This guide was written by Hatch. Copyright 2018. 1

An Insider’s Guide to Savings

This guide was written by Hatch. Copyright 2018. 2

Introduction 3

How to use this guide 3

Section 1: When Should You NOT Save? 4

Section 2: Why Do An Annual Review? 9

Section 3: Protecting Your Savings From Tax 11

Section 4: Taking Action: How To Optimise Your Savings 17

Contents

This guide was written by Hatch. Copyright 2018. 3

IntroductionMaking the most of your savings is one of the key ways to grow your wealth over time. Whether you’re looking to buy your first home or just saving for a rainy day, how you manage your savings can have an enormous impact on when you’ll be able to reach your goals.

However, like many areas of finance, working out where to keep your savings and when to switch accounts is not always a straightforward question. So much depends on your current circumstances, what you’re saving for and when you’ll need to withdraw your savings. We’ve put together this ‘insider’s guide’ to give you a better idea of what your options are and how to choose the best accounts for you.

By the end of this guide, you’ll understand:

● What types of savings accounts are available to you (and the pros and cons of each).

● Why it’s important to review your savings accounts every year.

● How to make sure your savings are protected from tax.

● How to review your savings and identify the best combination of accounts for you.

How To Use This GuideMore than anything, our goal is to give you practical guidance on how to find the best accounts and get the most out of your savings. We have done our best to explain any complex details clearly and added information to help you understand more about your options and how different accounts work. This will help if there are any specific issues that come up in the process of sorting out your savings.

However, you should feel free to skip to different sections of this guide as needed. If you want to understand the detail of different types of ISA (for example) then you can learn more in Section 3 below. However, if you’d rather just get stuck in, you can skip straight to section 4, “Taking Action” which will show you step by step how to optimise your savings.

We hope you find this guide helpful! If you have any questions or feedback, we’d love to hear it. Please send us an email at support@hatchplan.co.uk, or speak to your financial coach.

This guide was written by Hatch. Copyright 2018.

If you have any expensive debts (e.g. credit cards, overdraft or personal loans), you’ll almost certainly be better off paying off your debt as soon as you can, rather than adding to your savings accounts. The reason why is because most credit cards and loans will have a far higher interest rate on the debt than your savings account will give you - even if you get the best rates.

For example, a typical credit card might charge 18% interest on the amount you owe, while the very best savings accounts are currently no higher than 5%. Any money in your savings account would be completely undermined by the much higher growth of the debt on your credit card!

In contrast, by paying off your credit card as quickly as possible, you’ll limit the amount of time that your debt can grow through interest and end up much better off overall.

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Key Ideas

● You’re almost always better off repaying expensive debts instead of keeping your cash in a savings account.

● Some might be better off overpaying their mortgage too.

● Any savings you don’t need in the short term might be better off invested, rather than kept in a savings account.

When Should You NOT Save?

Section 1

Pay Off Expensive Debts

This guide was written by Hatch. Copyright 2018. 5

Exception #1 - Debt with low interest rates

Of course, this logic is reversed in cases where the interest on your debt is lower than the rate you could get in a good savings account. For instance there are some ‘Balance Transfer’ credit cards which will give you a 0% interest rate for a set period of time. In this case, you would be better off contributing to a savings account (as long as you don’t forget to pay off the outstanding amount before the 0% rate expires!)

Exception #2 - If paying off the debt would leave you with no access to funds in an emergency

Most of the time it still makes sense to pay off your expensive debt, even if it would leave you with no cash emergency fund at all. After all, if you used all your savings to pay off a credit card and then an emergency came up, you would still have your credit card available to cover the cost. While that would mean adding more debt to pay off, you’ll still end up better off than if you tried to keep some cash savings and left your existing debt to build up interest.

The key assumption here is that you would still have some access to funds in an emergency, even if you end up having to use your credit card or overdraft. If the debt you have is a personal loan and you don’t have a credit card or overdraft then you would not automatically have access to credit, and you could find it difficult to get access to funds if an emergency does come up.

Therefore, if paying off your expensive debt means that you wouldn’t have access to any funds in an emergency (including a credit card or overdraft), it’s certainly a good idea to keep some savings in cash rather than risk finding yourself in a desperate situation.

Overpaying Your MortgageIf you have a mortgage you could also consider using your savings to overpay your mortgage instead of keeping them in a savings account. Just like other types of debt mentioned above, if the interest rate on your mortgage is higher than the interest you could earn with a good savings account then you are better off paying off the mortgage as much as you can instead of keeping the cash in savings.

