Halifax 5% regular saver - don't understand interest, help!

REM1307

Halifax are doing a regular savings account with 5% annual interest. This sounded great so I went into the branch to get more info. In their leaflet, they give the example of if you saved £500 a month for 12 months you'd get interest of £161.92 gross. By my calculations this works out at 2.7% interest, which is a lot less than 5%. Where are they getting the 5% from?

Can someone explain this to me please?

KingL

sounds about right - quick and dirty (5%/12 months, compounding interest ignored)
first column is blanace each month second column is interest for month. Sums to £162.50)

   500   2.08       
1000   4.17       
1500   6.25      
2000   8.33       
2500   10.42       
3000   12.50       
3500   14.58       
4000   16.67       
4500   18.75       
5000   20.83       
5500   22.92       
6000   25.00       
    [B]162.50[/B]

noh

Read this
http://www.moneysavingexpert.com/savings/best-regular-savings-accounts#dont

Cleaver

REM1307 wrote: »

Halifax are doing a regular savings account with 5% annual interest. This sounded great so I went into the branch to get more info. In their leaflet, they give the example of if you saved £500 a month for 12 months you'd get interest of £161.92 net. By my calculations this works out at 2.7% interest, which is a lot less than 5%. Where are they getting the 5% from?

Can someone explain this to me please?

You would invest £6,000 over the year, not as a lump sum at the start. If you put all £6,000 in at the start of the year at 5% you would have around £307 gross interest for the year, which is maybe the figure you're expecting to see?

But because you're investing £500 each month, you'll earn 5% on £500 in the first month, 5% on £1000 during the second month, 5% on £1500 during the third month, and so on...

As a guide, here is the rough interest you'd make each month on 5%:



jan £500 £2.08
feb £1,000 £4.17
mar £1,500 £6.25
apr £2,000 £8.33
may £2,500 £10.42
jun £3,000 £12.50
jul £3,500 £14.58
aug £4,000 £16.67
sep £4,500 £18.75
oct £5,000 £20.83
nov £5,500 £22.92
dec £6,000 £25.00

Total: £162.50

kingmonkey

You would get £161.92 gross.

REM1307

Thank you everyone. It doesn't look as good like that!

Kingmoney - I meant gross but typed net! Will amend 1st post.

abstemious

I would suggest you read the MSE expert article on regular saver accounts to see how they work. I can't post a link to it but it's easy to find. Just click on the Banking Saving link above and look for the article marked "Regular Savings Accounts: Earn up to 5% if you can save EVERY month"

All the money you have in the account will earn 5% interest. The interest rate you calculated is lower because you divided the interest received by the £6000 maximum you could save in the account over the year. For eleven months of the year you won't have £6000 in the account though. In the first month you would have £500 which would earn 5% interest for twelve months. The £500 you save in the second month would earn 5% interest for 11 months and so on.

If you already have £6000 you want to save maximise the interest you can earn by putting it in an easy access savings account and drip feed the £500 into the regular savings account every month. Put some numbers into the calculator on the MSE page I mentioned above to see how much you can expect to receive over the year by doing this.

YorkshireBoy

REM1307 wrote: »

It doesn't look as good like that!

You could always save your £500 per month with Egg.

You'll only get 3.25% VARIABLE (the Halifax rate is FIXED). You won't get as much interest (just over half as much as you would get with Halifax), but it might "look" better?

opinions4u

abstemious wrote: »

I would suggest you read the MSE expert article on regular saver accounts to see how they work. I can't post a link to it but it's easy to find.

Even easier if you click here. Good idea.

REM1307 wrote: »

Halifax are doing a regular savings account with 5% annual interest. This sounded great so I went into the branch to get more info. In their leaflet, they give the example of if you saved £500 a month for 12 months you'd get interest of £161.92 gross. By my calculations this works out at 2.7% interest, which is a lot less than 5%. Where are they getting the 5% from?

If all the money was in the account for a year you would expect to see £300. But the balance in the account increases monthly, it doesn't start at £6,000 it starts at £500, so, on average, your balance is just over half the amount that is in the account on maturity.

REM1307 wrote: »

It doesn't look as good like that!

But it's still more than saving £500 a month in an account that pays 3.25%.