Help required with Halifax 10% Regular saver

DOCSOC

Hi
Please can anyone assist - I opened a Halifax 10% Regular Saver on line. Visited a branch yesterday and discussed with a member of staff who showed me a declining rate of interest for this account. It commenced with 10% for first payment then decreased for the following 11 payments. It works out atabout 4.33% AER.
I am now confused - or is she. It is advertised as 10% AER and I said to her that it must breach the trade discriptions act if not giving 10% - she said they are - I said only for one month and then decreasing. Has anyone else comeacross this - I am on the point of cancelling before first first payment is made.
Thanks.

LongTermLurker

DOCSOC wrote: »

Hi
Please can anyone assist - I opened a Halifax 10% Regular Saver on line. Visited a branch yesterday and discussed with a member of staff who showed me a declining rate of interest for this account. It commenced with 10% for first payment then decreased for the following 11 payments. It works out atabout 4.33% AER.
I am now confused - or is she. It is advertised as 10% AER and I said to her that it must breach the trade discriptions act if not giving 10% - she said they are - I said only for one month and then decreasing. Has anyone else comeacross this - I am on the point of cancelling before first first payment is made.
Thanks.

It IS 10% AER, but remember that you will have £500 in for 12 months, another £500 in for 11 months, another £500 for 10 months ... and finally £500 for just 1 month - so on each £500 you will get 10% on the first, 11/12 of 10% on the second, 10/12 of 10% on the 3rd ... and 1/12 of 10% on the last (assumptions made). They aren't going to give you 10% of the full £6000, because you haven't had £6000 in the account for a full year. The percentage stays the same every month, but you only get interest on the portion you have already deposited.

It's no different to any regular savings account - the only way you beat it is if you have a lump sum that is deposited for the whole 12 months. Don't close it, it's a very good account. Hope that makes sense.

Darth_Calculus

Yes, as LongTermLurker suggests, the interest is calculated daily on the balance for each day, and for the first month (assuming a deposit of £500 p/m) you'll only have £500 in the account, for the next month you'll have £1000, etc.

This table explains it quite well, and reconciles to the "AER" that the branch member came to:

Date Deposit Months Interest (10%)
01/01/2008 £500 x 12/12 = £50.00
01/01/2008 £500 x 11/12 = £45.83
01/01/2008 £500 x 10/12 = £41.67
01/01/2008 £500 x 09/12 = £37.50
01/01/2008 £500 x 08/12 = £33.33
01/01/2008 £500 x 07/12 = £29.17
01/01/2008 £500 x 06/12 = £25.00
01/01/2008 £500 x 05/12 = £20.83
01/01/2008 £500 x 04/12 = £16.67
01/01/2008 £500 x 03/12 = £12.50
01/01/2008 £500 x 02/12 = £8.33
01/01/2008 £500 x 01/12 = £4.17
Total £6000 £325.00

£325 / £6000 = 5.42%, which after basic rate tax of 20% is 4.33%. Whilst this is technically correct, it is a silly way of looking at it, as this is how ALL savings accounts work; the basic premise being that the interest you get will broady be the weighted average balance x APR. If you start with nil in the account, and end up with £6000, then the average balance will be about £3000 (with evenly spread deposits), so you'd only expect to get £3000 x 10% = £300. (note the reason you get £325 in the example above, is because the deposits are NOT evenly spread: you pay £500 on "day 1" of each month, not "day 15", so you get an extra 1/2 month's interest)

So, as LTL suggests, this account is still worth going for.

James

UproarUK

4.33% assumes you already have the £6000 and do nothing with it apart from put £500 into the regular savings account each month. If you put the remainder in a top paying instant access savings account and transfer £500 accross each month you would earn much closer to the 10%.
See http://www.moneysavingexpert.com/savings/best-regular-savings-accounts#dripfeed

surreysaver

It does pay 10%. It is just not all you money is in it for a year. An account that pays 2% you will only receive 2% interest if your money is in it for a year. That is why it is called AER - Annual Equivelant Rate.

amz84uk

DOCSOC wrote: »

Hi
Visited a branch yesterday and discussed with a member of staff who showed me a declining rate of interest for this account. It commenced with 10% for first payment then decreased for the following 11 payments. It works out atabout 4.33% AER.
quote]

I noticed this strategy from Halifax 'sales staff'. They are attracting customers with the 10% advert, but they then try to fob customers off away from this 10% offer, and onto other products such as ISA Stocks, etc. I sent off my cancelation letter for the ISA Stocks on Friday.

Docsoc - this is a good 10% rate and to maximise the savings, drip-feed it from another high-savings account. This is what I am doing!

Don't be fobbed off by Halifax. I'm surprised that nobody has legally challenged Halifax using this approach by getting customers in, and then selling other products, which offer less profitable returns.

darude

Same thing happened to me, just say you're not looking to invest for any longer than a year and they won't bother you so much.

exel1966

The whole idea of organisations having these headline grabbing offers is to reel customers in to try and sell them their other products.
They are called loss-leaders and it happens across a wide spectrum ranging from supermarkets to banks.
The very simple way to overcome any sales tactics is to politely inform the c/s agent at the start of proceedings that you are not interested in any other products. I can't see a problem now !

As for the 10% AER. There's nothing misleading, no breaches of trade descriptions and every account holder will get exactly the 10% AER as has been detailed above.

Mistert_2

amz84uk wrote: »

DOCSOC wrote: »

Hi
Visited a branch yesterday and discussed with a member of staff who showed me a declining rate of interest for this account. It commenced with 10% for first payment then decreased for the following 11 payments. It works out atabout 4.33% AER.
quote]

I noticed this strategy from Halifax 'sales staff'. They are attracting customers with the 10% advert, but they then try to fob customers off away from this 10% offer, and onto other products such as ISA Stocks, etc. I sent off my cancelation letter for the ISA Stocks on Friday.

Docsoc - this is a good 10% rate and to maximise the savings, drip-feed it from another high-savings account. This is what I am doing!

Don't be fobbed off by Halifax. I'm surprised that nobody has legally challenged Halifax using this approach by getting customers in, and then selling other products, which offer less profitable returns.

Mistert - Don't see how 'drip-feeding' from another high-savings account gives you a better return over 12 months than the 4.74% gross that this Halifax 10% offer really adds up to. It's something dreamed up by a clever marketing set-up to grab the headlines. Better keeping your money in the higher-savings account surely?

LongTermLurker

Mistert wrote: »

Don't see how 'drip-feeding' from another high-savings account gives you a better return over 12 months than the 4.74% gross that this Halifax 10% offer really adds up to. It's something dreamed up by a clever marketing set-up to grab the headlines. Better keeping your money in the higher-savings account surely?

If you have £6000 in a 6.5% high interest instant access account, and one month you take out £500 and put that in a 10% regular saver, for that month you have £5500 @ 6.5% and £500 @ 10%

Do it again next month and you have £1000 earning 10%, etc

At the end of the year you'll have an average interest rate somewhere between 6.5% and 10% (I can't be bothered working it out, but many people have posted the formula on various threads.

(* edited first line to clarify)

amiehall

you're not comparing like with like.... i save my wages in regular savers, ie. i have the money about a week before it's in the regular saver. if you worked out the annual rate i'd get on a normal instant access account that paid 6.5% (or whatever....) then the return would be far lower, just because the interest rate is lower.... in fact i just worked it out, on wages paid in of £500 a month, you'd end up with 3.5% gross. i don't see what's so difficult. regular savers are easiest used with "new money" but it's undeniable that you'd make more by swapping existing money you have around with them too if the regular saver's at a higher interest rate than your normal savings account....