The advantages of overpaying your mortgage are clear - by paying more of the mortgage you’ll reduce the time it takes to pay it all off and lower the total amount of interest you pay, saving thousands over the long term. You’ll also be able to get a much better deal when it’s time to remortgage - the smaller your outstanding mortgage is compared to the value of your property, the better interest rate you can access.

This guide was written by Hatch. Copyright 2018.

You would need to find a savings account at least matching your mortgage rate in order to get the same benefit. For instance if your mortgage rate is 3%, you would need to be getting at least 3% interest on your savings to be equally well off (from a purely financial point of view - see below for important things to keep in mind!)

Important Considerations

There are some important things to think about before you commit to overpaying your mortgage.

1. Check if your lender will charge you for overpayingMost lenders will allow you to overpay your mortgage by up to 10% each year, but this is not true in all cases. If your lender charges a fee when you overpay then you could end up worse off than if you had contributed to your savings instead! Rules will vary between lenders and between types of mortgage, so make sure to check the rules before you commit!

2. Will you end up replacing cheap debt with expensive debt?If you chose to overpay your mortgage instead of building an emergency fund you could end up replacing a relatively low cost debt (your mortgage) with much more expensive debt (e.g. credit card) if an emergency does come up.

For instance if you chose to use £1,000 to overpay your mortgage you would reduce the amount of interest you pay to the mortgage lender, but if you then needed to spend £1,000 on a credit card to replace your boiler you’ll almost certainly pay a much higher interest rate to your credit card company.

This could certainly undo all of the benefit of overpaying your mortgage in the first place, so you should consider building up an emergency fund before overpaying your mortgage.

3. Will you have enough in savings for your goals (and for emergencies)?When deciding what to do with your money it’s not always a simple case of comparing interest rates. Any money you use to overpay your mortgage is money that you can’t use towards your other financial goals (or use for day to day living). Given that mortgages are usually paid off over the course of decades, if you used all of your spare cash to overpay your mortgage instead of contributing to savings then you could end up being unable to afford the other goals you have!

In general with savings there is usually a trade off between interest rate and ‘liquidity’ (i.e. how easily and quickly you could spend your savings if you wanted to). Maybe in pure financial terms overpaying will leave you better off, but if it prevents you from doing the other thing you want to do in the meantime, then it may not be worth the cost. Ultimately it’s up to you to judge the right balance.

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This guide was written by Hatch. Copyright 2018. 7

4. You could be better off investing instead of saving OR overpayingIt could be the case that neither saving or overpaying your mortgage are the right option. Historically, investing your money has been the best way to grow your wealth over the long term. Even if overpaying your mortgage makes sense when compared with the best savings accounts, you could be even better off investing your spare cash in a diversified portfolio of investments. Please read below, or speak to your coach if you think investing might be the right option for you.

The final alternative to saving is investing your money instead. The difference between the two is that when you save your money in a savings account there is no chance that you’ll get back less than you put in. You’re contributing to a ‘pot’ and the bank rewards you for keeping your money there by paying a small amount in interest which grows your savings over time.

In contrast, when you invest your money you are buying assets (e.g. property, stocks and shares, etc) which you expect to go up in value. If the assets do go up in value then you can sell them later for a profit, but there’s always a risk that the assets could go down in value and so you get back less than you put in (or nothing at all).

So why do people bother investing their money if there’s a chance that they might not get their money back? Because when you invest sensibly, in return for taking on some risk you have the chance of growing your wealth much more significantly than cash savings, especially over the long term.

So, it’s important to find a balance between saving enough to cover your near term expenses and investing the rest of your savings for the medium and long term. Two important rules of thumb to help you decide whether you should be investing are:

#1 Only invest money you can afford to keep invested for at least 5 years

The trouble with investing is that in the short term no one can be certain whether a certain asset is going to go up or down in value. Every day global events can have an impact on the price of different types of assets. So, if you invested money today that you are going to need to use in 6 months (e.g. to buy a house), then you could find that a dip in the market leaves you with less money than you put in and so unable to afford your goals.

Instead, you should invest money with the long term in mind. Over the long term, a diversified portfolio of investments has tended to produce a decent return for investors, even though there are peaks and troughs along the way.

