ISA or Fixed Savings?

Bella79

Hi all 

We are currently saving £300pm (each) into a first direct saver at 7% Which is the max you can put in, we are 5 months into this.

But we still have roughly £45k sat in the our santander reg current account, Because savings rates have bee so low, I just left it in there, but now I am thinking its time to shift it out. 

This is ALL our savings, there is nothing else.

I have been reading on here about savings accounts/Personal allowance? etc and I am now a little confused. 

Should we just open x2 of the Natwest ISAS at 5.9% fixed for 2 year? and put £20k in each? that would then leave us £5k in our current account for easy access/emergency fund etc.

Or is there a better way to handle it?

We are in  low paid jobs, so prob won't be able to save huge amounts again (what we have was from a unexpected windfall) and the £600pm in the first direct will only be for the next 7 months, we will not be able to continue with that after this initial 12 month period. 

Advice greatly appreciated. 

Doctor_Who

Do you need to use ISAs? You say you are in low paid jobs, if each of your incomes is below £17570 then you will have some of the starter savings rate (upto £5000 interest taxed @ 0%) available as well as the £1000 PSA. The reason I ask this is because non-ISA savings accounts typically pay higher rates than ISAs and any interest earned in non-ISA accounts may be completely covered by your starter savings rates (if applicable) and your £1000 PSAs.

See here for more details:

https://www.moneysavingexpert.com/savings/tax-free-savings/

fabsaver

Given that you state this is all your savings I would suggest that the ISA account is the better option.

In the event that one of you were to lose your job and needed to live off that money you may need access. I doubt a £5k emergency fund would be sufficient in such circumstances.

This is because ISA accounts have to allow access (usually subject to an interest penalty). Non ISA fixed term accounts do not as a rule allow access until term except in the most extreme of circumstances.

The remaining £5k does not have to remain in your current account earning little or no interest. There are plenty of easy access accounts paying around 4.5% currently.