Savings: Lump sum: annual or monthly interest?

sindersoot

As stated in another thread I have some money I'd like to divide up into three separate saving methods.

One option I have been looking at is Principality 5.11% gross fixed for 3 yrs as I don't pay tax. Would I be better to take monthly interest and then put that in another savings account with easy access or notice. I am confused as to whether this would gain more interest and also would this work out more beneficial should the interest rates rise over the three year period.

RayWolfe

If the AER are the same for both types then your plan is good. I suspect however that the AER for the monthly interest is lower.

withnell

The AER is worked out assuming that the interest is reinvested at the same rate - so unless the account you put the monthly interest into is also paying 5.11% gross, you'll make a loss

sindersoot

Thanks for advice, looks like I'd be best to leave interest where it is an go for annual payment. Forgot to mention that the gross monthly interest rate is 4.99% against 5.11% for annual.