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The best way to earn (decent) interest on a £4,000 balance

by Paul Work 15 February 2010 |

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I have a £4,000.00 balance that I want to invest for a year. The reason being is this capital should come off my mortgage, but as this is so low currently (2.09%) I have been looking to see if I can do better with savings %. THe best one I have found is the Alliance & Leicester Current Account that pays 6% on balances up to £2.5k. I can take one out in my name and one out in my wife's to gain 6% on all 4k. This also then opens the regular savers account for her (non-tax paying) at 6% also.

Does anyone have any comments / suggestions please?

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78

bellini posted
Hi Paul
Sounds like a good plan!
If you need any further inspiration, my colleague Rachel has written an article on the best places to invest and she's mentioned the A&L account here.
http://www.lovemoney.com/news/savings/the-top-six-places-to-invest-your-money-in-2010-4406.aspx
Regards,
Verity
Posted on 15 February 2010 | Love 1 love Report
804

MikeGG1 posted
Paul
I have been there and done it.
The interest gets added monthly and you have to transfer in £500 per month. You also need to maximise your wife's account and minimise yours because of tax.
Transfer £2,500 into her account and £1,500 into yours. That covers month 1. She can transfer £140 to the regular saver account which should be in her name.
At the beginning of month 2, transfer £500 into your account from your salary account and then transfer £627.50 from your new account to her new account. She again transfers £140 to her regular saver account and transfers £500 back to your salary account. The difference is made up by the interest paid. Don't forget her R85 to get it tax-free.
Repeat monthly and she will have about £1,730 in her regular saver and about £2,500 in her current account and you should have about £6 in your current account.
Only £9 tax would be deducted from gross interest of over £240.
Mike
Posted on 15 February 2010 | Love 0 loves Report
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Swarbs posted
Bear in mind that you have to pay £500 a month in to get the A&L account, else your interest reverts to 0.5%. One good option is to open an A&L account and the Halifax Reward Current Account for you and your wife. You then put £2k in each current account and set up monthly standing orders to transfer £1,000 from your A&L accounts into your Halifax accounts and then transfer it straight back again a couple of days after it arrives. You should be able to set these up on both accounts to run and run.
You will then get 6% interest on your £4k for a year, so around £240 gross, and £120 in rewards from Halifax (£60 per account), making a total of £360 - a 9% return in total. Ok, it would be a bit lower than that as some of the money wouldn't be in the A&L account the whole time, but it sounds worthwhile to me! Well, it would do, as I did this very thing throughout the whole of 2007!
Posted on 15 February 2010 | Love 1 love Report
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MikeGG1 posted
Why not get a Santander account as well and use the same money circulating round them all?
However, these offers only last for 12 months so it might be easier to do one this year and another next year. The other consideration is that A&L becomes part of Santander in October.
They may object to Swarbs suggestion of sending the money straight back because lots of people seem to be cottoning onto that idea. It would be better for one lot of money to do the round trip of all the accounts so that each account has the money coming in from one place and going on to another.
Santander and Halifax require £1,000 whereas A&L require £500, so you have alternative ways of circulating the money. I would suggest £1,000 from home a/c to Santander then to Halifax then half each to A&L and then 2 halves return to home a/c.
That also has the advantage of separating the Santander account from the A&L accounts.
If you do that, you would only transfer £127.50 from your A&L account to your wife's A&L account to allow for the £12.50 interest before she transfers it on to her Regular Saver.
Mike
Posted on 15 February 2010 | Love 1 love Report

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