Saving VS Investing

This guide was written by Hatch. Copyright 2018. 8

#2 Make sure you have an emergency fund

As mentioned above, you should only invest money that you can afford to leave invested for a long period of time. So, that also means that you should have a plan for what you would do if there was an emergency and a sudden expense came up.

We usually recommend keeping at least 3 months salary in cash savings so that if you do have an emergency expense you don’t have to withdraw your investments (assuming that is even possible).

If you’d like to know more about the pros and cons of investing, and how to get started, please ask your financial coach!

This guide was written by Hatch. Copyright 2018. 9

Key Ideas

● The best savings accounts change often.

● Which accounts you should have depend on your circumstances and goals, which will often change too.

● The power of compound interest makes it worth your while.

There are three really important reasons that you should do a full review at least once per year.

#1 The best rates change often

There are dozens of factors that can impact what interest rates are offered by the banks, and the best rates can change surprisingly often. Some of the best interest rates currently available only last for a set period of time (typically 12 months) before dropping to a much lower rate.

Banks know that the vast majority of people don’t bother to switch savings accounts often so it is in their interest to offer a high interest rate to tempt you in, safe in the knowledge that you won’t bother switching when the rate drops to less than 1%.

By reviewing your savings accounts at least once per year you can make sure that you’re always getting the best rate on your savings which will leave you much better off in the long run.

Why Do An Annual Review?

Section 2

This guide was written by Hatch. Copyright 2018. 10

#2 The right account depends on your circumstances

There are many different types of savings accounts, and which one is right for you will depend on your current circumstances and goals. So, an additional reason to review your savings every year is to take into account the fact that circumstances, goals and priorities can change drastically from year to year.

#3 The power of compound interest

Sometimes it feels like switching accounts won’t make much difference. If, for example, you move from an account earning 0.5% to an account earning 2%, is that really worth it?

The real power of switching can be seen in comparing what happens if you keep getting the best rates over a long period of time.

Supposing you have £1,000 which you want to keep in savings for the next 10 years. The table below shows what would happen to your savings when you get different levels of interest rate on the account (assuming you had the same rate every year and made no withdrawls).

If you can keep your £1,000 savings in a 5% account every year for the next 10 years it will have grown by 62.9% overall, compared to just 5.1% overall if you stuck with the default interest rate of 0.5%. This is thanks to compound interest which is another way of saying that over time you will earn interest on your interest.

This means that getting even a 1% or 2% increase in your savings rate today can have a huge impact on the total growth of your savings over time. Surely that is worth one afternoon per year!

Interest rate each year Total after 10 yearsTotal growth of

savings

0.5% £1,051.14 5.11%

1% £1,104.62 10.46%

3% £1,343.92 34.39%

5% £1,628.89 62.89%

This guide was written by Hatch. Copyright 2018.

The good news is that since April 2016 the majority of people in the UK have not had to pay any tax on their savings thanks to the Personal Savings Allowance. This means that basic rate taxpayers can earn up to £1,000 of interest from their savings without having to pay any tax on their interest earnings. Higher rate taxpayers can earn up to £500 of interest before paying tax, while additional rate taxpayers don’t have any tax free allowance.

For example, if you earned 3% interest on £50,000 you would earn £1,500 in interest. For a basic rate taxpayer, the first £1,000 would be tax-free, but you would have to pay tax on the remaining £500. That means you’d owe £100 in tax (£500 X 20%) and so your total gain for the year would be £1,400.

A higher rate taxpayer earning would only get £500 tax free. The remaining £1,000 would be taxed at the higher rate of 40%, so your total gain for the year would be: £1,500 - (£1,000 X 40%) = £1,100.

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Key Ideas

● Most savers pay no tax at all thanks to the Personal Savings Allowance.

● You can save up to £20,000 per tax year in an Individual Savings Account (ISA) to permanently protect it from tax.

● Some ISAs come with special benefits for first time buyers.

Protecting Your Savings From Tax

Section 3

Up to £1,000 tax-free interest with the Personal Savings Allowance

This guide was written by Hatch. Copyright 2018.

As outlined above, the Personal Savings Allowance (PSA) means that most people won’t pay any tax on the interest they earn from their savings. It’s tempting therefore to think that ISAs are not as relevant as they once were. However ISAs are still important to consider for a few reasons.

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The great thing about the Personal Savings Allowance is that the vast majority will now pay no tax on their savings at all. Only those with a high amount in savings will earn enough interest to have to think about tax.

Whether or not the Personal Savings Allowance protects you from paying tax on your savings today, it’s important to know what an ISA is and how it works.

