Best way to save money over 10 months?

ruminderchadha

I want to save £500 a month till January 2009 at which point I will need to withdraw the entire amount, including all interest earned.

What would be the best way for me to save this £500 each month so in January 09 I can:

a) earn the maximum interest (preferably tax free!)
b) withdraw the amount without losing interest/paying a hefty penalty.

At the moment, I am putting the money into my HBSC Flexi Saver account which gives me about 3% interest.


Thanks!

nicko33

If you are a higher rate taxpayer then the answer will probably be a combination of an ISA and a Regular Saver that allows at least 1 free withdrawal

If you are a basic rate taxpayer then the answer will probably be 2 Regular Savers that allow at least 1 free withdrawal

ruminderchadha

Thanks for that. I am a basic rate tax payer.

I am looking at some of the Regular Saver accounts but none of them seem to allow a withdrawal before 12 months without losing out on the interest.Would you be able to suggest any accounts which would give me a high rate of interest and allow me to withdraw the money at the end of 10 months, along with the interest earned till then?

nicko33

for the Regular Savers, check this thread
http://forums.moneysavingexpert.com/showthread.html?t=608697

the top rates like A&L 12% do not allow any penalty-free withdrawals, but many others do.

e.g. HSBC 8% you can't make withdrawals except to close the account, but that is penalty-free. As you are already with HSBC that may be the simplest. (see post #5 on first page of the above link)

ruminderchadha

Thanks for your reply.

HSBCs Regular Saver scheme does give me 8%, but if I withdraw the money before the end of 12 months, I'll only get the interest they give for the Flexible Saver account, which is about 2.3%.

The thing is, I want to be able to save at a higher rate, but be able to withdraw before 12 months and still get the interest at that rate. However, this doesn't seem to be possible!

nicko33

Another option, but harder to manage, would be to open an Alliance and Leicester Premier Direct current account. This requires £500/month funding, but pays 8.5% on balances up to £2500.

So fund it with your £500 every month, then after 5 months, start making payments out of the A&L into some other accounts.

This sort of fiddling about is only going to get you about an extra £10 (very rough guess) so may not be worth the hassle.

nicko33

ruminderchadha wrote: »

Thanks for your reply.

HSBCs Regular Saver scheme does give me 8%, but if I withdraw the money before the end of 12 months, I'll only get the interest they give for the Flexible Saver account, which is about 2.3%.

yes, that link looks to be inaccurate in this case


Maybe the West Brom Magic8 then. 7.6% and 2 free withdrawals per year.
You can put from £20-1000/month in, so after January just keep putting £20/month in.

If you can find a cash-ISA for more than 6.08% though, that would be better.

So, from the top cash isa article
http://www.moneysavingexpert.com/savings/best-cash-isa#best

Alliance & Leicester's Direct ISA pays a higher 6.25%, yet this rate includes an introductory bonus, so the rate will drop by 1% in May 2009. This is a good length of time, but only go for it if you're willing to switch to a higher paying accountat that point, which it will allow you to do without penalty.

This rate is on all balances from £1, and you can transfer in all previous years' ISAs (see Cash ISA Transfers article for more details). The account can be operated online or over the phone, and allows no-notice withdrawals.


edit:
so Alliance and Leicester Premier Direct current account. + Alliance and Leicester Direct ISA
all with the same provider to make it simpler

ruminderchadha

Thanks for your reply.

With the A&L Premier Direct Account, does the interest get put into the account on a monthly basis or annually? Because if I get the interest only in February 2009, and I will withdraw the money in January, the entire purpose (and interest!) would be lost.

nicko33

http://www.alliance-leicester.co.uk/currentaccounts/index.asp?page=prem-legals&currpage=premierdirect

We pay 8.19% gross (fixed) before deductions a year on credit balances of £1 up to £2,500 (8.50% AER fixed) until 30.04.09. After that rates will go back to the Bank of England base rate less 1%. We work out interest each day and add it to or take it from your account each month.

edit:
you will want to close the account when you withdraw everything anyway, because you will stop funding it with £500/month.
In which case, even if interest was only added annually, at close of account all the interest due should be added.

edit2:
I estimate this method,
from start of March to end of Dec would get you £152 interest after tax
from start of March to end of Jan would get you £182 interest after tax

ruminderchadha

Thanks for your reply.

The thing is, I wouldn't want to close the account. I'd want to withdraw the money I save from now till January 2009 (I am getting married then, so will need to withdraw the money).

I'd like to, however, keep the account alive as after January 2009 would want to open Regular Saver account which would give me 12%.

So if I was to withdraw it all in January 09, would I still get the interest accrued although I do not close the account?

nicko33

ruminderchadha wrote: »

I'd like to, however, keep the account alive as after January 2009 would want to open Regular Saver account which would give me 12%.

So if I was to withdraw it all in January 09, would I still get the interest accrued although I do not close the account?

Interest is paid monthly, so you can withdraw it without closing the account.


To then get the 12% Regular Saver you would need to close the Premier Direct current account, wait 3 months, then open a Premier Current Account

http://www.alliance-leicester.co.uk/currentaccounts/index.asp?page=prem-legals&currpage=premierdirect#pca
Premier Regular Saver with an interest rate of 12.00% gross p.a./AER is available to customers only at the time of opening a new Premier Current Account. To apply for a Premier Regular Saver account, applicants must not hold or have held any Alliance & Leicester current account in the 3 months preceding a new Premier Current Account application.