Savings account vs ISA?

elsmandino

Hi there.

I am separating from my partner and am looking to buy my own property by the end of the year.

I have £160,000.00 in savings (sitting in a current account) and am wondering what to do with it, until I need it to buy a mortgage - probably towards the end of the year or beginning of next.

Should I open two saving accounts and put half in each (to get FSCS £85,000.00 protection) or should I consider an ISA.

Apologies for the basic question - I really need to up my game in financial planning.

wiseonesomeofthetime

Certainly consider an ISA for £20k NOW and £20k after 6 April 2025.

Then I would separate the remainder, yes.

Neil49

You can only put £20k into an isa for each tax year.

A quick and easy option is to transfer the funds into an NS&I Direct Saver account and get 3.3% (gross).       This is fully protected by the Government so the £85k protection limits don't apply.

Once you have time to consider your options better you can transfer the funds back out again without any restrictions. 

Albermarle

To be clear, a cash ISA is a savings account.

It is just one with some tax protections, but also limited in how much you can add each year.

Have a good read through this .

Savings - All Guides - MoneySavingExpert

Cisco001

Cash ISA by by end of march to utilise 24/25 allowance.

Then open another one to after 06 April ulitlise 25-26 allowance. Remember to choose flexible ISA.

The rest spread it through 2 savings bank account.

Check this up
https://moneyfactscompare.co.uk/savings-accounts/

Beeblebr0x

Perhaps take out a maximum holding in Premium Bonds after you've put 20k into a cash ISA?

elsmandino

Thanks everyone - I have been reading all I can, following your provided links, and am getting a bit more financially savvy, now.

I realise, now, the need to immediately set up an ISA so I can deposit £20,000.00 both before and after the 6/4/25.

I naively thought that there was one Cash ISA option but there are loads.

According to this, 

Best cash ISAs: up to 5.02% easy access, up to 4.48% fixed - MSE

Trading 212 - is the best current option (and is FSCS protected).

Should I immediately set up and account and make a deposit or are there any other factors to consider, first?

elsmandino

Right - I previously set up the ISA and will have to put in another £20,000.00 on April 6th.

I therefore still need to set up two easy access savings accounts to hold the remaining £140,000.00.

Looking at the MSE guide, the best savings accounts (at the moment) are Chip and GB Bank.

I will set these up, shortly, but I have noticed that Chip only has a decent interest rate for three months:

Best savings accounts: 5.25% easy access or 4.65% fixed rates

Martin says to diarise for a better rate on the Chip account.  What does this mean, in practice?  Does this mean that I reopen yet another savings account and move everything accross to that one?

friolento

elsmandino said:

 

Martin says to diarise for a better rate on the Chip account.  What does this mean, in practice?  Does this mean that I reopen yet another savings account and move everything accross to that one?

yes. you constantly need to keep an eye on easy access interest rates as they can, and very likely will, reduce. Whether it will be worth moving your money depends on what the moves are, and what will be available in the market at the time.

Bigwheels1111

A lot depends on if you will pay 20% or 40% tax, how much work you want to put in.
Spread it around so you don’t need to worry about FSCS protection.
85K is safe, great stick 85k in an account, the bank goes bust and you get 85k back, no interest as is over the 85k.
If you want to work a bit, Get a new isa with Trading212, then another in April. With whoever has the best rate at the time.
Now easy access savings, Chip and Atom for the rest.
Lets start to work the cash, Regular savers, I have 17, £4025 a month at rates between 5.50% and 10.4%.
Some are bank specific, some need you to open a basic savings account and add £1, then you can get a regular savers. Due to geographical location.
I think that’s how West Brom worked.

https://moneyfactscompare.co.uk/savings-accounts/regular-savings-accounts/?quick-links-first=false&product-favorites-first=false&sort-order=AER&sort-order-text=Rate

If you get a Raisin refer a friend referral it’s £50 bonus for £5000 saved for 6 months.
£5000 at 4.5% = £111 interest, plus £50 referral.

trickydicky14

Be careful not to make this too complicated, you say you have experienced a separation and will be looking for a new home so keep it simple.

You can always squeeze a few extra pounds in interest by opening regular savers and moving cash around from one account to another but it will involve a bit of work on your part.

I think you are on the right track, use your ISA allowance and open say two savings accounts. If you can get a better rate for locking your money away for say six months then do that but I would keep it simple for now.