What is an ISA?

An Individual Savings Account (or ‘ISA’ for short) is essentially a ‘wrapper’ that protects your savings from being taxed, now or in the future (for as long as you keep the money in your ISA accounts). Any interest you earn from savings in an ISA will not count towards your Personal Savings Allowance. So, a basic rate taxpayer could earn interest from savings in their ISA and still be able to earn up to £1,000 interest tax free from other savings accounts.

Each year the government sets a limit for the amount of money you can add to your ISA accounts in total - currently this limit is set at £20,000. You can save into just one ISA, or split your savings across ISAs of different types (see below).

Crucially, your annual allowance does not roll over from one year to the next so if you don't make the most of your ISA allowance this tax year, you won't be able to make up for it next year. The deadline for adding money to your various ISAs is April 5th.

Why is saving in an ISA important?

The main benefit of contributing to an ISA is that any money you add will not be taxed for as long as you keep it in an ISA. Although in a single year this might not seem like much, it can add up to make you thousands of pounds better off in the long run.

Protect up to £20,000 per year with an ISA

ISAs and the Personal Savings Allowance

This guide was written by Hatch. Copyright 2018.

There are several types of ISA that you should be aware of. You can contribute to only one of each type each tax year, but it is possible to transfer ISAs at any time (with a couple of exceptions).

Cash ISAs - Money that you add to these accounts will be kept as cash and any interest you earn from savings in a cash ISA will not be taxed. You can choose between 'Variable Rate' or 'Fixed Rate' accounts.

With a variable rate Cash ISA, the interest rate can change at any time, for instance if there are changes to the economy. However, you can also withdraw your money at any time.

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#1 Planning ahead

At the moment the majority of people won’t pay tax because savings interest rates are at historic lows, which means you’re unlikely to earn enough interest to go over the tax-free limit (at least for basic rate taxpayers). However, things could change quite quickly:

● If savings rates increase by only a couple of percentage points then you’ll earn significantly more interest.

● The government could lower the tax free allowance so that you have to pay tax from a lower amount of interest earned.

● If you expect to earn more money in the future then you could move up a tax bracket and so have a lower Personal Savings Allowance.

If you are close to your PSA limit then you may want to think ahead and use your ISA allowance now to make sure your savings are protected from tax for as long as possible.

#2 Higher rate taxpayers and big savers will hit the PSA limit quicker

For those in the higher rate tax bracket the Personal Savings Allowance is only £500 and so you’re much more likely to go over the limit in a single year. Additional rate taxpayers get no Personal Savings Allowance at all and so ISAs are the only way to protect their savings from tax.

#3 Special benefits of some ISAs

Some ISAs have special benefits that aren’t available with normal savings accounts. For instance the Lifetime ISA allows you to earn bonuses from the government if you’re a first time buyer looking to purchase a property. See below for more details.

Types of ISA

This guide was written by Hatch. Copyright 2018. 14

A fixed rate account can give you a better interest rate that is guaranteed for a period of time, but you would not be able to withdraw your money until the end of the fixed rate period.

Stocks and Shares ISAs - You can protect your investment returns from being taxed by investing using a Stocks and Shares ISA. Please ask your coach for more information about investing, and whether it is right for you.

Innovative Finance ISAs - These accounts are designed for people who would like to use 'peer to peer' loans or crowdfunding platforms. Any profit you earn from lending your money to someone or investing in a business through crowdfunding will be tax free.

Help to Buy ISA - The Help to Buy ISA is technically a Cash ISA, but with additional benefits and rules designed to help first time buyers afford their first property.

When you use savings in a Help to Buy ISA to purchase your first property, the government will top up the amount you have saved by 25%, up to a maximum of £3,000. The catch is that you can only contribute £200 per month to a Help to Buy ISA (and £1,200 in the first month you open the account).

Since a Help to Buy ISA is actually a special type of Cash ISA, you cannot contribute to both a Help to Buy and normal Cash ISA in the same tax year.

N.B. The Help to Buy ISA Scheme is now CLOSED to new applicants. If you have a Help to Buy ISA account already then you may still use it to buy your first property, but you can’t open a new account.

Lifetime ISA - Like the Help to Buy ISA mentioned above, the Lifetime ISA can be used to help you purchase your first home if you are a first time buyer. Any money you add to a Lifetime ISA will get a 25% bonus from the government - a very generous bump to your house deposit!

