Savings accounts

[telstarbox]

Mrs T and I currently have a couple of grand saved up for rainy days. We're hoping to build this up a bit over the next couple of years.

At the moment it's in a standard cash ISA which had an OK rate for the first year and then dropped so it's now paying less than inflation. Are there any better places to put it but keeping the ability to take out the money if we need it for an emergency?

 

[miami]

https://www.moneysavingexpert.com/savings/best-cash-isa/

You're not going to get better than inflation

 

[Domh245]

Nationwide's flex direct account is offering 5% interest on balances up to £2.5k for one year*, which beats most savings accounts and ISAs unless you've got plenty to put in or have run out of tax free allowance. After a year, you'll have to check the market and likely move it somewhere else to beat the 1% rate after that but you'll be up by about £125. You can also open a second joint flexdirect account which will also earn 5%

*You have to put £1000 a month in to qualify for the 5% as well, but that's done easily enough by moving £1000 from one account in on the first calendar day of the month and then transferring it back to the original account on the third

 

[big all]

Nationwide's flex direct account is offering 5% interest on balances up to £2.5k for one year*, which beats most savings accounts and ISAs unless you've got plenty to put in or have run out of tax free allowance. After a year, you'll have to check the market and likely move it somewhere else to beat the 1% rate after that but you'll be up by about £125. You can also open a second joint flexdirect account which will also earn 5%

*You have to put £1000 a month in to qualify for the 5% as well, but that's done easily enough by moving £1000 from one account in on the first calendar day of the month and then transferring it back to the original account on the third

whilst it is 5% it’s an effective rate of around half that at 2.5%, as the average amount in the account is half the final months amount

 

[Peter Mugridge]

*You have to put £1000 a month in to qualify for the 5% as well, but that's done easily enough by moving £1000 from one account in on the first calendar day of the month and then transferring it back to the original account on the third

Most banks have got wise to that and now have something hidden deeply in the T&Cs that stops them from paying the extra interest if they see this going on.

 

[Enthusiast]

Most banks have got wise to that and now have something hidden deeply in the T&Cs that stops them from paying the extra interest if they see this going on.

I operate four current accounts to take advantage of pathetic (rather than utterly pathetic) interest rates. Each of them has a minimum monthly deposit condition. The only condition for those deposits is that they must not be from another account with the same bank. Some of my deposits go in and are withdrawn within a minute or two. All that is needed is for the bank's system to recognise deposits totalling £x. It doesn't care where the money comes from (subject to above), when it leaves or where it goes to.

 

[DerekC]

Worth remembering that there is now a personal savings allowance so if you are on basic rate tax you can earn up to £1000 p.a. in interest and not pay tax on it, even if you have your money in an ordinary (non-ISA) account If you pay higher rate tax the allowance is £500.

To get a better rate of interest and if you won't need your money in a hurry you might be tempted by peer-to-peer companies, but be wary. I have a small amount of money with Zopa and it works very well, but I wouldn't put all my savings there. They aren't covered by the FCA Guarantee so you could lose your money if they go bust, although theoretically you can still recover it from the borrower. Their advertising suggests you might get up to 6%, but if you read the small print it's more realistically 4%.

 

[AndrewE]

Are you prepared to take a risk (i.e. "invest") rather than just save? If so then Innovative Finance might be an idea. I have a bit of my savings in a Zopa ISA (only a bit because there is still a slight risk) but it pays about 5% with no tax liability. You see occasional defaults, but over time it does seem to deliver.
I know it hasn't seen a crash or a depression yet, but my "establishment"/mainstream unit trusts are equally vulnerable (and have probably gone down quite badly just now, so are more vulnerable than the alternative stuff!)
I don't pay in more than £200 at a time so that when it is split among 10 borrowers I'm not exposed to more than a £20 default. Even those aren't a catastrophe as they sell them on and salvage something, also you sometimes get another payout if the money is finally reclaimed.
p.s. just seen that DerekC has said the same thing!

 

[AndrewE]

https://www.moneysavingexpert.com/savings/best-cash-isa/
You're not going to get better than inflation

Another thing that moneysavingexpert says is use a bank account that gives you a good rate on a linked regular savings account. It's not much in the bigger scheme of things, but the Santander regular saver pays 5%, although only on a max of £200 put in monthly for a fixed 1 year term (so effectively 2.5% on £1200) - still worth taking if you have a 123 current account.

 

[Mojo]

There are also Regular savings accounts if you don't mind the inconvenience of having your money in separate places. HSBC (including M&S and First Direct) pay 2.75% on up to £250 per month; it's accessible in that you can close account at any time and get your full deposits back, but you won't get any interest if you close early.

Club Lloyds have a regular saver of up to £400 per month at 2.5%, Coventry Building Society has the same rate but up to £500 pm.

Otherwise for "instant access" you're going to struggle to get anything above 1.32%; unless you put the money into various current accounts, as someone else has advised.

