Halifax 7%

Bitstring , from the wonderful person GPG said

No, but given the upper limit is £250/month, for a 1 year duration, it would appear to be hardly worth the hassle for most of the denizens of this NG.

"GSV Three Minds in a Can" wrote

On that logic, do we all not bother getting cash ISA's as well? - because their limit is also 3000pa ...

Without a hint of irony, "Tim" astounded uk.finance on 26 Oct

Bitstring , from the wonderful person Tim said

With ISAs a) you can accumulate them over many years b) they have tax advantages

All the Halifax is offering you is 1.x% more than you can get elsewhere, for one year probably. After which they'll doubtless screw you with an instant access account offering 50% of sod-all.

Without a hint of irony, GSV Three Minds in a Can astounded uk.finance on 26 Oct 2004 by announcing:

For one year definitely. And you have to make regular payments of up to a maximum amount; you can't pay the lump sum in at the start.

Exactly. So let's forget the complication of tax. Let's say the best rate you can get elsewhere is 5%, and let's say you have £3000 sitting in such an account. So you transfer £250 each month from that account to Halifax, and at the end of the year, when Halifax pay you your interest and transfer the money into a (say) 3% account, you withdraw it all and put it back into the 5% account.

Now, how much will this "7%" account have been worth to you?

Well, had you left the £3000 in the 5% account, you'd have earned £150 interest, basically £12.50 a month if we forget about the complication of monthly compounding.

But as it is, losing £250 from the first account for month 1 reduces your £12.50 to £11.46, but instead you earn £1.46 at Halifax, which is a whopping 42p more, whoopee!

This difference goes up in month 2, because now your interest earnings on £500 will be 7/12% instead of 5/12%. You get 83p more in month 2. And so it goes on. In month 12 you earn 7/12% on the whole £3000 instead of just 5/12%: A whole £5!

On average, in fact, you earned £2.71 per month more at Halifax, a total of £32.50, which is a 22% improvement on the £150 you would have earned by staying put. But 22% of 5% is only barely more than

Roughly it's worth half the difference more to anyone switching funds.

This 7% account is of use only to *real* savers who can divert £250, or less, *from income* into such an account instead of into a 5% account. To them, the 7% account is indeed worth 2% more instead of just 1% more. But they're still only £32.50 better off.

We'll also forget the annoying fact that the money moved from the 5% a/c tot he 7% a/c is likely to earn 0% (being lost in limbo) for some numebr of days between 3 and 7.

Basically, as I said, and all but one person agreed, it really isn't worth the hassle unless you were already looking for a savings account and thing £250/month is lots of money. Which is the market Halifax were aiming for ... junior/beginner savers.

Now if Halifax was still a B/soc and there were some potential carpet bagging benefits ...

Good point, actually. Losing 5 days at 7% on £250 is 24p, each month. Over the year that adds up to almost £3, which is almost 10% of the maximum benefit of £32.50. And don't forget tax comes off, so it's going to be a close call as to whether the move would fund a bottle of M&C at the end of the year.

Mind you, you can avoid the loss (or reduce the number of days lost to at most one) by moving the money in actual tangible cash.

Just in case it wasn't obvious from my post, I fully agree that it's not worth moving funds from other savings. If you're saving anyway, it can't hurt to put up to £250pm into this than anything else, if you've exhausted your ISA allowance, and haven't got better fish to fry, like paying off loans.

In message , Ronald Raygun wrote

The Halifax already have a track record for transferring higher interest investments into accounts paying a lot less than 1%

The lazy investor may not reap the benefit of the 7% return.