Both First Direct and HSBC offer Regular saver accounts with current rates of 6%. There are terms to make you work for this yield of course. With First Direct you have to hold a current account with them and pay in £1,000 per month (to waive the monthly fee) and with HSBC you need to hold an Advance account (which you need to pay in £1,750 a month into to qualify for).
AND you can’t access your money for a year, if you want the interest. Bastards.
What’s the benefit?
I could if I was so inclined, max out both regular savers. £250 for HSBC and £300 for First Direct, for 12 months each, by transferring cash from current cash savings into the regular savers.
The bulk of my cash savings are currently in the Santander 123 account, earning a nice 3% interest. Which if the current reports on inflation are to believed, it is about a 1.8% real return after tax.
So I can drip feed the regular savers from current savings.
The difference in interest earned on a 6% regular saver and a 3% normal account isn’t going to be quite double, as the contributions won’t be in the higher interest account for a full year. If we consider it in monthly chunks of £550, so both the HSBC and First Direct regular savers. The first £550 will get a years worth of 6% interest. The second £550 will get a month of 3% interest and then 11 months at 6% interest. The third will attract 2 months of interest at 3% and then 10 months at 6%. And so on.
The total interest earned is £303 (4.69%) when drip fed into the Regular Savers from the 3% account, or if the £6,600 was left at 30% it is £198. This is an extra £105 across the year with no tax deducted. Or approximately £84 after 20% tax or £63 after 40% tax.
What’s the faff?
Faff Factor 1 – Applying. Let’s say online forms fill you with rage and suspicion. So it takes half an hour to apply for each account. £84/£63 isn’t bad for an hours ‘work’.
Faff Factor 2 – More accounts. Another two accounts to keep track of. If you bank with either already, then less faff. If they are both new and it involves transferring money about each month and remembering two new internet banking ID’s then the faff factor is building. The amount of money I have pinging about between accounts would please a Cuban drug lord.
Faff Factor 3 – Reduced Liquidity. Not strictly true as you can access your savings at any time, but you forego any interest earned. As long as you have other savings then this is pretty insignificant.
Because you’re worth it?
£60+ for less than hours work makes it worth it for me. It does bring in another couple of accounts, but it’s free money so why not? I’ll take the small easy wins. They all add up.