The catch is that you can only contribute up to £4,000 per year and if you don't use your Lifetime ISA to purchase your first property then you won't be able to access any of your savings until you are 60 without incurring a hefty penalty.

If you do need to withdraw your money before age 60 then you'll pay a penalty of 25%, which could mean that you end up with less than you initially contributed. For example if you add £100 to a Lifetime ISA, the government would add 25%, leaving you with £125. When you withdraw early, the government takes back 25% which means you lose £31.25, and you end up with £93.75 - about 6% less than what you started with!

Given the particular rules around the Lifetime ISA it's important to make sure it's right for you before you start contributing.

This guide was written by Hatch. Copyright 2018.

If you are a first time buyer looking to purchase a property then opening either a Help to Buy ISA or a Lifetime ISA should be a no brainer. With both accounts you can earn bonuses from the government which will help with your home purchase, but there are additional limits and rules you should be aware of.

N.B. The Help to Buy ISA Scheme is now CLOSED to new applicants. If you have a Help to Buy ISA account already then you may still use it to buy your first property, but you can’t open a new account. We have kept this section for the benefit of any clients with an existing H2B ISA Account.

The Help to Buy ISA is probably right for you if:

● You are planning to buy a house in less than 12 months.The Lifetime ISA requires a one year wait before any bonus is paid so if you’re looking to buy soon then it’s not a good option. The Help to Buy ISA bonus can be used as soon as you have at least £1,600 in your account, which could be as soon as three months if you put in as much as possible.

● You might need to access the savings for something other than buying a house.You can withdraw your savings from a Help to Buy ISA whenever you like - you just won’t get the bonus that you would have done if you used it to buy a house. In contrast, you shouldn’t withdraw any money from a Lifetime ISA unless it’s to buy a house or until after age 60. If you do, you’ll have to pay a massive penalty of 25% which could mean you could get back less than you contributed! So, if you’re not sure whether you want to buy a house, or you might need that money for something else, a Help to Buy ISA is a better choice for you.

● You are aged 40 or older.You can only open a Lifetime ISA if you are aged between 18 and 39, so if you’re looking to buy your first property and you’re currently older than 39 then the Help to Buy ISA is your only option.

● You have no more than £200/month to contribute to your house deposit.You can only contribute £200 to a Help to Buy ISA each month, so if you’re unlikely to be able to save more than that each month then a Help to Buy ISA is definitely sufficient for your needs.

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Which ISA is right for first time buyers?

This guide was written by Hatch. Copyright 2018. 16

The Lifetime ISA is probably right for you if:

● You want to contribute more than £2,400 per year to save towards your house.For example, if you’re planning to save £8,000 over the next two years then you’ll usually be better off using a Lifetime ISA rather than Help to Buy. Since the amount you can save is so much higher, you’re getting the government bonus on a much bigger pot, and therefore a better overall return.

● You will want to purchase a property worth more than £250,000 and it’s outside of London.With the Help to Buy ISA you can only get the government bonus if the property you’re buying is worth £250,000 or less, except if it’s in London where it goes up to £450,000. However, the Lifetime ISA has the same £450,000 limit across the country. So if you’re not in London and you want to buy a house worth more than £250,000 a Lifetime ISA is the only way to get a government bonus.

● You are sure that you won’t need your LISA contributions for anything other than purchasing a property or retirement.You can only withdraw your Lifetime ISA savings without a big penalty when you use it to purchase your first property or at retirement. If there’s a chance that you won’t use your LISA to purchase a property then it would be safer to stick with a Help to Buy ISA.

Here is a table summarising the main differences:

Help to Buy ISA Lifetime ISA

How much can you save?

Up to £1,200 in the first month.Up to £200/month after that.

So, max is £2,400/year (£3,400 in year one).

£4,000/tax yearNo minimum or maximum per month.

Government bonusWhen you buy a house, the state will add 25%

to the total in your HtB ISA.25% bonus is paid on any contributions.

Minimum amount needed to get the

bonus?£1,600 £1

Maximum bonus£3,000

(You would need £12,000 or more in your ISA to get this).

£1,000 per year(You can only contribute and earn a

bonus up to age 50).

Max. Property Value£250,000

or£450,000 in London

£450,000 UK wide

Easy Access to Savings?

Yes. You can withdraw your money at any time, but if you’re not using it to buy an

eligible property, you won’t get the bonus.

