To use regular savers or not

trickydicky14

Theleak250 said:

The way I do it is, yearly and then add to a bucket.

For example over the last year I have four regular savers on the go. They will mature next month, at which point all of the cash will go into a notice saver and then I will start again with another four regular savers. I “only” have 13k so I am going to put some of it into Barclays Rainey day and the rest into an account I find on mse. Whichever is paying the best rate then. A notice account. 

yes I could send the 13k already saved into further savers but I will run out of accounts I suspect and it gets a bit complicated. 

I find having regular savers you have to fill up also helps with motivation to save. If I miss a month it’s very annoying. But obviously sometimes life throws you something that costs unexpectedly! Another thing is to consider, if you are able to put the money away and not need it, it would be worth locking it away for five years at a good rate because who knows what will happen with the rates. But im
not in a position to do that myself personally.

Interest rates would have to be much more generous for me to sign up to a 5 year savings account, a lot can happen in a year let alone 5 years but that’s just my opinion. Just keep plugging away at the RS's.

friolento

topyam said:

 . Any current accounts I have are with providers that don't offer Regular Saver accounts. 

In this case, you should be looking at getting current accounts that give you access to these RSs.

Make use of the switch incentive offerings. For example, the First Direct one. You do not need to touch your main current account to do this. If you don’t already have a disposable current account, just set one (or two) up, then switch it. The Chase app is a good source for setting up multiple current accounts quickly. Lots of info on switching on the forum. Collect your switch bonus, use the RS. 

Bridlington1

friolento said:

topyam said:

 . Any current accounts I have are with providers that don't offer Regular Saver accounts. 

In this case, you should be looking at getting current accounts that give you access to these RSs.

Make use of the switch incentive offerings. For example, the First Direct one. You do not need to touch your main current account to do this. If you don’t already have a disposable current account, just set one (or two) up, then switch it. The Chase app is a good source for setting up multiple current accounts quickly. Lots of info on switching on the forum. Collect your switch bonus, use the RS. 

It's also worth checking the likes of TopCashback, Quidco etc before opening the current accounts to see if you can get a spot of cashback for opening the current accounts on top of the switching offers.

RexItaliae

This year for the first time I'll be earning more than the 40% income tax threshold, so I can only earn up to £500 tax-free interest.

My strategy is to have enough RS accounts making me reach the £500 interest threshold, and keep the rest of my savings in the best easy access cash ISA I can get. (I won't reach the 20k ISA limit this year for sure.) To do this I use a spreadsheet similar to the ones seen in this thread, which counts the monthly interest yielded by each account, and I add them all up across the tax year. Interestingly this year I had to stop paying into some of my RS before reaching month 12 because of the Nationwide Fair Share payment of £100 (which counts as savings) that made me reach the £500 target earlier than expected.

I know that now there are RS accounts whose net rate (for me being only 60% of their AER gross rate) is higher than the best easy access cash ISA, but I'm not sure what this implies in terms of what's best to do: should I open all the RS whose annual interest rate x 60% is higher than the best easy access cash ISA I can get, and then on top of those add as many RS I can open that would mature £500 in total within the current tax year (or whatever the value of "500 - Nationwide Fair Share" is)? I'm not sure, but I suspect the difference between this and my simpler strategy above would be a matter of a few pounds.  

friolento

RexItaliae said:

This year for the first time I'll be earning more than the 40% income tax threshold, so I can only earn up to £500 tax-free interest.

My strategy is to have enough RS accounts making me reach the £500 interest threshold, and keep the rest of my savings in the best easy access cash ISA I can get. (I won't reach the 20k ISA limit this year for sure.) To do this I use a spreadsheet similar to the ones seen in this thread, which counts the monthly interest yielded by each account, and I add them all up across the tax year. Interestingly this year I had to stop paying into some of my RS before reaching month 12 because of the Nationwide Fair Share payment of £100 (which counts as savings) that made me reach the £500 target earlier than expected.

I know that now there are RS accounts whose net rate (for me being only 60% of their AER gross rate) is higher than the best easy access cash ISA, but I'm not sure what this implies in terms of what's best to do: should I open all the RS whose annual interest rate x 60% is higher than the best easy access cash ISA I can get, and then on top of those add as many RS I can open that would mature £500 in total within the current tax year (or whatever the value of "500 - Nationwide Fair Share" is)? I'm not sure, but I suspect the difference between this and my simpler strategy above would be a matter of a few pounds.  

Assuming you expect to remain a HR tax payer, my strategy would be to maximise my ISA contributions to as near as £20k as possible. Whilst this might lead to a little lower interest in the short term, in the medium and longer term ISAs should be to your advantage. If you choose a flexible ISA, if your RS(s) allows penality-free withdrawals or closure, and if you don't mind the extra admin, you can get the best of both worlds.

clairec666

Simple calculations here, can't guarantee it's the optimum strategy...

