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Santander 1|2|3 v The Rest (12 Oct 2016 update)

12 October 2016

Doing the sumsNo New Year cheer from TSB or Lloyds Banks.
First Santander announced they were slashing their Gross interest from 2.96% to 1.49% from 1 Nov. Now TSB & Lloyds have given notice that they both will be cutting interest rates by 2% in the New Year. This will affect TSB Classic Plus (& the new rate will only apply up to £1500) and Club Lloyds Current Accounts. So how will you and your partners £20,000 be affected? We've done the sums, again, to reflect these changes. Club Lloyds is no longer used in the calculation and is replaced by Bank of Scotland Classic Account with Vantage.

Let's see how the numbers will stack up after 8 January 2017;

Option One:
Putting all £20,000 in 1 Santander account;

Santander 1|2|3 current account pays 1.49% gross interest on £20,000 = £298 interest per year.
You have to pay £5 a month compulsory fee, so that's -£60 a year.
That brings the interest down to £238, which means a truer interest rate of 1.19% Gross.

Option Two:
By 'spreading' that £20,000 around, you could have;

3x (1 account each & 1 joint) Nationwide FlexDirect Accounts paying 4.89% interest on £7,500 = £366.75 interest per year.
3x (1 account each & 1 joint) TSB Classic Plus Accounts paying 2.96% interest on £4,500 = £133.20 interest per year.
1x Bank of Scotland Current Account with Vantage paying 2.96% Gross interest on £5,000 = £148 interest per year,
1x Tesco Bank Account paying 2.96% Gross interest on £3,000 = £88.80 interest per year.
The total interest when spread over these 8 accounts = £736.75, which is an average interest rate of approx 3.7% and £498.75 more interest than lumping it all in one Santander 1|2|3 account.

With either option you will need to set up 2 Direct Debits, as this is a condition for both the Santander & Bank of Scotland Accounts. You'll also need to meet minimum monthly payments (except Tesco where no minimum payment is required). For the Santander option it's £500, and for the 2nd 'spreading' option it varies between £500 & £1000, dependant on the Bank. But that can also be done with £500 and move it around, multiple times when required, by setting up standing orders between the different banks and accounts. Worth the extra effort for nearly £500 more interest.

If you've got different requirements let us know and we'll find the best options currently available to you.

(Visitor) 'M' (name witheld to protect privacy) commented :
What would you recommend if a joint married couple who trust each other with the money have ***** in savings. What is the best way to earn interest at the moment we have it in ***** accounts but wondering if there is a better way of getting interest on it. Thanks
(Administrator) BlogMan replied :
Hi 'M', Thanks for your enquiry. I've blanked out some of your personal details to maintain confidentiality. If you'd like to message me again with your email address I'll send you a private, personal and free suggestion to suit your circumstances.

(Visitor) Richard commented :
The two direct debits for each account are a barrier to stop people having multiple accounts how do you get all of the active monthly direct debits for each account that you need to spread £20000 and any more it is impossible.
(Administrator) BlogMan replied :
Hi Richard. Yes some of the hoops banks want us to go through can be restrictive... the big Banks have had easy access to cheap money from the Government and the Bank of England which means that they do not have to rely on our deposits, so yeah they put these conditions in place to restrict us, and to even discourage to many of us subscribing into them. In the above comparison you only need to setup 2 direct debits in total for either option. If you don't have 2, or have an additional account that also need direct debits, then you could consider setting up payments to charities. For example Barnardo's and the RSPCA allow you to setup Direct Debits of just £1 per month. So having £5000 in a Bank of Scotland current account with Vantage would result in you getting an average of just over £12.30 interest each month of which £2 would go to good causes.

(Visitor) Martin commented :
Good blog. However when you make these calculations, please don't assume that everyone has a partner and so can have joint accounts. It would be good if you worked out examples and advice for the many single investors out there.
(Administrator) BlogMan replied :
You're right Martin more comparisons are required. So I'll be doing more, and from the single investor perspective too. UPDATE 2 Nov: There is now a comparison for the individual saver in the blog article Santander 1|2|3 v The Rest - for the individual saver.

(Visitor) Sean commented :
This is a misleading comparison, though. First, it assumes that two individual and one joint account are possible, in other words it assumes savings from a couple (or at least, two people who trust each other and can comply with requirements for joint accounts). Second, it's only short term, as the FlexDirect at least only earns interest for the first year; after a year, you have to hunt around and switch again to maintain the rate. Great that someone's doing the comparisons, but all the limitations should be stated.
(Administrator) BlogMan replied :
Thanks for your feedback Sean, I very much appreciate your input. True, these comparisons are based on a couple. Its aim was to show that rather than putting all £20,000 (if you're lucky to have that sum between you) in a Santander 1|2|3 account that you could make a lot more by spreading it around different providers. Yes it does take a little effort initially, and yes the FlexDirect 5% is only for the first year. But if you're serious about making (safe) money then you must be prepared to 'hunt' around for the best rates all of the time. That's why I have started this site, to try and help people find the best safe homes for their money, and alert them of where the best deals are, and show how the best deals can be achieved. It's great to get your comments, which I will use to improve and develop the site. I will start by doing a comparison for the individual saver very soon. UPDATE 2 Nov: There is now a comparison for the individual saver in the blog article Santander 1|2|3 v The Rest - for the individual saver.

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