HSBC 10% AER/gross Saving

Paulo_Monteiro

Hi all,


I'm currently looking to open a savings account and I found an HSBC Fixed Rate Regular Saver account that promotes an 10% AER/gross Saving.


http://www.hsbc.co.uk/1/2/personal/savings/regular-saver;jsessionid=0000DWD0tU4VbNn21X9cPWTIJkJ:12c5b13pa

I now that compound interest rates come in place and that this is not tax free, but I don't get I they say that at 10% interest, you will earn approximately £163 interest (gross).

Can someone explain it to me, using financial mathematics?
If I'm thinking to make monthly regular saving of 250 pounds every month how much should I get in 1 year time?


PV = 250
i = 10%
n = 12 months

FV ?

Can someone explain me?

YorkshireBoy

(12 x £250) x 10% / 12 x 6.5 = £162.50 gross

I don't think "compound interest" comes into play because the interest, although accruing daily, isn't paid until the account matures.

bitterSTAR

You must have a qualifying HSBC current account to get the 10% interest, ie HSBC plus which costs £12.95 a month. (In case you were not aware)

Paul_Herring

YorkshireBoy wrote: »

(12 x £250) x 10% / 12 x 6.5 = £162.50 gross

And before people start asking about that 6.5:

The first £250 is in there for 12 months out of the 12. The second £250 is in there for only 11 months out of the 12, the third for 10... and the last for 1 month out of the 12.

12/12 + 11/12 + 10/12... 1/12 = 78/12 = 6.5.

Robert_Sterling_3

£162.50 is a pretty good approximation to the correct answer.

It is pretty good but all people having such an account will not all get the same amount of interest.

Here is a little test for you to see if you know your onions.

Why is it that two people can get different amounts from this account?

This question also appears in the "No Orchids for Miss Blandish" thread in the Money Savers Arms forum.

SoloSailor

Also spotted this one. You can still get a reasonable rate by just opening
a normal current account and crediting £500/month as well as
the regular saver account. Then set up a standing order to move £250
into the regular saver, then move the other £250 back out....

8% for non tax payers..where else can you get this rate?
6.4 for tax payers, I think that works out too.

Obviously a few hoops to jump through...to get this rate...

apt

£50 cashback from Topcashback is a further incentive to go for the HSBC Advance account plus the 8% Regular Saver.

SoloSailor

Good point APT