A regular saver offering 7% interest is "equivalent" after tax at 40% to an ISA with 4.2% interest. 6.5% is equivalent to 3.9%, and so on.

Maxing out three of the highest regular savers for a year will probably bring in £350+ in interest, which with the £100 Nationwide bonus brings you close to your £500 limit. So any extra regular savers you open (which will likely be 6.5% downwards) are going to be taxed on most of their interest. If you're getting more than 3.9% in the ISA, put the money in that instead.

Added complication though - if you open a regular saver now, the interest won't count towards the 2025-6 tax year, so your £500 limit will only be used up by accounts which mature before April 2026. (Exceptions to this are Zopa, Natwest and RBS regular savers which pay interest monthly.) Not quite sure how this changes things for you.

Bridlington1

clairec666 said:

Simple calculations here, can't guarantee it's the optimum strategy...

A regular saver offering 7% interest is "equivalent" after tax at 40% to an ISA with 4.2% interest. 6.5% is equivalent to 3.9%, and so on.

Maxing out three of the highest regular savers for a year will probably bring in £350+ in interest, which with the £100 Nationwide bonus brings you close to your £500 limit. So any extra regular savers you open (which will likely be 6.5% downwards) are going to be taxed on most of their interest. If you're getting more than 3.9% in the ISA, put the money in that instead.

Added complication though - if you open a regular saver now, the interest won't count towards the 2025-6 tax year, so your £500 limit will only be used up by accounts which mature before April 2026. (Exceptions to this are Zopa, Natwest and RBS regular savers which pay interest monthly.) Not quite sure how this changes things for you.

Other exceptions would be if you close the account early or accounts that pay interest on a set date (e.g. SRBS).

clairec666

Bridlington1 said:

clairec666 said:

Simple calculations here, can't guarantee it's the optimum strategy...

A regular saver offering 7% interest is "equivalent" after tax at 40% to an ISA with 4.2% interest. 6.5% is equivalent to 3.9%, and so on.

Maxing out three of the highest regular savers for a year will probably bring in £350+ in interest, which with the £100 Nationwide bonus brings you close to your £500 limit. So any extra regular savers you open (which will likely be 6.5% downwards) are going to be taxed on most of their interest. If you're getting more than 3.9% in the ISA, put the money in that instead.

Added complication though - if you open a regular saver now, the interest won't count towards the 2025-6 tax year, so your £500 limit will only be used up by accounts which mature before April 2026. (Exceptions to this are Zopa, Natwest and RBS regular savers which pay interest monthly.) Not quite sure how this changes things for you.

Other exceptions would be if you close the account early or accounts that pay interest on a set date (e.g. SRBS).

Good point. In some cases, might be worth closing an account in March to "force" the interest into the current tax year. I probably should have used that to my advantage earlier this year, but didn't realise in time.

RexItaliae

clairec666 said:

Simple calculations here, can't guarantee it's the optimum strategy...

A regular saver offering 7% interest is "equivalent" after tax at 40% to an ISA with 4.2% interest. 6.5% is equivalent to 3.9%, and so on.

Maxing out three of the highest regular savers for a year will probably bring in £350+ in interest, which with the £100 Nationwide bonus brings you close to your £500 limit. So any extra regular savers you open (which will likely be 6.5% downwards) are going to be taxed on most of their interest. If you're getting more than 3.9% in the ISA, put the money in that instead.

I agree on 7% gross RS = 4.2% ISA. However, consider the following scenario:

Suppose I have 5 regular savers: 3 of them on 7%, and 4 of them at 6.5%, and my ISA gives me a 4% interest. Suppose I earn £500 gross in total from the top 3, and another £500 from the bottom 4. You suggested to keep the top three RS, and in fact ditch the bottom four because once taxed they give me less than I'd get if I had put the money in the ISA.

However, another way I can look at the situation is: I can "pretend" that the interest matured on the top three RS at 7% is taxed which means I get a net 4.2% interest out of them, whereas the interest matured by the bottom five accounts is within my £500 threshold and therefore not taxed. Now I feel like I would miss out if I had the money maturing £500 interest at 6.5% in a cash ISA which yields only 4%. Would this way of "looking at the situation" be mathematically correct?

I guess what I mean to ask is: in a situation when one goes beyond the tax-free threshold, should one consider the interest matured by the highest-paying accounts to be "beyond the threshold", or should one consider the interest matured by the lowest-paying accounts to be beyond the threshold?

masonic

RexItaliae said:

I guess what I mean to ask is: in a situation when one goes beyond the tax-free threshold, should one consider the interest matured by the highest-paying accounts to be "beyond the threshold", or should one consider the interest matured by the lowest-paying accounts to be beyond the threshold?

You should consider the accounts being taxed to be those you'd drop if you didn't have the capital. You wouldn't remove money from the highest paying accounts if there were lower paying accounts you could sacrifice.