Halifax regular saver account 6.05%

from_suffolk

This account pays a healthy 6.05% but limits the investment to £3000.

Is it possible to open this account with an investment of £2,700 then 12 monthly payments of £25 ?

I am currently awaiting the blurb from Halifax but thought that the savie money saving experts might know.

Aark

You can only save a maximum of £250 per month.

Leia_Stephens

Aark is right, the maximum you can save per month is £250, with a maximum initial deposit of £250; but I am trying something out with them ;D.

Apparently the Regular Saver a/c doesn't have to be closed at the end of its year term but unfortunately what you have paid in throughout the year and the interest earned will be paid into your nominated Halifax a/c.

However, when I opened my RS a/c I set up the monthly standing orders with Smile myself, and didn't stipulate an end date ;D, therefore, hopefully my so payments will continue to be paid into my RS a/c, after the 1st year is up, when I hope it will still be open ;D.

Leia

Margaret_Millne

Your payments will keep going in, and they will attract whatever the rate is for the regular savings account from that date, but only on the new payments.

The anniversary balance will have gone out of the account into your nominated account.

This is how I understand it anyway.

Leia_Stephens

Your payments will keep going in, and they will attract whatever the rate is for the regular savings account from that date, but only on the new payments.

Thanks, MM .

Yes, this is how I understand it too.

After the anniversary date I hope to use some of the anniversary money to pay back into the RS over the course of the next year ;D.

Leia

carl3276

what i want to know aboout the rs account is this:
i understand the interest is paid yearly, so if I put £250 in each month, by the third month i will still only have £750 in the account as no interest will have been added.

if i was to put £250 in the ing account, by the end of month 3 i would have £250+interest + 250+interest + £250+interest

so as far as i can see, after around 6 months i would have made more interest in the ing account than i would have in the rs account

please explain to me if i'm wrong ??? ??? ???

Milarky

so as far as i can see, after around 6 months i would have made more interest in the ing account than i would have in the rs account

You are confused about the difference between 'annual' and 'monthly' interest. Whether interest is paid once a year or more often, then the quoted 'Annual Equivalent Rate' [AER] on two different accounts is directly comparable - because that's why it was devised!. So ING's 'AER' is '4.85' variable [going up to '5.00' from 1 September] for instance, while Halifax's Regular Saver pays '6.05' fixed 'AER' and is therefore a better rate at present. [It may not still be so competitive during the 12 months it runs, as ING's would go up - though not necessarily by as much as the base rate set by the Bank of England's Monetary Policy Committee]

carl3276

i don't think i explained myself very well :-/

what I was trying to say is with the ing account, I would be earning interest on my interest where as with the rs account, because the interest is only paid once per year I would only earn 6.05 on my actual monthly savings (not the accrued interest)
??? ??? ???

Milarky

So you're thinking in general about which kind of account is 'best' then? - one that pays monthly interest or one that pays annual interest at  the 'same' annual rate?

[forgive me, I am still guessing here...but it's worth a stab!]

Let's take 6% once a year or 0.5% monthly, for instance:

From a standing start 1.005^12 is paid on the initial investment [ignoring any tax] that earns you 6.1678% so clearly better, yes? The 'AER' on this account is 6.16%, while the 'gross' rate [because that is what is contractually payable in 12 monthly amounts] is 6.00%

But the HRS account is designed with 12 equal instalments in mind, so the effect of compounding will be different to a 'simple interest' case:

Using 'rule of 78': interest payable = 6.05% x 78/144 = 3.2778% before tax. With 20% tax, for a basic rate individual, this becomes 2.6217% of total of regular payments. that is £78.65 if paying £250 per month.

If thinking along the lines of: "what is the maximum advantage possible by compounding", the anwser would be e^0.06 in this case, or e^I, where 'I' is the annual interest rate, and 'e' is the base of the natural logarithim (about 2.718 ) 'e' raised to the power of '0.06' [6% example] is 6.18365%.

BTW, I know of one account,  Egg, that actually uses 'daily' compounding  (which could account for is name?)