📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!

Regular Savings Accounts - not as good as it seems

Options
2

Comments

  • LongTermLurker
    LongTermLurker Posts: 1,998 Forumite
    Part of the Furniture 1,000 Posts Combo Breaker
    You haven't thought this through very well have you? If I take money from a 6.5% paying 'clean' account and put it in a 10% paying 'regular saver' account, my aggregate interest rate is around 8.4% on the amount moved.

    Now, and especially if you are retired, which would you rather have?...6.5% or 8.4% ?
    And let's say you had £12000 in a 6.5% paying account, you could slide £500pm across to Halifax RS at 10%, another £250pm to A&L at 12% and another £250 to Barclays at 7.75% - the average rate on all the regular savers would be 9.9% and you would still be getting 6.5% on the chunk that hadn't moved yet - so I guess that means you're getting an overall average of 8.4% on £12000.

    And let's take it further, let's say you have £17k - you could tie up £5k for a year in the Hx GS a/c and get 12% on the Halifax RS, giving you £750pm @ 12% and £250pm @ 7.75%. That's nearly 11% on £1000 every month, 6.3% (flat 1 year term) on £5000 plus the original 6.5% holding area for the £12k - I'll let Milarky or YB work that lot out but it sounds as good as it gets to me :T
    You've never seen me, but I've been here all along - watching and learning...:cool:
  • YorkshireBoy
    YorkshireBoy Posts: 31,541 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    And let's take it further, let's say you have £17k - you could tie up £5k for a year in the Hx GS a/c and get 12% on the Halifax RS, giving you £750pm @ 12% and £250pm @ 7.75%. That's nearly 11% on £1000 every month, 6.3% (flat 1 year term) on £5000 plus the original 6.5% holding area for the £12k - I'll let Milarky or YB work that lot out but it sounds as good as it gets to me :T

    £6,000 x 12% / 12 x 6.5 = £390.00
    £6,000 x 6.5% / 12 x 5.5 = £178.75

    £3,000 x 12% / 12 x 6.5 = £195.00
    £3,000 x 6.5% / 12 x 5.5 = £89.37

    £3,000 x 7.75% / 12 x 6.5 = £125.94
    £3,000 x 6.5% / 12 x 5.5 = £89.37

    £5,000 x 6.25% = £312.50

    Total interest = £1,380.93

    Overall return = £1,380.93 / £17,000 = 8.12% gross

    Or £275.93 more than you would have had leaving it all in the 6.5% 'clean' account.
  • MiserlyMartin
    MiserlyMartin Posts: 2,284 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Combo Breaker
    Its funny that you are all discussing this account tonight because I was just trying to work out if it was worth the aggro of opening the Guaranteed Saver (6.25%) with the £5000 to get the 12% on the reg saver. My £5,000 for this would come from Kaupthing Edge currently paying 6.5%.

    I just tried to work out what the average rate would be with just the £11,000 invested in just the halifax accounts and I get 6.4%, this can't be right can it?
  • LongTermLurker
    LongTermLurker Posts: 1,998 Forumite
    Part of the Furniture 1,000 Posts Combo Breaker
    Its funny that you are all discussing this account tonight because I was just trying to work out if it was worth the aggro of opening the Guaranteed Saver (6.25%) with the £5000 to get the 12% on the reg saver. My £5,000 for this would come from Kaupthing Edge currently paying 6.5%.

    I just tried to work out what the average rate would be with just the £11,000 invested in just the halifax accounts and I get 6.4%, this can't be right can it?
    Taken from YB's figures above:

    £5,000 x 6.25% = £312.50 (relates to the GS account)

    £6,000 x 12% / 12 x 6.5 = £390.00 |_ relates to the Hx RS account
    £6,000 x 6.5% / 12 x 5.5 = £178.75 |

    so total interest = £881.25/£11000 = 8.01%

    £11000 @ 6.5% (KE) would gross you £715, so the Hx option would be £166.25 more (I think)
    You've never seen me, but I've been here all along - watching and learning...:cool:
  • LongTermLurker
    LongTermLurker Posts: 1,998 Forumite
    Part of the Furniture 1,000 Posts Combo Breaker
    £6,000 x 12% / 12 x 6.5 = £390.00
    £6,000 x 6.5% / 12 x 5.5 = £178.75
    I knew you'd rise to it ;)

    OK, what's the relationship of the 6.5 and 5.5 multiples above? Are you saying that the money spends just over half its time in the RS account and just under half in the feeder a/c?