There's also the option of Premium bonds, but you have got to be investing a fair sum (or be exceptionally lucky). There's a probability calculator on the Moneysavingexpert website: https://www.moneysavingexpert.com/savings/premium-bonds-calculator/#result

 

[AndrewE]

There's also the option of Premium bonds, but you have got to be investing a fair sum (or be exceptionally lucky). There's a probability calculator on the Moneysavingexpert website: https://www.moneysavingexpert.com/savings/premium-bonds-calculator/#result

however it's not looking so good for the future. https://www.mirror.co.uk/money/premium-bond-prizes-cut-nsi-21514673 says

[From May]Under the new rates, Premium Bond Prize fund will drop from 1.4% of the money invested to 1.3%.

1.3% is a lot less than inflation, and you may well not get lucky at all! I think having two £1 million prizes a month is wrong and skews it away from rewarding more people.

 

[Mojo]

however it's not looking so good for the future. https://www.mirror.co.uk/money/premium-bond-prizes-cut-nsi-21514673 says 1.3% is a lot less than inflation, and you may well not get lucky at all! I think having two £1 million prizes a month is wrong and skews it away from rewarding more people.

It's worth pointing out that this is a reduction of the odds per bond from 24,500 to 1 to 26,000 to 1 and the interest rate/odds have been as low as this, and lower than this, for a few years in the past: https://www.nsandi.com/historical-interest-rates

I suspect that in reality very few people will notice the difference. I, personally, have claimed significantly more in money from Premium bonds than I would have done in an Instant access savings account, and it has not affected my Tax code as I was very close to the £500 tax free allowance limit. I have also benefitted from the extra reward points by making payments through my Tesco Clubcard bank account

 

[JamesT]

It's worth pointing out that this is a reduction of the odds per bond from 24,500 to 1 to 26,000 to 1 and the interest rate/odds have been as low as this, and lower than this, for a few years in the past: https://www.nsandi.com/historical-interest-rates

I suspect that in reality very few people will notice the difference. I, personally, have claimed significantly more in money from Premium bonds than I would have done in an Instant access savings account, and it has not affected my Tax code as I was very close to the £500 tax free allowance limit. I have also benefitted from the extra reward points by making payments through my Tesco Clubcard bank account

Maybe I'm unlucky. I was bought some Premium Bonds when I was born, getting on for 40 years later and I've never won a single thing from them.

 

[hexagon789]

Maybe I'm unlucky. I was bought some Premium Bonds when I was born, getting on for 40 years later and I've never won a single thing from them.

Depends how many you hold, the lower the amount the worse your chances.

 

[Domh245]

whilst it is 5% it’s an effective rate of around half that at 2.5%, as the average amount in the account is half the final months amount

Depends how you do it. I keep mine very much as a savings account, so it's kept at the maximum and then I transfer the £1000 in and back out again on top of that. All the interest payments I've got have been consistent with the full interest rate on the whole balance.

Another thing that moneysavingexpert says is use a bank account that gives you a good rate on a linked regular savings account. It's not much in the bigger scheme of things, but the Santander regular saver pays 5%, although only on a max of £200 put in monthly for a fixed 1 year term (so effectively 2.5% on £1200) - still worth taking if you have a 123 current account.

Santander have a 5% saver? I know they had a 2.5% one at the end of last year, and the latest issue is only 2%, but if they had a 5% regular saver they probably wouldn't be having their current account labelled as "dead duck". First Direct have a good regular saver linked to their current account (2.75% AER) and you get a healthy switching bonus if you move your current account over.

 

[AndrewE]

Santander have a 5% saver? I know they had a 2.5% one at the end of last year, and the latest issue is only 2%, but if they had a 5% regular saver they probably wouldn't be having their current account labelled as "dead duck". First Direct have a good regular saver linked to their current account (2.75% AER) and you get a healthy switching bonus if you move your current account over.

I don't know how I qualified for it (and it might just be an old saver renewed as a loyalty bonus) but I expected it to be 2.5% and they corrected and upgraded it to the 5%. "123 world" or something. However the current account interest is about to be cut again, but that is not really surprising in the current environment.

 

[thejuggler]

I don't know how I qualified for it (and it might just be an old saver renewed as a loyalty bonus) but I expected it to be 2.5% and they corrected and upgraded it to the 5%. "123 world" or something. However the current account interest is about to be cut again, but that is not really surprising in the current environment.

I'd want confirmation of 5% as I have not seen it mentioned anywhere, I've had Santander regular savers on 123 World for a few years. It started at 5%, but this year it renewed at 2% on £200 a month max, which is 1% on £2400 over a year.

For simplicity consider a Marcus account, but this is dropping to 1.3% shortly.

 

[AndrewE]

I've had Santander regular savers on 123 World for a few years. It started at 5%, but this year it renewed at 2% on £200 a month max, which is 1% on £2400 over a year.

Maybe I missed that bit!

 

[AndrewE]

I'd want confirmation of 5% as I have not seen it mentioned anywhere, I've had Santander regular savers on 123 World for a few years. It started at 5%, but this year it renewed at 2% on £200 a month max, which is 1% on £2400 over a year...

I have just looked at their website... it says

What you can get
2.00% AER/gross (fixed) for the first 12 months

• Save up to £200 a month

• and adds

  Automatic roll-over at the end of your savings period so you can continue to save at the rate available at the time

  so maybe that is what is behind it (doesn't say which time!) Or maybe I am not getting the rate I was expecting!