HSBC savings

PaulDesmond

Never got involved in savings but at 60 with some spare cash I decided to look into this.  I am with HSBC. I noticed 2 in particular. Regular savings account 5% and Loyalty cash ISA. The ISA is tax free @ 2.81% I assume the figure above 2.85% means the difference is taxable. But if the Regular savings account @ 5% is taxable that means I get 4% after tax which is more than the 2.81% ISA. I am a pensioner. Can someone shed some light on this please.

Regular savings account states I can put in up to £250 per month which I can do. I assume that means it would be 4 months to put £1,000 in where an ISA I could put a lump sum in, but the interest doesn’t seem that great. I am only looking at thousands not tens or hundreds of thousands.

jimjames

It's really not worth using an ISA at 2.81% when you can get over 5% for an ISA elsewhere unless you really only want to use HSBC. You don't need to worry about tax unless you're getting over £1000 of interest. Regular savers are good for small regular amounts but not for paying a lump sum

PaulDesmond

Not sure what you mean about interest over £1,000. I have a state and private pension and some of this is taxable.I would have asumed any interest even on a Regular saveing acount would be chareged interest on the full amount. Is that not the case?

And with the Regular saveing it states "Save between £25 and £250 every month". Does that mean I have to put in at least £25 every month as a minimum and no more than £250 a month? This seems more ideal to me at my age.

I would be starting off with a blank sheet and make a first payment of up to £250.

ColdIron

PaulDesmond said:

Not sure what you mean about interest over £1,000. I have a state and private pension and some of this is taxable.I would have asumed any interest even on a Regular saveing acount would be chareged interest on the full amount. Is that not the case?

You have a £1,000 Personal Savings Allowance. If your pensions come to less than £17,570 then you have the Starting Rate for Savings available to you before the PSA. If you have no savings to speak of there is a decent chance that you will pay no tax on the interest at all

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

And with the Regular saveing it states "Save between £25 and £250 every month". Does that mean I have to put in at least £25 every month as a minimum and no more than £250 a month? This seems more ideal to me at my age.

Yes that's right

BTW If you will pay no tax on your interest there isn't much point in using an ISA. 2.81% is a dreadful rate, you would be better off with a taxable account at 5.20%

PaulDesmond

Thanks you have been very helpful.

If your pensions come to less than £17,570 then you have the Starting Rate for Savings available to you before the PSA. My combined pensions come to £14,232 after tax. Does that mean that I can get up to £17,570 plus the £1,000? 
or
(£17,570 - £14,232 = £3,338) up to £4,338 on the savings.

ColdIron

You need to do the calculation before tax but you are on the right track

A quick stab:

£14,232 - £12,570 = £1,662 taxed = £2,077.50 untaxed

£12,570 + £2,077.5 = £14,647.50 (gross pension) so Starting Rate for Savings available = £2,922.50

£2,922.50 + £1,000 = £3,922.50 interest before paying tax

elkiedee

I still have a little money left in an HSBC ISA - the only reason I haven't moved it elsewhere is because it's instant access and it's money I anticipate wanting to spend over the next few months - I spent some a few years ago and have transferred about two thirds to a limited access ISA at the Coventry Building Society, currently on 4.46% (paid monthly, 4.55% paid annually) though that rate's no longer available and I expect it to drop soon (I opened my account at the end of February/March. .

I would suggest looking at savings accounts available from other banks/building societies and moving your existing savings - as explained you can earn up to £1,000 interest tax free, and as you say even when you pay tax you can get more on a lot of accounts.

Regular savers are great if you're able to put away a little bit from your pension or other income every month, but if you have between £1,000 and £10,000 (or slightly more) in that 2.81% ISA, you need an account which you can move all that money into now.

PaulDesmond

Okay thanks. 

I watch Martin Lewis on TV talking about all the savings plans and the plethora of ISAa leaving me more confused at the end. 

If I go past the max alowance, do I pay tax as it is put in or is it calculated when I withdraw? 

Albermarle

PaulDesmond said:

Thanks you have been very helpful.

If your pensions come to less than £17,570 then you have the Starting Rate for Savings available to you before the PSA. My combined pensions come to £14,232 after tax. Does that mean that I can get up to £17,570 plus the £1,000? 
or
(£17,570 - £14,232 = £3,338) up to £4,338 on the savings.

The latter one ( in bold) is correct.
Remember though that the allowances are currently frozen for at least another 3 or 4  years, whilst your pensions will increase. So that tax free interest figure will reduce each year.

As said above the problem you have is that you are looking at the savings accounts of a big bank, which are typically uncompetitive. Smaller banks and building societies have better rates, although many can only be operated online ( but not all) .
Here is a comparison tool. Please note that every savings provider mentioned is covered by the compensation scheme of up to £85K, regardless of whether you have heard of them or not.

Compare The Best Savings Accounts UK | Rates Up To 10.38% (moneyfactscompare.co.uk)

jameseonline

I wouldn't tie yourself to a 5% HSBC Regular saver when you can get more than 5% with others and most you can take money out/close without penalty.

HSBC & First Direct give penalty for closing the account early.

https://www.moneysavingexpert.com/savings/best-regular-savings-accounts/

https://www.moneysavingexpert.com/savings/savings-accounts-best-interest/

You could get a Cahoot Sunny Day, max that at £3000, get a Santander Edge Saver, max that at £4000, both of those pay monthly & are easy access.

PaulDesmond

Hi I have gone to your link and found Virgin money. I have heard ML talk about them before. Just a few questions about one of them.

https://moneyfactscompare.co.uk/savings-accounts/regular-savings-accounts/

Virgin money Regular Saver. Questions? 

1)        [Rates] there are 2 two one says 10.00% the other 10.38% and both say paid at £1. What does this mean?

2)      I can’t have more than £3,000 in this. Is there a reason for this limit and could I open other savings accounts.

3)       Term 31.07.25. I take it, this the min time it has to be in the account but I will be paying monthly payments into this.

4)      New and existing Virgin Money current account customers from 4/12/19. I don’t have an account.

5)       Missed Payment Penalty. Unused subscriptions from previous months can be made up in subsequent months.