Northern Rock ISA - reinvest ??

Snow-Munki

Hi,

Coming up to next financial year should I invest in another £3600 into Northern Rock. Just checking and I would get 6% interest which seems pretty good for not too much bother. All I need to do is send them a cheque for that amount.

Otherwise I have to transfer to another bank etc etc... what would be best ?

bristolleedsfan

Snow-Munki wrote: »

Hi,

Coming up to next financial year should I invest in another £3600 into Northern Rock. Just checking and I would get 6% interest which seems pretty good for not too much bother. All I need to do is send them a cheque for that amount.

Otherwise I have to transfer to another bank etc etc... what would be best ?

You can put your 2008/09 ISA cash anywhere irrespective of where your previous years ISA funds are.

Snow-Munki

thanks but surely it's better putting it in one big pot as you then get interest on interest ?

Lavendyr

Makes an absolutely negligible amount of difference, compound interest is the same. I will dig out the post I made a few weeks ago on this to illustrate...

Lavendyr

Here you go...

Lots of little pots means you get no less interest than all in one big pot.

Year 1:
ISA 1: £3000 - at 6% you gain £180
Total interest = £180

Year 2:
ISA 1: £3180 - at 6% you gain £190.80
ISA 2: £3000 - at 6% you gain £180
Total interest = £370.80

Year 3:
ISA 1: £3370.80 - at 6% you gain £202.20
ISA 2: £3180.00 - at 6% you gain £190.80
ISA 3: £3000.00 - at 6% you gain £180
Total interest = £573

versus:
Year 1:
ISA 1: £3000 - at 6% you gain £180
Total interest = £180

Year 2:
ISA 1: £6180 - at 6% you gain £370.80
Total interest = £370.80

Year 3:
ISA 1: £9550.80 - at 6% you gain £573.05
Total interest = £573.05

And so on, meaning there's little to no difference between having one big pot and having more than one smaller pot - you still gain the same interest (assuming identical interest rates).

Megalomaniac

I would be tempted by the 6% fixed instant access postal ISA with Northern Rock because of the generally predicted drop in interest rates. However, when I tried today, it could not be opened for the next tax year unfortunately, and therefore, could well be withdrawn before then.

Fixed vs Variable.... tough choice, especially with the interest rate announcement on the 11th April.

bristolleedsfan

Megalomaniac wrote: »

I
Fixed vs Variable.... tough choice, especially with the interest rate announcement on the 11th April.

Not a tough choice at all IMO. Theres another thread stating that Bradford And Bingley are launching a 6.25% One Year Fixed Rate ISA on 26th March 2008 ready for the next tax year.

During 2008 Base rates will only go one way.

Megalomaniac

Very good deal... in hindsight I would have snapped it up but I needed to get this all in order before I go to Norway for a month next week! Never mind.

edit: Just had a look at the current one, and says you need £1000 to invest. That would have been my problem as I would be paying in quarterly so I would have ruled that one out. I expect it may even need the full £3600 to be invested at 6.25% maybe. Who knows... why try to predict the future and instead concentrate your efforts in developing a time machine

[Deleted User]

I'm not convinced fixed ISAs are that crucial actually even considering the current market, far from it if you ask me. Looks like a time when finicial institutes may actually offer higher rates to get our money...