No. If you don’t use the money to buy a property then you can’t withdraw until you’re 60. If you do withdraw you’ll pay a penalty of 25%, which could leave you

with less than you contributed.

This guide was written by Hatch. Copyright 2018.

Key Ideas

● Your general goal should be to keep your savings in accounts with the highest interest rate possible.

● There is always a trade off between convenience and interest rate. Lock money away to get a higher rate, but be careful not to go too far.

● If in doubt, keep things simple. You can make a massive improvement without being perfect.

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Making sure your savings are in the best accounts is not a difficult process, but often requires a bit of time and research. So, make yourself a cup of tea and spend an hour or so following our step by step guide below!

We’ll assume that you have paid off any expensive debts, and you have an up to date financial plan which shows how much you should be saving (as opposed to investing).

The first step is to pull together information about your current savings accounts. This will help you work out which accounts you should keep and which you should switch, so it’s worth spending the time putting together a complete list.

Important: We are at this point only thinking about types of savings accounts. If you have any investments (e.g. P2P Lending, Stocks and Shares ISA, Pensions), you should not include them in your savings review.

Taking Action: How To Optimise Your Savings

Section 4

Step 1: Gather information about your current savings

This guide was written by Hatch. Copyright 2018. 18

Here’s the information you should make a note of:

● Bank - e.g. Santander● Account Type - e.g. Current Account● Amount in that account today - e.g. £10,000● Interest Rate - e.g. 1.5%● How much you contribute to that account each month - e.g. £200/month● Term. How long the money is locked away for - e.g. 1 year

If you don’t know what the interest rate is for any of your accounts you can try logging in to your online banking account, searching your emails for information they sent when you opened the account, or simply googling the name of the account.

You’ll end up with a table looking something like this:

Name / Provider Amount Type of AccountInterest

RateMonthly

ContributionTerm

Santander 123 Account £10,000 Current Account 1.5% £0 0

Once you’ve completed the list, you’ll have a full overview of where your existing savings are, what types of account you have, the interest rate and whether your savings are locked away for a period of time.

When it comes to savings there is almost always a tradeoff between accessibility and interest rate. If you’re willing and able to lock your money away for a period of time, you’ll be rewarded with a higher interest rate. However, you’ll need to be careful not to lock away money that you are going to need to spend.

The next step in optimising your savings is to calculate how much money you need to keep in accounts that you can access and how much you can afford to lock away in accounts for a number of years.

Step 2: Calculate how much you need to access in different timeframes

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Calculating the amount you should keep in easy access accounts

How much do you need as an Emergency Fund?

We usually recommend that an emergency fund should be approximately 3 months salary, but it could be more or less depending on your personal circumstances and level of caution.

If you are particularly cautious then you may feel like 6 or even 12 months salary would make you feel more secure. On the other hand, if you currently don’t have much in savings then it can take a number of years to build up such a large emergency fund.

How much will you need for your goals in the next 12 months?

Next, think about how much of your savings you might want or need to spend in the next 12 months. If you have a big purchase coming up then you’ll obviously need to make sure that you can access the money you need to afford it!

Don’t forget to include things like summer holidays, christmas presents and large annual expenses (e.g. gym memberships or car insurance) which can easily be forgotten when you’re only thinking of day to day expenses. If in doubt, it’s better to overestimate the amount you need easy access to than to find out that you can’t access your savings when you need them.

Calculating the amount you could lock away for a year or more

How much will you need to have available in 1 year? (And in later years?)

Any savings that you don’t need to keep in an easy access account can instead be locked up for a year or more, in return for a higher interest rate. Both Bonds and Fixed Rate Cash ISAs offer higher interest rates the longer you’re willing to keep your money locked away.

However, there are two reasons to be extra careful about locking your money away:

● You could lock away money that you end up needing. Our circumstances and priorities can change quickly, so even if you have got a sufficient emergency fund, we would recommend thinking carefully before locking your savings away for more than 2 years, particularly if you think your circumstances could change significantly in the near future.

● The best interest rates available will change over time as the economy grows more or less quickly. In recent years interest rates have been extraordinarily low when compared with average rates over the last few decades. While locking your money away is a good way to guarantee a good rate, it also means that if interest rates do go up significantly you wouldn’t be able to take your savings out and take advantage of even better accounts.

This guide was written by Hatch. Copyright 2018. 20

Goals that are 5 years or more away

If you are saving towards a goal that is more than 5 years away then you should be looking at investing your money instead of keeping it in savings accounts. Investing usually gives you much better returns over the long term than savings accounts.

