A question about : Are Regular Savers still worth it?
With the increase in bank base rate, I have been thinking about whether drip feeding regular savings account is still worth it, or whether it is more trouble than it is worth.
In order to test this, I have done some calculations (please feel free to check the maths).
These are for 1 year fixed rate regular savers.
As a reference, I have taken a standard savings account with 6.2% AER.
Note: I have not combined the standard savings and regular saver rates, as I was only interested in the additional gain.
I have made the following other assumptions.
a)£250 regular saver amount (other amounts should scale up/down)
b) Account funding is from an external savings account, paid by BACS
c) Best case 3 days loss of interest at 6.2% AER, when transferring money from the standard savings account to the regular saver.
d) Best Case 3 days loss of interest on transferring the money out of the regular saver.
(I have taken this as the amount of interest that would be lost if I had kept all the money in the standard savings account for a year, then transferred it out)
Code:
No Tax paid
Regular Saver
Rate 6.2% (ref) 6.5% 7% 7.25% 8% 10%
Gain with no £99.82 £104.61 £112.57 £116.55 £128.47 £160.13
deductions
Difference £0 £4.78 £12.75 £16.73 £28.65 £60.31
c.f. 6.2%
rate
With deductions £1.77 £9.73 £13.71 £25.63 £57.29
(c) & (d)
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20% Tax paid
Regular Saver
Rate 6.2% (ref) 6.5% 7% 7.25% 8% 10%
Net Rate 4.96% 5.20% 5.60% 5.80% 6.40% 8.00%
Gain with no £80.00 £83.85 £90.24 £93.44 £103.01 £128.47
deductions
Difference £0 £3.84 £10.24 £13.43 £23.01 £48.47
c.f. 6.2%
rate
With deductions £1.42 £7.82 £11.01 £20.59 £46.05
(c) & (d)
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40% Tax paid
Regular Saver
Rate 6.2% (ref) 6.5% 7% 7.25% 8% 10%
Net Rate 3.72% 3.90% 4.20% 4.35% 4.80% 6.00%
Gain with no £60.11 £63.00 £67.82 £70.23 £77.44 £96.63
deductions
Difference £0 £2.89 £7.71 £10.11 £17.33 £36.52
c.f. 6.2%
rate
With deductions £1.07 £5.89 £8.30 £15.51 £34.70
(c) & (d)
Looking at the figures, these assume that the standing orders are perfectly timed (perhaps manually tweaked) so that only 3 days loss of interest occurs.
This makes some of the regular savers look decidedly naff. Certainly, I don't think most people would both with a 6.5% regular saver for a maximum gain of £1.77.
Best answers:
- this has been discussed before - the general view seems to be that 1 year savers at less than 8% are not worth the effort at current rates
the big benefit is in the 2 year/multi year savers
Mike - I have been thinking exactly the same thing, moneyandmountains. It seems that as rates are going higher, saving accounts are increasing, but reg savers dont appear to be doing so, as much.
For example, a year or so ago, I had three reg savers, A&L 10% Portman ISA 8%, and Halifax 7%. At that time, the best normal savings accounts were only about 5.00%.
Nowadays, savings accounts are at 6.2%, but the best reg savers dont seem to have increased all that much, as they are still at 7-8%.
Also, with Interest Rates going up every few months, a competitive reg saver at the begining of a year, can become decidedly average by the middle of the year, as normal savings accounts catch up.
I do agree with oldfella about the multi year reg savers, however what I would really like is for there to be a reg saver where you could put in more than Ј500 per month. I find it a pain having ten or so different savings accounts open at the same time, just to be able to get a decent rate of interest.
In an ideal world, I would just have 3 - ISA, Main savings, Reg saver. - It's true that the post mentioned is an excellent guide to Regular Savers. However -
1. Although it does refer to the issue, it does not specifically look at the best feeder accounts. SS2 did say something about incorporating this info at some point - which would be fantastic - but there weren't a lot of responses to this.
2. At the moment important issues that don't fit in 100% with Best Currently Available Lists (ie. whether regular savers are still worth it), don't seem to come up there. Maybe this, and the above point, will change if and when it becomes a sticky?
I PM'd Kazza and he concurred. He and others are also curious as to why SS2's thread has not been stickied, and as to why Kazza's own thread has been recently unstickied.
