Regular Savings Accounts

[BillyShears]

My bank, bank 'A' has a 10% 'regular savers' account. I've set up to pay the maximum £250 per month into it. But I would like to save more into these accounts, including money in accounts paying less generous returns. So this is my plan.

I open both current and regular savings accounts in a second bank, bank 'B'. I then set up a standing order to send £500 per month from my main bank 'A' to the current account in bank 'B'. £500 being the minimum amo0unt that 'B' requires to be paid into the current account monthly to qualify for the regular savers account. £250 of this will then be transferred into the regular savings account at bank 'B', which will then get 10% interest. A second standing order will then send the remaining £250 back to my original bank 'A'. Unless I can find a third bank 'C' with a similar regular savers account. In which case, I could move the money from the 'B' current account to 'C', increasing the amount moved if necessary, cream some off into 'C's regular savings account, and then send anything remaining back to 'A'. And so on.

Of course, at the end of the year, I have to work out what to do with the money all over again, but it should work for a year, shouldn't it?

Any advice?

Billy Shears

Edited April 8, 2006 by BillyShears

[bottletop]

If you work out the real interest on the account you may find yourself going to a lot of trouble for not much potential return...

Your 1st £250 is in for the full year and will get 10% interest (£25)

Your 2nd £250 is in for 11 months and wil receive 11/12ths of £25 (£22.91)

next up 10months : £20.83

9: 18.75

8: 16.66

7: 14.58

6: 12.50

5: 10.41

4: 8.33

3: 6.25

2: 4.16

1: 2.08

Add them up and you only earn £141.63 on 3k. ...less than 5% gross anyway.

"But I would like to save more into these accounts, including money in accounts paying less generous returns"

An ISA's the best bet if you haven't used your new 3k allowance yet I would imagine

Edited April 8, 2006 by bottletop

[BillyShears]

If you work out the real interest on the account you may find yourself going to a lot of trouble for not much potential return...

Your 1st £250 is in for the full year and will get 10% interest (£25)

Your 2nd £250 is in for 11 months and wil receive 11/12ths of £25 (£22.91)

next up 10months : £20.83

9: 18.75

8: 16.66

7: 14.58

6: 12.50

5: 10.41

4: 8.33

3: 6.25

2: 4.16

1: 2.08

Add them up and you only earn £141.63 on 3k. ...less than 5% gross anyway.

"But I would like to save more into these accounts, including money in accounts paying less generous returns"

An ISA's the best bet if you haven't used your new 3k allowance yet I would imagine

I will be using my full ISA allowance. The regular saver account would be on top of this. It's true that some of the money is only in there for a short time, but the 10% interest is attractive. Clearly if I left the other money in an account earning nothing, then I'd be getting a poor rate of return, but if I can shuffle money around, I can do better. One of the problems is that fixed deposit size. I'm already committed to save £250 per month, and I would have to do the sums to see if I could double that just from salary. However, if I could find a current account paying a reasonable interest rate, then I could put the money into there, and shuffle it into regular savers accounts as necessary. I think that Alliance and Leicester do some sort of internet-only weird account with 5% or something. I may be wrong in that, but I have their leaflets and can study the details more. Hmmmm... "Premier Direct Current Account" 5% AER on balances up to £2500. So the £250s would be earning that until they switched to the "regular savings account" where they would then earn the larger amount.

Billy Shears

[Jason]

I have 3 regular savers:

Barlcays @ 10% with £250 per month (criteria: pay in £1k in a month)

Halifax @ 7% with £250 per month (criteria: money must be from another bank or BS)

Portman ISA @ 8% £250 per month

You could also go for HSBC also, but the criteria is you must have your salary paid into that current account. If you do this you can get £250 @ 8%.

So you could have you salary into HSBC, say £1250:

Pay £250 to HSBC regular saver @ 8%

Transfer £1k to Barclays.

Pay £250 into Barclays reg saver @ 10%

Pay £250 into Halifax reg saver @ 7%

Pay £250 into Portman ISA @ 8%

- £250 left over

Bing bang bosh. Sorted.

Although, you need to take into account the lost interest in transfering the money. So I havn't bothered to go for the HSBC account, but I have the other three!

Edit: And I have an ICICI @ 5.15% for any surplus cash (minus £150 cash buffer) after this!

Billy: Which accounts are you refering too?

Edited April 8, 2006 by Jason

[BillyShears]

I have 3 regular savers:

Barlcays @ 10% with £250 per month (criteria: pay in £1k in a month)

Halifax @ 7% with £250 per month (criteria: money must be from another bank or BS)

Portman ISA @ 8% £250 per month

I'm at Barclays now. I will probably be opening an Alliance & Leicester Premier thingy and the additional regular saver account. How does the Portman ISA work?

Billy Shears

[Gbob]

I'd definitely go for the A&L account. It's 10% on £250 per month for the regular saver and 5% on the current account. Also you only have to pay in £500 a month to the current account which can come from anywhere. Some of the others only allow you to open one if you have your salary paid in.

