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Moneyforums guide to Savings Accounts. From Cash ISA's to Regular Savers to Premium Bonds, all explained in an easy to understand manner.
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Guide to saving money on household bills & personal finances - Start saving thousands of 's every year TODAY !
A guide to Savings Accounts, from Cash ISA's to Regular Savers
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Money Forums Savings Guide - Updated May 2006
 

Want to Save money ?

Don't Know where to Start ?

Then this Savings Guide is for you !
The Moneyforums Savings Tree, takes you step by step along the most efficient savings accounts available to UK savers. From Cash ISA's to Regular Savers to Premium Bonds, all explained in an easy to understand manner.

  1. Mini-Cash ISA's
  2. Regular Monthly Savers
  3. High Interest Savings Accounts

1 Mini CASH - ISA's - Annual Savings Limit £3,000

Cash ISA's are the first call for your savings, Why ?

Because they are tax free savings account, with the interest paid GROSS. Ideal savings accounts for both existing and future tax payers.

How Much Can I invest ?
Each year (between 6th April and 5th April), each person in the UK receives an CASH ISA Allowance of up to£3000 per year.

Are there any conditions on withdrawing my money i.e. like pensions ?
The Cash ISA like pensions is a tax free wrapper, but that is the only similarity between the two. A Cash ISA savings account behaves exactly the same as any other savings account, namely that you can withdraw funds at anytime from an instant access Cash ISA account, without notice. Off course if you opened a Fixed Rate Account that say is fixed for 1 year, then there would be some interest penalties attached to withdrawal of funds early, i.e. in exactly the same manner as an none ISA Fixed rate savings account would behave.

Where Can I find Cash ISA's
Virtually every bank and building society offer cash ISA accounts, the rates vary so it is best to do some research before committing to the first high street bank. At the moment good payers are the internet savers such as ING, Intelligent Finance, others include the Halifax. Additionally you may be able to secure a higher rate by fixing your ISA for a year or more.

Anything else I need to know ?

  • Once monies are withdrawn they cannot be re-deposited to your existing Cash-ISA, i.e. if you have £3000 deposited, and you withdraw £500 then you cannot at a later date ADD that £500 back into your Cash-ISA in the current tax year. Off course you could add it to your next years £3000 allowance.
  • You can MOVE ISA's between providers to chase the best rates.
  • The Cash ISA allowances were due to expire in April 2010, but now have an open ended life span.
  • Beware of the bonuses used to entice you in ! Many ISA providers give an added bonus for a short period of time, say for the first 6 months before the rate drops to an uncompetitive rate.
  • Another trick attached to some bonus accounts is a Transfer Out Fee, usually about £25 charged to transfer to another provider once the rate drops. £25 is usually more than the value of the bonus earned. So ensure you check the Terms and Conditions to ensure that there is NO transfer fee attached to the Cash ISA account.
  • The Cash ISA annual limit rises to £4000 from April 2008.
 
 
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2 Regular Monthly Savers- Annual Savings Limit Up to £24,000
 

Why Regular Monthly Savers ?
Many financial institutions that operate regular monthly saver accounts, usually pay a very high interest rate, much higher than any other types of accounts on offer, present range is from 6% to as high as 10% ! Interest is paid NET of income tax at the basic rate, but still these accounts for the basic rate tax payer be even better than the Cash ISA's

How Much Can I invest ?
This various from institution to instruction, starting from a £100 monthly limit (Yorks Bank), all the way to £1000 (Derbyshire BS)

How do I deposit the money every month ?
Usually you are required to setup a standing order into your savings account so that you meet the rule of saving an amount every month into your Regular Savings Account. You can either set one up using the form given to you at the time of opening the account or setup your own SO online if you have online banking.

I'm a none tax payer, what happens to my interest rate ?
if your a none tax payer, then ensure you fill in form R85 on account opening, to get the interest credited to your account gross. Alternatively you can complete form R40 at the end of the tax year.

Do I have to deposit the maximum every month ?
No, usually it is the case that you can deposit between a range every month, for instance the Derbyshire requires a deposit of £10 to £1000 per month

What happens if I miss a payment ?
For most accounts this means that your account would revert to a non regular saving account, and thus imply a loss of interest i.e. you will lose the special rate. Though some accounts do allow for 1 missed payment per year.

What happens at the end of 12 months ?
After you have deposited your 12th payment i.e. the initial deposit being the first, followed by 11 Standing orders, your account will revert to normal monthly saver account and thus earn interest at the lower rate, hence forth. Most accounts will continue to accept standing orders at this new lower savings rate. With the interest credited on the account anniversary.

What Should I do on maturity ?
There is no point in continuing paying monthly deposits into the monthly saver if it is no longer at the special rate thus the best thing to do is to close the account and open a new Regular Monthly Saver at the higher interest rate at either the current institution or another.

What do I do with the money from a matured Regular Monthly Saver ?
You would put the money into a high interest savings account preferably linked to a current account from where the standing orders would go into your new Monthly regular Saving accounts. This is called a feeder account, thus your lump sum will be earning interest at a high rate whilst it is feeding your Regular Monthly Saver.

Anything else I need to know?

  • Read the Terms and Conditions of your account for variations in the rules between providers.
Visit the ISA Forums for the latest in rates & accounts.
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3 Savings Accounts - No Limit
 

High interest Saving Accounts
The best accounts are usually the internet only accounts i.e. as operated by ING Direct and Intelligent Finance.

How Much Can I invest ?
Usually there is no effective limit, unless there is a special promotional offer i.e. cahoot ran an account last year that paid 5.65% on the first £50k.

How do I access my account ?
If you have opened an internet account, then you will normally only be able to access your account online, any withdrawals and deposits will have to be via online transfers from your current or other nominated bank account either with the same or different institution.

I'm a none tax payer, what happens to my interest rate ?
If your a none tax payer, then ensure you fill in form R85 on account opening, to get the interest credited to your account gross. Alternatively you can complete form R40 at the end of the tax year.

Anything else I need to know?

  • Read the Terms and Conditions of your account for variations in the rules between providers, as if you have a bonus rate, there may be a special condition attached to the bonus, i.e. you may only be allowed 1 withdrawal within a specified period from account opening.
Visit the Savings Forums for the latest in rates & accounts.

 

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