What's this forum's policy on bumping? If it's not against etiquette, maybe that's a solution?
Just to say, I am definately not disrespecting the hard work that has been clearly been put into the post in question, or indeed the whole of the Savings and Investment board. I just thought that as lots of people are looking into the feeder/regular savers system together, it makes sense to tie these up in one place too. - The YBS regular saver, even though only at 7% (rise pending hopefully) is particularly good as it carries no time limit and allows up to Ј20K to be saved.
- Not sure I'll be chasing .45% or 0.15%, even if both of them do pass the recent full 0.25% BoE increase on.
BACS in and out, set up of account, missed payments any other !!!!-up risks. (c0ck-up, there I've beaten you system!. Really this what the world's come to. One can't use that phrase anymore without being censored)
I might consider it for a whole balance shift, but not on a regular saver...
With a couple of regular savers, manually tweaking the SO date, is a head ache enough as it is. Well to me anyway, prob better off being a woman, I might be able to juggle better.. lol - I think the question is a little unfair. A regular saver is not intended to be 'drip fed' into although there's clearly nothing to stop anyone doing that and it certainly used to be profitable for people with a pot of cash savings. I did it myself. Just because it's not at the moment due to the small sums involved, doesn't mean that 'Regular Savers aren't worth it' for... err... regular savers. If £250/month isn't enough then open a few, but I'm sure most people aren't in the position to be able to (or want to) regularly squirrel away thousands every month into a cash account. But for anyone wanting to save, say, up to £1k/month into cash accounts, regular savers are still very much worth it and deserve a place on this board. And these regular savers will indeed then be earning the full head-line rate on *all* their savings as no drip-feed account is involved. The only issue is really what to do with the money afterwards if you have a saver that matures or is 'full'.
- I'm currently moving about two and a half K into regular savers on a monthly basis. I pay the minimum into the average payers in order to maintain my membership and not fall into the status of a "dormant account". Every now and again when a few bob has built up, it is nice to be able to transfer to a higher paying account with the same institution without having to raid a different piggy bank and go through the rigmarole of I.D. I have opened a couple of I.S.A.s using this method.
The other category of reg save is the higher interest payer open ended a/c. with a maximum and I include Yorkshire, Bath, Scarboro here. My theory is that when I am approaching the maximum, I will drop my payments to the minimum (Ј10/month) and withdraw about Ј800. That way, I will never go above the maximum and receive a mickey mouse rate of interest and it will only cost me Ј120 a year. I am aware that this will not work in the case of Bath because they don't allow you drop your monthly payments so it's a case of withdrawing Ј3800.
Knowing my luck, they'll either increase the limit as I'm approaching it or the rate will become uncompetitive, in that scenario it will be a case of looking elsewhere. - My approach is to use my stoozing money - so the CC companies are lending me money at 0%, which I use to fund Ј1500 of regular savers each month from which I earn 8-10% interest.
Mike - Hi everybody. I was thinking about writing a post just like this actually and was going to check whether people had discussed it before. I have also been wondering about whether to keep my 12 month regular saver accounts going. They do involve a certain amount of effort - I have found opening and closing the Abbey accounts a little troublesome.
I hope you do not mind but I am going to link to this post in my own thread here:
Regular Savings Accounts: The Best Currently Available List!
https://forums.moneysavingexpert.com/....html?t=608697
I am planning on including a section on the best feeder account (which would appear to be the Sainsbury's account) - I have posted in 2 separate threads asking people who open this account to let me know if it is suitable for this purpose. If they do, then I will include it. I will also include the Coventry First account (which I am using at the moment) but will point out clearly that this involves a first year only bonus.
Thanks for pointing out that Principality account - I will include it in my thread and give you a credit at the top of the thread, info addict.
I cannot believe Kazza's ISA thread has been de-stickied! It is an excellent thread! It is what inspired me to write my regular savings thread! I have posted a message on that thread asking why it has been de-stickied. - Info addict, I have added the Principality BS regular saver to my thread. It is not clear to me from the website whether this has to be opened up in a branch or whether you can do it by post. Can you tell me from your own experience? I also cannot see anything on the website saying that you have to live in Wales to open up an account so I am assuming there are no geographical limitations but please let me know if you know otherwise.
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