ISA v normal Savings + fixed v variable

Spint Forumite Posts: 38
Third Anniversary 10 Posts

Hi, My brother who has learning difficulties (I think he would've been diagnosed with a form of autism back in the 70s if it had been well known then) has always committed the cardinal sin of sticking to the bank (HSBC) that receives his wages. He has an ISA with them along with a flexible saver. The latter has nothing in it and just over £6000 for the ISA. He also has £15000 in his current account which has slowly built up over the years as he's just left it there and never moved it to his ISA.

It would seem the best ISA pays around 5.9% while a savings is about 7%. Am I right to assume that it would work roughly the same between them when you take into that you have to pay tax on the normal savings accounts?

I'm also wondering if it's prudent to find a variable one although the interest rates seem to have stabilised now.

Can anyone recommend which type and rate he should go for? He won't need access to the funds and can save a bit each month. I'm thinking that if there really isn't a lot of difference then he might as well go for one that is flexible, just in case.

I'm finding it a bit of a minefield so if anyone can recommend an option then I'd be extremely grateful.


  • Newbie_John
    Newbie_John Forumite Posts: 180
    100 Posts Name Dropper
    If he's on 20% tax then £21k in ISA at best 5.7% ISA will generate £1140 interests (max £20k), assuming £1k at 6% elsewhere - together £1200. At saving account 6.7% it will make £1281 interests, with about £56 tax to pay - so total £1225 saved. Very similar numbers really.

    You could always split between - £14900 at 6.7% generates £998.30 interest so within limit and the rest at ISA?
  • Albermarle
    Albermarle Forumite Posts: 18,760
    10,000 Posts Fifth Anniversary Name Dropper
    Firstly you need to work out if he is actually likely to pay any tax on interest.
    If he is a basic rate taxpayer he can earn up to £1000 interest tax free.
    If he earns less than £17750, he can earn more interest tax free.
    Tax-free savings: check if you're eligible - Money Saving Expert

    Otherwise whether it is an ISA or a normal savings account you have to choose between ;
    Easy access and a variable interest rate.
    Restricted access with a slightly better rate
    Fixed term /no access for the length of the term with better rates.
    The latter do not normally allow any more deposits after the initial one, so no good for regular months savers.
    There are specific regular saver accounts, that have good interest rates but limit how much you can add each month.

    For sure HSBC will not have the best rates, but still better than sitting in a current account , if he does not want to open accounts with new savings providers.

    Best savings accounts: 4.52% easy access or 6.15% fixed rates (
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