When I opened mine they were doing 6 months interest free on credit card balances too.

I'm at Barclays now. I will probably be opening an Alliance & Leicester Premier thingy and the additional regular saver account. How does the Portman ISA work?

Billy Shears

[laughing_goat]

I'm at Barclays now. I will probably be opening an Alliance & Leicester Premier thingy and the additional regular saver account. How does the Portman ISA work?

Billy Shears

I think it's a not to bad idea, all but the alliance and leicester account insist that your salary be paid into the current account you have to open with them. So if you open one of the others and an A&L account you'll be laughing (well a little bit anyway).

Edited April 8, 2006 by laughing_goat

[Jason]

I'm at Barclays now. I will probably be opening an Alliance & Leicester Premier thingy and the additional regular saver account. How does the Portman ISA work?

Billy Shears

Portman: http://www.portman.co.uk/savings/regular_s...90-6554900-182N

I also mentioned it in this thread: http://www.housepricecrash.co.uk/forum/ind...ndpost&p=342158

I opened this account yesterday!

[AvidFan]

If you're doing this by feeding a regular saver from a normal interest account, you get the average of the two interest rates...

Say: ICICI @ 5.15% as your "pool" of money

Now take Barclays and AL&L at 10%... that means you get 10% on the deposits as they arrive.

As your money pool moves from ICICI to Barclays / AL&L you get the average of 5.15 and 10 (= 7.575%)

Minus (of course) the interest lost when your money is in transit. I'd say this is about 3 days per month, and if you're using these two top-paying accounts you'll be moving a total of 500/month. On average then I think you lose about 3 days * 12 months = 36 days of interest on the amount moved per month, 500 quid. Which isn't too much...

Net rate of 7.575 % is 6.065% for lower-rate take payers, or 4.545% for higher-rate tax payers. I personally think that is quite impressive.

I know everyone bangs on about Gold - and its recent performance is obviously not to be ignored, but I'd love a few Gold bugs on here to take into account the sort of interest rates that are possible on savings using the above scheme when they comment. Actually, while Gold could be seen as speculative and therefore "risky", I wonder what people really think about the viability of cash at at least 4.5% NET (i.e. the base rate) over several years, compared to the "got to get the timing right" buying of /speculation on Gold? Would my losses as a cash saver be really that significant ? Would I really get "screwed" in real tearms, given that Gold only performs "well" in an inflationary/deflationary market so I could expect interest rates to increase over the same period (increased savings interest and compressed house prices)? When people say that anyone with cash savings will be screwed, do they mean "with respect to Gold" or because the ratio of house selling prices to money saved won't correct that far ? I'd like some reference to the above "at least the base rate NET" achievement of interest, compounded over the many years of mayhem we expect...

Serious discussion / analysis duly welcome.

[BillyShears]

If you're doing this by feeding a regular saver from a normal interest account, you get the average of the two interest rates...

Say: ICICI @ 5.15% as your "pool" of money

Now take Barclays and AL&L at 10%... that means you get 10% on the deposits as they arrive.

As your money pool moves from ICICI to Barclays / AL&L you get the average of 5.15 and 10 (= 7.575%)

Minus (of course) the interest lost when your money is in transit. I'd say this is about 3 days per month, and if you're using these two top-paying accounts you'll be moving a total of 500/month. On average then I think you lose about 3 days * 12 months = 36 days of interest on the amount moved per month, 500 quid. Which isn't too much...

Net rate of 7.575 % is 6.065% for lower-rate take payers, or 4.545% for higher-rate tax payers. I personally think that is quite impressive.

Serious discussion / analysis duly welcome.

In my case, most of the money saved would be new money, not existing money. So it would be money earning 10% from the get-go, rather than sitting in a lower-performing account.

Couldn't I avoid the 3 days lost by removing the 500 per month from my account in cash, walking across the street (literally), and banking it? Does cash deposited over the counter enter your account immediately?

Billy Shears

[AvidFan]

In my case, most of the money saved would be new money, not existing money. So it would be money earning 10% from the get-go, rather than sitting in a lower-performing account.

Couldn't I avoid the 3 days lost by removing the 500 per month from my account in cash, walking across the street (literally), and banking it? Does cash deposited over the counter enter your account immediately?

Billy Shears

Maybe. But more importantly, some of these accounts require a standing order deposit from the crrent account they expect you to open at the same time as the reg savers account. The AL&L standing order is actually out of your control - it doesn't appear in the current account standing order list so can only be cancelled by them. There's no option to have the money come from elsewhere, but with a current account rate of 5% why would you bother ?

[delboypass]

Many banks actually still pay your interest whilst your transfer is in stasis.

when transfered normally transferred immeditiately but banks need to carry out checks before placing it into your account (slowest in the world ive heard!!)

[OzzMosiz]

Many banks actually still pay your interest whilst your transfer is in stasis.

when transfered normally transferred immeditiately but banks need to carry out checks before placing it into your account (slowest in the world ive heard!!)

