Regular Saver interest rate

CloudRuler

Apologies if this has been asked before.
I'd like to know how to calculate the interest rate on the total amount deposited in a regular saver as if the money were deposited all at once. So for example if I were to deposit £250 per month in a 10% regular saver for 1yr, that would be the same as receiving what interest rate on £3000 deposited at once in a fixed rate bond for 1yr?

rb10

To calculate the interest you'd get, do

[interest rate]*[amount paid in per month]*6.5

which gives a good approximation, provided you've paid in the same amount on around the same day each month.

So in your case, it would be 0.1*250*6.5 = £162.50 (before tax).

If you want to compare it to receiving a particular interest rate on a 1 year fixed rate account, you also need to take account of how much interest you've received in the account that you've been taking the money from, which you calculate by doing

[interest rate]*[amount paid to RS each month]*5.5

where [interest rate] is the percentage divided by 100, e.g. 3% would be 0.03.

hotkee

Hmm I make it £105 gross (net £84) if you open with £250 and put in £250 for next 12 months

If you had £3000 single lump, its £195 (net about £160)

Milarky

As pointed out above, the equivalent rate on a lump sum is about 54% of the rate on the (12 months) regular saver [i.e. 6.5/12]

Also as pointed out, the 'average' interest rate (you might like to think of this as the true 'fixed deposit equivalent rate') is [ 46% x lower rate + 54% x higher (RS) rate ] / 100%

However even that is slightly misleading -unless you already have the £3000 - and so need to keep it all somewhere throughout the year. For anyone saving out of income the rate goes back up to the RS nominal rate - because on average the saver only had 54% of the amount they ended up with at the end.

CloudRuler

Thanks to everyone that has posted. I don't pay tax (student so only part-time work) so no need to worry about the tax calculations. The reason I asked was because I have a bond maturing soon and I'm looking for somewhere to put the money, the £3k figure was just an example. I'm trying to weigh up the regular saver interest with that offered on fixed rate bonds although I'm not entirely decided between fixed rate and variable given how low the rates are. Are they likely to get lower? Also not sure whether to do this years ISA now or wait to do it in a couple of months.

Steve_xx

If you put £3000 in a fixed rate bond for a year @ 10% interest it would earn you £300 in total, then you would get tax deducted @ 20%, leaving you £240.

CloudRuler

Steve_xx wrote: »

If you put £3000 in a fixed rate bond for a year @ 10% interest it would earn you £300 in total, then you would get tax deducted @ 20%, leaving you £240.

Don't pay tax and I know how to calculate the interest on a fixed rate bond, that wasn't the question. A

It seems there's no shorter way to calculate the interest rate on a regular saver, with regard to the interest on the total amount, than to calculate the interest then work out the percentage which is what I was hoping for.

Money_Grabber13579

Steve_xx wrote: »

If you put £3000 in a fixed rate bond for a year @ 10% interest it would earn you £300 in total, then you would get tax deducted @ 20%, leaving you £240.

And where are you going to get a 10% fixed rate bond from?!! :rotfl::rotfl::rotfl:

opinions4u

I tend to use:

http://www.moneysavingexpert.com/savings/best-regular-savings-accounts#calculator

Looks good to me

If you are funding equal amounts on the same date each month, I'd suggest RATE x 0.54 is the best calculation. This is approximate and can vary with funding dates etc.

e.g. 6% x 0.54 = 3.24%
or 10% x 0.54 = 5.4%