A&L and Barclays 10% savings acc

siuron

From what i know, its £250 max a month = £3000 a yr

They say 10% interest, but do i really get 10% of £3000 at the end of the year = £300 interest?

A&L stated:
Interest frequency Annual - At the end of 12 months on the anniversary of the first payment.

Barclays stated:
Interest will be calculated on a daily basis on the cleared balance and will be credited to the Regular Saver account at the end of the 12 month term.

Do they mean the same thing? and Barclays say Gross pa% is 10%, AER 10%,but Net Rate pa is 8%? what is net rate?

yesbutnobut

siuron wrote:

From what i know, its £250 max a month = £3000 a yr

They say 10% interest, but do i really get 10% of £3000 at the end of the year = £300 interest?

Do they mean the same thing? and Barclays say Gross pa% is 10%, AER 10%,but Net Rate pa is 8%? what is net rate?

Hi siuron,

you would get approximately 10% (before tax) of the average balance in the account. Therefore you should expect to get around £150 gross (£3000 * 10% / 2) or approx. £120 net after 20% tax has been deducted (note 10% gross less 20% tax = 8% net)

The actual calculation is slightly more complicated ...

siuron

so the amount of interest i get is £300(before tax)-£120(tax to be taken)=£180?

yesbutnobut

No, I'm afraid you'll only get £150 (before tax) - £30 (tax) = £120

That's also assuming that you're a basic rate tax payer; if you're a higher rate tax payer you need to pay another 20% (or £30). If you earn less than about £5k p.a. (including interest) you can claim the tax back.

siuron

basic rate tax payer is who? i'm on 17k pa

yesbutnobut

Yes, you're a basic rate tax payer, as is anyone earning less than £37,295 p.a. (but more than £6,985) in tax year 2006/2007.

ceejam

You won't have £3000 in the account, so don't get £300 interest!

The average (assuming you pay in £250 a month) is £1500, so 10% interest is £150, minus tax of 20%, you'll be basic rate, so you get £120 at end of year for paying in £250 a month.

If you've got an ISA (say A&L @ 5.2%) and put £3000 in at the start of the year, you'll get £156 tax free!

siuron

that works out to be 4% overall, quite similar to ISA. so i guess i can see it as another ISA, because i cant open more than 1 ISA right?

mr_fishbulb

Think of it this way. The account is only open for a year, after the year the money is put into a normal savings account.

So for the first £250 invested in the first month you will get the full 10% interest.
For the 2nd £250 in the 2nd month you will only get 11 months interest (11/12 of 10% = 9.17%)
3rd £250 for 3rd month = (10/12)*10% = 8.33%
And so on.

It seems to work out at an average of 5.42% gross.

I think that's right.

Innys

Correct. If you can afford it, you should usually invest in an ISA first and only then, if you have any spare cash, consider one of these regular saver deals.

Some of them are more restrictive than others, e.g. they often want you to have a current account with them and pay in a certain amount each month before you qualify for the regular saver paying the highest interest rates. Others, e.g. Halifax, have no such restrictions.

Hope this helps

siuron

5.42% = £162.6 is still higher than the A&L 5.2% £156?

i already have ISA which will be transferred to A&L
i also have a regular savings with barclays, now considering one with A&L.

also since its only for the 1st yr.. what happens if the have the same 10% deal next yr? can i not stay and carry on?

and if they dont, i can take the money to somewhere else without charges?