    So (amount transferred x Hrate) / 12 = 1 month's interest at higher rate
    and multiply that by 6.5 months?

    Then adding (amount transferred x Lrate) / 12 = 1 month's interest at lower rate
    and multiply that by the remaining 5.5 months?

    Or am I just guessing...?
    You've never seen me, but I've been here all along - watching and learning...:cool:
  • LongTermLurker
    LongTermLurker Posts: 1,998 Forumite
    Part of the Furniture 1,000 Posts Combo Breaker
    martinman3 wrote: »
    You must be a non tax payer as those are gross figures, the gains for regular tax payers are 80% of that, for higher rate payers are 60% of that.
    I think they're right to quote gross rates - doesn't mean Milarky is a non taxpayer, but what he's doing (sorry if I've just re-assigned someone's gender again ;)) is giving you the option to adapt the figures to your circumstances and me to mine.

    All comparisons should be made against the AER and all banks quote the AER gross, they then take away the need for you to make your own tax calculations by providing the NET figure - your arguement is like saying "Banks are twisting the facts by not telling higher rate tax payers that they have to pay another 20% tax on top". All Milarky's omitted to do was work out your tax liability for you - I would have thought everyone was aware they had to pay tax on savings interest, unless tax exempt.
    You've never seen me, but I've been here all along - watching and learning...:cool:
  • YorkshireBoy
    YorkshireBoy Posts: 31,541 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    OK, what's the relationship of the 6.5 and 5.5 multiples above? Are you saying that the money spends just over half its time in the RS account and just under half in the feeder a/c?
    Exactly right. I'm no mathematician, but when others (that are) post formulae I either write it down or memorise it!

    I've never really been able to explain it as well as others but I *think* it comes from the fact that your first payment is in the reg saver for a full year, ie 12/12ths...the second for 11/12ths etc.

    So, 12/12 + 11/12 + .....2/12 + 1/12 = 78/12 or 6.5

    The feeder account doesn't have the 12/12ths (because your first payment leaves on day 1), so...

    11/12 + 10/12 + ......2/12 + 1/12 + 0/12 = 66/12 = 5.5


    Hopefully the mathematicians will spot any errors in the above. :o
  • LongTermLurker
    LongTermLurker Posts: 1,998 Forumite
    Part of the Furniture 1,000 Posts Combo Breaker
    I've never really been able to explain it as well as others but I *think* it comes from the fact that your first payment is in the reg saver for a full year, ie 12/12ths...the second for 11/12ths etc.

    So, 12/12 + 11/12 + .....2/12 + 1/12 = 78/12 or 6.5

    The feeder account doesn't have the 12/12ths (because your first payment leaves on day 1), so...

    11/12 + 10/12 + ......2/12 + 1/12 + 0/12 = 66/12 = 5.5
    Ah, that makes sense - and very well explained :T
    You've never seen me, but I've been here all along - watching and learning...:cool:
  • martinman3
    martinman3 Posts: 727 Forumite
    I think they're right to quote gross rates - doesn't mean Milarky is a non taxpayer, but what he's doing (sorry if I've just re-assigned someone's gender again ;)) is giving you the option to adapt the figures to your circumstances and me to mine.

    All comparisons should be made against the AER and all banks quote the AER gross, they then take away the need for you to make your own tax calculations by providing the NET figure - your arguement is like saying "Banks are twisting the facts by not telling higher rate tax payers that they have to pay another 20% tax on top". All Milarky's omitted to do was work out your tax liability for you - I would have thought everyone was aware they had to pay tax on savings interest, unless tax exempt.

    All true except Milarky had quoted gains in £ and these figures only applied to non-taxpayers. Once tax was taken off, for most people, you can see the actual gain in £.
  • I've been reading through this with intrest,I will soon have around £15,000.

    Is it best to invest this in 1 account or several smaller ones.

    Sorry for hijacking the post.
This discussion has been closed.
Meet your Ambassadors

🚀 Getting Started

Hi new member!

Our Getting Started Guide will help you get the most out of the Forum

Categories

  • All Categories
  • 351.1K Banking & Borrowing
  • 253.2K Reduce Debt & Boost Income
  • 453.6K Spending & Discounts
  • 244.1K Work, Benefits & Business
  • 599.1K Mortgages, Homes & Bills
  • 177K Life & Family
  • 257.4K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 16.1K Discuss & Feedback
  • 37.6K Read-Only Boards

Is this how you want to be seen?

We see you are using a default avatar. It takes only a few seconds to pick a picture.