Managing Savings

sunnyjolls

Hi,

I have had an ISA for 2007/2008 which I used the full £3000 limit. I have about another £6000 worth of savings which is currently just sitting in a savings account.

My question is, what would be the best waste to maximise savings on all this money? Should I leave the 2007/2008 ISA where it is, open another ISA for 2008/2009 and put the new limit of £3600 straight in and leave the remianing £3000 in a savings account?

Or, is there some way I could pool this all together in one account? However it wouldn't then be tax free would it?

Please help I'm very confused!

neilp

In a word, yes - you could pool £6,600 in one ISA, but will probably get a better rate by having £3,000 in one and £3,600 in another. The rest I would suggest keeping in a savings account, though there is a case for opening a regular savings account and transferring across the maximum each month.

Milarky

One approach to (cash) ISA saving for the less assured is a regular saving of up to 1/12th of the annual limit into the ISA you select (currently £250pcm rising to £300 after April) Some of the better rates are regular savings only type accounts (like the Scarborough at 6.25% at present) but that doesn't mean you have choose such a product and could open any instant access account paying a good rate - eg Barclays or Egg and just set up a standing order to these. The theory is that doing this allows you to achieve the maximum annual amount without the 'pressure' of doing so - because you don't need to find £3600 before the tax year starts. It represents a 'budgeting' view of ISA saving.

Unfortunately this won't address the other problem with cash ISAs - which is consistency of rates. This year's 'best buy' is unlikely to stay that way (Kent Reliance has been consistent however) so that you have to consider whether the drip drip approach is that beneficial compared to the 'big bang' one of opening the top ISA each year. After a few years of shopping around the novelty wears off and you then have a pottage of accounts.

sunnyjolls

neilp wrote: »

In a word, yes - you could pool £6,600 in one ISA, but will probably get a better rate by having £3,000 in one and £3,600 in another. The rest I would suggest keeping in a savings account, though there is a case for opening a regular savings account and transferring across the maximum each month.

Thanks very much for your replies.

Appologies if I'm being stupid, but do you mean that I would generally earn more interest keeping them separtely, due to the fact that the ISA's with "transfer in" options generally pay a lower interest rate??

Milarky, I hadn't considered drip feeding the money into the ISA as I have it already so just assumed that it would be better to transfer the whole lump sum in one go?? Again, are you saying that those with the monthly deposit saving scheme may offer a higher interest rate??

Is there an ISA savings calculator on here anywhere?

neilp

Yes - recent best buys mostly have not allowed transfers in (except Icesave and A&L).

If you are in a position to transfer the full £3,600 into an ISA at the start of the tax year, or even a big chunk of that, you would be better to do so rather than drip feeding it in, for the simple reason that you will earn the higher tax free rate for a larger chunk of your savings over a longer period.

Assuming you are in a position to do this, my recommendation (for what it's worth) would be to do it, then open a separate regular saver, which will pay a higher rate than an instant access account, and drip feed savings into that.

sunnyjolls

That is what I had initally thought but I think I have confused myself now??? I've put togther a costing of interest paid monthly if I deposit £300 per month, based on 5.5%. If I have go this right (which I don't think I can have) I would earn more interest paying it in monthly than I would if I put £3600 in one go.

Monthly = £270.36
Annually = £198


Have I got this all wrong??

I do have the £3600 available now so if it makes sense I think I would rather put it in in one go providing it's the best optoin!!

Lokolo

Not sure how you calcualted that but it is wrong

I am going from Jan-Dec as the year.

Jan - £300 - 5p interest a day
Feb - £600 - 9p
March - 14p
April - 18p
May - 23p
June - 27p
July - 32p
August - 36p
Sep - 41p
Oct - 45p
Nov - 50p
Dec - 54p

Total: £108(~) (31 x 5 + 28 x 9 etc.)

Now to work out £3600, for a year, total interest is: £198 as you worked out.

sunnyjolls

Thankyou, I knew I must be. For a start I wasn't calculating it daily!! :rolleyes:

I will get there!!

[Deleted User]

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