If you’d like to learn more about investing, please talk to your financial coach.

Account Type

Advantages Disadvantages Best for you when...View the

Best Rates

Help to Buy ISAs

- When you use a Help to Buy ISA to put down a house deposit the government will give a 25% bonus, up to £3,000

- Easy access - you can withdraw your cash at any time

- You can only contribute £200/month (£1,200 in month 1)

- Interest rates not as high as regular savers

- Government bonus only available to first time buyers purchasing a property worth up to £250,000 (£450,000 in London)

- You're a first time buyer looking to purchase your first property for up to £250,000 (or £450,000 in London)

- You might need access to your savings for something other than buying a property

Now CLOSED to new

applicants

Once you have a summary of where your savings are today and how much you’ll need for different time frames, you can start identifying which accounts are the best ones for you!

A) First time buyers

If you are looking to purchase your first property then your first port of call should be to make sure you are making the most of either the Help to Buy ISA or a Lifetime ISA (but not both!)

Both accounts allow you to get a government bonus which will help you afford the deposit on your first property so it’s absolutely a no-brainer to take advantage of that as much as you can before contributing to other accounts. However, you can only use one of them when buying your first property, so don’t waste your money by opening and contributing to both at the same time.

See above for a full explanation of how to decide which account is right for you.

Step 3: Identify the best accounts

This guide was written by Hatch. Copyright 2018.

B) Accounts you can access easily

Top Tips For Choosing The Best Accounts

● Are there any special conditions to earn the top interest rate?Some accounts with the best rates have strict criteria and requirements you need to comply with to earn the full interest. For example at the time of writing, the Nationwide FlexDirect Current Account offers a fantastic 5% interest rate, but only on the first £2,500. Plus, you need to deposit £1,000 per month into that account to keep the high interest rate.

That doesn’t mean that you shouldn’t take advantage of these great accounts! Just make sure you know about any special conditions that apply before opening the account.

● How long does the rate last?Many current accounts and regular saver accounts offer a great interest rate as an introductory bonus to get you to open an account, but then revert to a very low default rate after a year. Again, this doesn’t mean you shouldn’t use them to get the best rates, but you should keep it in mind when it’s time for your annual review next year.

● Can you open and manage the account online?Some accounts can only be opened by going into a bank branch during opening hours. Given how often we put off switching our savings accounts in general - we strongly recommend you keep your savings in accounts that can be managed online.

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Account Type

Advantages Disadvantages Best for you when...View the

Best Rates

Lifetime ISAs

- Government pays 25% bonus on any contributions.- Get the bonus on up to £4,000 per year (far higher than Help to Buy limit).

- Only available for 18-39 year olds.- Can only be withdrawn for use as a house deposit for first time buyers, or at retirement.- Withdrawing for any other reason will incur penalty of 25%.- Limit of £4,000 contributions per year.- Account must be open for at least one year before it can be used towards house deposit.

- You are a first time buyer looking to purchase your first property for up to £450,000 (anywhere in the UK).- You definitely won't need the money for anything other than a house deposit until you reach retirement.

View Lifetime ISAs

This guide was written by Hatch. Copyright 2018.

● Your accounts don’t have to be perfect to be significantly improved.It’s easy to get overwhelmed by the many possible combination of accounts that are available. Getting the maximum possible interest could require opening several new accounts, and keeping a close eye on how much money is added to which account each month. However, if that sounds a bit too complicated, don’t let that put you off making no changes at all!

If you have one high interest current account with a regular saver at the same bank, and then put the rest in the best easy access account, you’ll be significantly better off than taking no action at all and letting your savings accounts default to almost 0% interest.

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Choosing The Best Easy Access Accounts

Below is a table outlining the types of accounts that allow you to withdraw your money at short notice, in order of where the best interest rates can be found.

Account Type

Advantages DisadvantagesBest for you

when...View the

Best Rates

Current Accounts

- You can deposit or withdraw when you like.

- Often have the best interest rates available (up to 5%).

- Some accounts have strict requirements in order to earn the high interest rate e.g. must deposit a certain amount each month and/or have a number of direct debits set up from this account.- High interest rates usually apply only up to a certain limit. E.g. 5% on the first £2,500.

- You want to get the best rates.- You can meet the list of requirements e.g. amount deposited each month.

View Current Accounts

Regular Savers

- Some of the best interest rates available on the market (up to 5%).