I transferred my ISA out of my HSBC account and they payed me the interest upto that date - fair play - shame they couldn't match my new rate.

[padders]

Can you manage (and setup?) the barclays account online?

Also, where does the money have to come from? I am self-employed and the business account is with barclays as well. Is moving from my biz account to my current account good enough?

[Jason]

Can you manage (and setup?) the barclays account online?

You can manage the Barclays reg saver + current account online. It's ok I guess, although you can only transfer a maximum of £1k out of your current account using online banking per day - this is big problem for me and I will probably leave Barclays because of it.

I'm not sure of the full limits, i.e. does the £1k limit including standing orders+ direct debits? I don't think it does, but the monkeys on the phone can't confirm this.

[Gwailo]

I know everyone bangs on about Gold - and its recent performance is obviously not to be ignored, but I'd love a few Gold bugs on here to take into account the sort of interest rates that are possible on savings using the above scheme when they comment. Actually, while Gold could be seen as speculative and therefore "risky", I wonder what people really think about the viability of cash at at least 4.5% NET (i.e. the base rate) over several years, compared to the "got to get the timing right" buying of /speculation on Gold? Would my losses as a cash saver be really that significant ? Would I really get "screwed" in real tearms, given that Gold only performs "well" in an inflationary/deflationary market so I could expect interest rates to increase over the same period (increased savings interest and compressed house prices)? When people say that anyone with cash savings will be screwed, do they mean "with respect to Gold" or because the ratio of house selling prices to money saved won't correct that far ? I'd like some reference to the above "at least the base rate NET" achievement of interest, compounded over the many years of mayhem we expect...

Serious discussion / analysis duly welcome.

You raise some good points about 'cash savings' as compared to 'Gold speculation' - I do both!

The only potential downside with cash savings is the risk of inflation, (which is an increase in the amount of money) - which by most accounts is far higher that the official (2%) rate mentioned by the Government.

Gold on the other hand is indeed quite risky - but does offer more protection than cash in an ibflationary environment.

I duno which one is best - so actually save cash (off-shore of course) and speculate with Gold.

[AvidFan]

I know everyone bangs on about Gold - and its recent performance is obviously not to be ignored, but I'd love a few Gold bugs on here to take into account the sort of interest rates that are possible on savings using the above scheme when they comment. Actually, while Gold could be seen as speculative and therefore "risky", I wonder what people really think about the viability of cash at at least 4.5% NET (i.e. the base rate) over several years, compared to the "got to get the timing right" buying of /speculation on Gold? Would my losses as a cash saver be really that significant ? Would I really get "screwed" in real tearms, given that Gold only performs "well" in an inflationary/deflationary market so I could expect interest rates to increase over the same period (increased savings interest and compressed house prices)? When people say that anyone with cash savings will be screwed, do they mean "with respect to Gold" or because the ratio of house selling prices to money saved won't correct that far ? I'd like some reference to the above "at least the base rate NET" achievement of interest, compounded over the many years of mayhem we expect...

Serious discussion / analysis duly welcome.

You raise some good points about 'cash savings' as compared to 'Gold speculation' - I do both!

The only potential downside with cash savings is the risk of inflation, (which is an increase in the amount of money) - which by most accounts is far higher that the official (2%) rate mentioned by the Government.

Gold on the other hand is indeed quite risky - but does offer more protection than cash in an ibflationary environment.

I duno which one is best - so actually save cash (off-shore of course) and speculate with Gold.

Seems to me that in this over-inflated credit bubble, financial institutions have abandoned the need to absolutely prove solvency in the face of adverse economic conditions in favour of being able to demonstrate a huge cash flow, i.e. "pseudo liquidity" (to help them sleep at nights). This comes in the form of 10% lost-leader savings products (provided you sign up to have your salary deposited with the bank). While this may capture a few genuine switchers, I don't see any reason why the financially savvy can't take them for any penny, cash in the savings after a year and cut and run to the next best offer. There are, and always have been, plenty of these out there. Enough, I expect, to ripple through quite a hefty deposit. The only downside is the cutting of interest rates on the "pool accounts" than can be used to feed the regular savers acounts (if you have more regular saving money going out than you earn / have spare in a month). But I reckon if you try hard, you can get the base rate net on a not insignificant amount. I always thought this was the best approach given that at some point, deflation would kick in and you'd get proportionally richer at a rapid rate when combined with falling house prices (if that's what you're saving for). However, now the general opinion appears to be that Gold finds its true value in ANY adverse economic cycle, whether it be inflationary or deflationary. I'm so confused... but I know looking at how much everything has increased in price recently, that we're being lied to about the rate of inflation. I'd love some honestly and a nice 7% interest rate... but we ain't gonna get it...

Interesting you mentioned offshore accounts - I though they were only useful for delaying interest payments which has limited benefit for someone with regular, constant income like me. And besides, the gross rates are always a little lower on offshore accounts... Do you know something I don't ?