Monthly or Annual Interest ???
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david_sills wrote: »I have several isa's but at some stage in the near future I would like to transfer the savings into something which will provide a monthly income in retirment...........is there such a thing as a monthly income cash isa?
David Sills
You can get monthly income from a cash ISA, but I would suggest that it is a very poor way to finance retirement. The interest rates are relatively low and you have no protection from inflation whatsoever. Your capital remains constant and therefore steadily devalues in real terms.
Also of course, you can only put £5K/year into a cash ISA.
Other and better (IMHO) options include annuities, dividend paying shares and income funds all of which should provide a better return than a cash ISA.0 -
londoner01 wrote: »Similar problem, still none the wiser.
I'm considering opening an easy access saver to drip-feed another savings account.
This easy access saver has the option of having my interest paid in annually, or monthly.
Monthly interest is at 3,06% AER, and annual interest is at 3,10% AER. If you want more info, the account is a Santander esaver Issue 4 (newbie can't link apparently).
I intend to deposit a bulk sum and have a net monthly "exit" from the account of about 4% of the bulk sum. I only plan to keep the account for just over a year because the bonus interest then drops.
Any Maths whizz that can show me some equation goodness? I would probably understand them if someone showed them to me but am unable to come up with them myself.
By the way I am a taxpayer at 20% if that makes a difference.
Thanks in advance and looking forward to some sexy Maths!
better to start your own thread
however an AER of 3.10% is better than an AER of 3.06% all other things being equal
on a 100 pounds saved for a year, you would be better off by £0.06 gross or £0.048 after tax0 -
Hmm - that's odd. That account says the AER is 3.10% for annual interest. For monthly, it says gross pa / AER = 3.06%. For monthly interest, gross pa does not equal AER. So I think what it probably means is the gross p.a. is 3.06% and the AER is 3.10%.
If the money is in for a whole year, the AER tells you the effective rate you're going to get - the compounding of the monthly interest ups the effective rate slightly. So if both have an AER of 3.10%, that's what you get.
But if you have the money in for less than a year, I reckon annual is slightly better, assuming both have the same AER. If you picture the balance in the account as a graph over time, the annual interest is a straight line over the year, but the monthly interest curves upwards, intersecting after a year. So between anniveraries, the line for annual interest is slightly above that of the monthly interest. (Most noticable at the start - after 1 month, the monthly account has had no time to compound to start making up the difference.)
I don't think the tax makes a difference. Monthly interest takes off the tax slightly sooner, but the taxable bit grows exponentially too - all the maths is linear so you can think of splitting the money into your bit and the taxman's bit, and they grow independently within the account.0 -
I have seen that ING Direct offer 5% interest
sorry where does it say that?, i see they only have 3%
http://www.ingdirect.co.uk/savings/0 -
I have seen that ING Direct offer 5% interest
sorry where does it say that?, i see they only have 3%
http://www.ingdirect.co.uk/savings/
Look at the date of the post, 31-03-2005, nearly seven years ago.0
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