What is "new money" with regards a Regular Savings account?

bgscotty

Hello.

I would welcome a little advice...

I have a Halifax Regular Savings account at 7%.

I wonder if someone could explain the concept of why Regular Savers are best for "new money" please?

For example, what kind of account is best for me to "drip feed" from?

Thank you in advance.

BG

Milarky

Because where you have only just earned the "new money" to be able to pay in you haven't had to worry about where it was invested previously or what rate it was earning there....

Accounts that you can use to hold "existing" savings earmarked for a regular savings account are generally "instant access" (variable rate) ones. There are many 'e saver' or 'online saver' accounts of this type but whilst they are easy to move money in and out of - and can often pay directly to any other account - they don't pay the best rates. For these you have to have an account with an institution which links money movement to you current account - and that all takes time - at least two days to withdraw.

[Think 'Direct Instant Access' and 'Linked Instant Access']

After 27 May we will see how these delays come down. That is when 'Faster Payments' are due - promising the ability to move money between all accounts within hours rather than a standard two days - and thereby benefiting anyone who presently links their drip feed savings to their current account with a built in delay and loss of interest on movements.

bgscotty

Thank you milarkey.

Before (and after May 27) is it an ok idea to drip feed into the Halifax 7% Regular Saver from the 6.17% Current account?

I'm not too sure whether to keep a Regular Saver or to just put the £3000 (12 x £250) lump sum in the highest rated savings account.

Cheers,

BG

Milarky

bgscotty wrote: »

Thank you milarkey.

Before (and after May 27) is it an ok idea to drip feed into the Halifax 7% Regular Saver from the 6.17% Current account?

Yes -that's the account I use at the moment - transfers are instant of course! The rate of 7% on the regular saver, although not the best, does at least at allow access (and a reduced rate) or variation of payments. Also if you are using several regular savings accounts, the amounts saved (and earning the headline rates) do mount up of course - but such an approach will always require more organisation.

[Deleted User]

bgscotty wrote: »

Thank you milarkey.

Before (and after May 27) is it an ok idea to drip feed into the Halifax 7% Regular Saver from the 6.17% Current account?

I'm not too sure whether to keep a Regular Saver or to just put the £3000 (12 x £250) lump sum in the highest rated savings account.

Cheers,

BG

Putting £1000 into a high interest savings account e.g. Kaupthing Edge over one year will earn £156.00, assuming you're a basic rate tax payer.

Putting £1000 into a regular savings account e.g. the Halifax 7% you mentioned over one year will earn £90.24, assuming you're a basic rate tax payer. If you put it into Abbey's 7.25% (top one here: http://www.moneyfacts.co.uk/savings/bestbuys/regular-savings-accounts.aspx), you'd earn £93.44.

So the high interest savings account is looking good to me... (Best buy table: http://www.moneyfacts.co.uk/savings/bestbuys/internet-savings-accounts.aspx)

Calculations worked out using: http://www.moneysavingexpert.com/savings/savings-accounts-best-interest#savingscalc

bgscotty

Thank you for the replies...

[Deleted User]- brilliant! many thanks for taking the time to work that out ;-)

Meltdown_2

[Deleted User],
where would the remainder of the £1000 be sitting whilst you are drip-feeding into the Halifax or Abbey accounts?
This information would be needed to do a proper comparison with £1000 deposited in the Kaupthing Edge account.

Mikeyorks

Deleted_User wrote: »

Putting £1000 into a high interest savings account e.g. Kaupthing Edge over one year will earn £156.00, assuming you're a basic rate tax payer.

That is completely wrong.

At 6.5% (less tax) - the interest is £52 !!

Your other figures look similarly suspicious.

The issue here was 'new money' .... so the Halifax Reg Saver gives a straight up 7% on that basis. It's only where it's re-cycled money that the interest rate is subjugated by the feeder account. So if you re-cycle £3k from a 6% account into the Halifax 7% account ..... you get 6.5% on the whole (less any interest delays on the transfers)

[Deleted User]

Yikes!

Sorry about that guys - not sure why I was under the impression it was 1k and not 3k as originally stated:

bgscotty wrote: »

I'm not too sure whether to keep a Regular Saver or to just put the £3000 (12 x £250) lump sum in the highest rated savings account.

To clarify: putting £3000 (not 1k as stated in my post - however 3k was used to do the original calculations) into a high interest savings account over one year will earn £156.00, assuming you're a basic rate tax payer.

Putting £3000 (again not 1k as I wrote in my original post) into a regular savings account over one year will earn £90.24, assuming you're a basic rate tax payer.

Meltdown wrote: »

where would the remainder of the £1000 be sitting whilst you are drip-feeding into the Halifax or Abbey accounts?

Meltdown - Spot on - an oversight on my part, my bad. To the OP, based on 3k sitting in a 6% AER (average figure I've plucked out of the air) savings account, with £250 taken out each month, you'd earn, over 11 months, a total of £66.18

The workings out for £66.18 are for the period of Apr 08 -> Feb 09 (starting with £3000 - £250 already, in the account), based on 20% taxation, using the following formula:

Interest = ((Monthly closing balance * Savings account % AER) / 365 days) * Number of days in month

Again please say if I've made a mistake...

So to summerise:

High interest savings account: interest of £156.00
Regular savings acccount: interest of, £90.24 + £66.18 = £156.42

I've PM the OP to ask to look at this thread so they've not gone away with a false view from my original post.

Thanks for pointing out the mistakes, I was only trying to help though

One final point:

Mikeyorks wrote: »

The issue here was 'new money' .... so the Halifax Reg Saver gives a straight up 7% on that basis. It's only where it's re-cycled money that the interest rate is subjugated by the feeder account. So if you re-cycle £3k from a 6% account into the Halifax 7% account ..... you get 6.5% on the whole (less any interest delays on the transfers)

I'm not sure I follow.

Mikeyorks wrote: »

It's only where it's re-cycled money that the interest rate is subjugated by the feeder account.

Surely the money is always subjugated by the feeder account if the limit, per month, for the regular saver is £250, and they've got a total of £3000 to invest?!

Am I missing something here?

Mikeyorks

Deleted_User wrote: »

Am I missing something here?

Afraid so.;)

The thread is about 'new money' into a Regular Saver. Which implies you take £250 from salary every month and pop it into a Reg Saver? So you get an undiluted 7% (first sentence of post #2 also covers it).

Completely different scenario where you are re-cycling money. If you have a pot of £3k then the Reg Saver 7% is reduced to the ({average % of that account + the feeder account} - time to transfer between accounts). The last bit should disappear with the arrival of faster payment. So at least you could choose a best rate easy access account as the feeder. Whereas currently it's probably best to have the feeder / Reg saver with the same Institution in order to avoid the monthly BACS delays?