the switch! 

I've had one bank for most of my life now I'm juggling 4, many more and I'm not sure how you keep track!
Speaking of new banks tho, I have a Barclays account now, want to setup the blue rewards rainy day saver, but does anyone know if you need to meet the account requirements for blue rewards before you can switch the blue rewards on? (800/ deposit)?

Thanks again all! 

SPRichards

Glad I got everything setup, just got an email about my Lifetime ISA with Moneybox, interest has just gone up to 3.25% which is nice!

SPRichards

Bridlington1 said:

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

Curious what rate my savings accounts need to able to beat 3.25% tax free. lowest is 4.5% which I believe still beats the LISA here, but I pretty much have all the accounts that have 4.5% and above, if I need more room to spread funds out I might have to dip down to 4% or slightly lower.

eskbanker

SPRichards said:

Bridlington1 said:

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

Curious what rate my savings accounts need to able to beat 3.25% tax free. lowest is 4.5% which I believe still beats the LISA here, but I pretty much have all the accounts that have 4.5% and above, if I need more room to spread funds out I might have to dip down to 4% or slightly lower.

It would need to be over 5.4% to beat 3.25% after allowing for 40% tax deduction on the whole amount....

SPRichards

eskbanker said:

SPRichards said:

Bridlington1 said:

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

Curious what rate my savings accounts need to able to beat 3.25% tax free. lowest is 4.5% which I believe still beats the LISA here, but I pretty much have all the accounts that have 4.5% and above, if I need more room to spread funds out I might have to dip down to 4% or slightly lower.

It would need to be over 5.4% to beat 3.25% after allowing for 40% tax deduction on the whole amount....

Thanks! Ok, well, nothing I have hits that, best is 5.25% with Lloyds. However I don't believe I will break through my allowance when my accounts payout the interest. Current estimate is about £480~ So should avoid paying the tax. For the first year at least. thinks it just going to be a case of prioritising the LISA instead of leaving that to early next year to top up. 

And when/if we get higher rates in the next couple months, 5.4% shouldn't be impossible to beat. 

Man, personal finance is hard, really glad I found this place.

amcc1

If you run out of tax-free options - NS&I Premium Bonds are an easy and fun alternative. A bit less popular now that savings interest rates have livened up. But surely less hassle than alot of switching etc. With amounts of £10K or higher you should get fairly regular winnings.