- Can only add a limited amount each month (between £150 and £250, depending on the provider).- Often restrictions apply e.g. You may have to have a current account from the same provider.- High rates usually last for no longer than 12 months.- Some accounts don't allow easy access until after the 12 months.

- You want to make regular contributions to your savings.

View Regular Savers

Notice Accounts

- Interest rates moderately better than easy access.- Notice period for withdrawals can help avoid dipping into savings.

- Must provide between 30 and 120 days notice before making a withdrawal.

- You want help to avoid dipping into your easy access savings. View Notice

Accounts

This guide was written by Hatch. Copyright 2018. 23

Account Type

Advantages DisadvantagesBest for you

when...View the

Best Rates

Cash ISAs

- Protect your savings from tax for as long as you keep it in an ISA.

- Variable Rate ISAs give you easy access, but interest rates are generally lower.- Variable Rate ISAs can change interest rate at any time.

- You're a big saver or high earner who expects to exceed the Personal Savings Allowance.

View Variable Rate ISAs

Easy Access

- You can withdraw savings whenever you need it.

- Often have the lowest rates of any savings accounts.- Those with higher interest rates usually last only for a short term.

- You need easy access to your savings.

View Easy Access

Accounts

C) Locking your money away for a year or more

Finally, for the savings that you won’t need for a year or longer, pick the best fixed term Bond or Fixed Term Cash ISA to lock your money away and get a higher interest rate.

In general, fixed term bonds will give you a higher interest rate, but if you’re a big saver or a higher rate taxpayer (i.e. you’re at risk of going over the Personal Savings Allowance) then you might still be better off using a Fixed Rate Cash ISA instead.

Below are the accounts that will give you the best rates:

Account Type

Advantages Disadvantages Best for you when...View the

Best Rates

Bonds

- Earn higher interest rates in return for locking cash away for a number of years (generally the longer the term, the higher the interest).

- Fixed interest rate means that you know what you'll earn for a period of time.

- Can lock in good interest rates for up to 5 years.

- No access to your savings until the end of the fixed term (between 1 and 5 years).

- If interest rates rise you won't be able to switch to a better rate until the end of the term.

- Some have minimum deposit amounts of more than £1,000.

- You can afford to lock money away for a number of years.

- You have an easy access emergency fund in another account.

- You have a large amount in savings.

View Bonds

Cash ISAs

- Protect your savings from tax for as long as you keep it in an ISA.

- Fixed Rate ISAs offer higher interest in return for locking money away.

- Fixed Rate ISAs give higher interest than Variable Rate ISAs but you must lock money away.

- You're a big saver or high earner who expects to exceed the Personal Savings Allowance. View Fixed

Rate ISAs

This guide was written by Hatch. Copyright 2018. 24

Once you’ve got your list of accounts, it’s time to start opening the new accounts and moving your savings into the right places!

If you’ve chosen accounts that can be opened and managed online, then the whole process can be very quick and painless. Below are a couple of top tips to make sure it goes smoothly.

Make sure you transfer your ISAs, DON’T withdraw the money

If you want to move an existing ISA to a better account you should make sure to transfer the ISA across and never withdraw the money from the ISA yourself.

Withdrawing savings from an ISA and then putting it in a new ISA account yourself would use up your ISA allowance since it would look like a new contribution. You would therefore be lowering the total amount of new contributions you could add to an ISA this tax year.

Instead, all banks and providers will have a process that allows you to transfer in an existing ISA. This will keep your savings protected from tax and you will still be able to add in up to £20,000 of new contributions to your ISAs.

The Current Account Switching Service makes things easy

The Current Account Switching Service was introduced in 2013 and makes switching your current account really easy. When you use this service, your new bank or building society will guarantee to move everything across from your old bank within 7 days (not including weekends or bank holidays).

Even better, they will make sure all of your direct debits and standing orders are transferred to your new account and set up to continue as normal. Finally, any payments that come in to your old account will be automatically sent to your new account for 36 months after the switching date. If you’re switching your current account and want to make sure it’s as smooth as possible - take advantage of the Current Account Switching Service!

Set a reminder to review your accounts next year

Banks and building societies change their interest rates all the time, and so what’s a top rate today might look average in the future. In addition, some of the accounts with the best rates revert to a much lower one after the first year.

By setting a reminder now for next year, you’ll know that there’s no chance you will forget to review your accounts and end up missing out on several months interest unnecessarily.

Step 4: Start switching!