Update! Santander First Home Saver Account: 5% on up to 50k savings (up to 35 only)

afmfifgh

NikkyWikky wrote: »

If I put the whole amount £49,999.99 then I assume it will get 3% on that amount.

Correct.

NikkyWikky wrote: »

...what happens to the interest made on the first month that obviously won't get 3% (as it will put the amount over 50k).

The first £49,999.99 continues to earn interest at 3%. Any amount over this earns 0% interest. Nothing happens to it, it just sits in the account earning nothing.

NikkyWikky wrote: »

So is it worth taking money out every month to make sure the interest earned is making money else where? If so how much?

If you want the money over £49,999.99 to earn you interest you need to withdraw it and put it in an account that earns interest. The interest is calculated daily so you will actually be losing out on interest the very next day your account balance reaches over £49,999.99. So in theory you would need to withdraw money every day to keep it below £49,999.99 but that is impractical.

So if you want to do it just monthly, keep say £49,875 in the account and you wont go over the maximum balance of £49,999 except maybe for a few days in the year, when interest is taken into account.

Each month on the 1st withdraw £125 and put it in another account or do whatever else you want with it.

NikkyWikky

Thanks afmfifgh makes sense. Out of curiosity how did you work out £49,875?

afmfifgh

NikkyWikky wrote: »

Thanks afmfifgh makes sense. Out of curiosity how did you work out £49,875?

If you are going to withdraw on a monthly basis, I worked out how much interest you will earn per month.

So with £49,875 earning 3% you earn £1,496.25 a year in interest.

Split over 12 months that equals £124.69 a month

If you add that to the balance it equals £49,875 + £124.69 = £49,999.69

Thus keeping your balance below £50,000 thus meaning each month the balance plus interest always remains just below the £50,000.00 cut off, so all your money earns 3%.

You may actually miss a little interest on months with 31 days as 365 days / 12 = 30.416 days. As such you may want to withdraw a little more just to be sure you keep the balance under £50,000 rather than cutting it as fine as you can.

Perhaps withdraw £130 a month or so and you will be fine.

Hope that explains my thinking.

rb10

afmfifgh's posts in this thread are incorrect and are massively over-complicating it.

Interest on this account is paid annually, not monthly.

So if you have a balance of £49,999.99 today, then you'll continue to earn 3% on £49,999.99.

Then when interest is paid, just withdraw the interest, to keep the balance at £49,999.99.

afmfifgh

rb10 wrote: »

Interest on this account is paid annually, not monthly.

That is correct, but the interest although paid annually is actually calculated daily, not annually. The reason for withdrawing money monthly was that it is impractical to withdraw money each day as it is calculated, monthly was put forward as a more convenient alternative.

rb10 wrote: »

So if you have a balance of £49,999.99 today, then you'll continue to earn 3% on £49,999.99.

That is correct and as I have said previously.

rb10 wrote: »

Then when interest is paid, just withdraw the interest, to keep the balance at £49,999.99.

That is also correct as I have said previously.

BUT

As the interest is calculated daily you would not earn any interest on the interest as that would put the balance above £49,999.99, even though it doesn't look as though it is as they only update the interest payments yearly but calculate daily.

The original question was that they wanted to earn interest on the interest, but if it is withdrawn yearly this will not be achieved due to the fact that interest is calculated daily.

Or have I got the wrong end of the stick? Happy to be shown to be wrong.

afmfifgh

afmfifgh wrote: »

Or have I got the wrong end of the stick? Happy to be shown to be wrong.

Having thought about this I agree I have got it wrong. I was basing my thoughts on the interest being compounded and although I said the interest is paid annually my calculations were based on it being paid monthly - doh!

So it is as I have been corrected. Just keep a balance of £49,999.99 in the account and you will be fine then when the interest is paid each year just withdraw it.

Sorry for the confusion!

big_mortgage

I have had a call from the branch my First home saver is with to tell me this account is changing. Upon checking the website:

Personal > Savings & Investments > Savings account changes

states that it is currently 0.6% (not true, ought to be 3%!)

It says it is going to an Instant Saver at 0.1% as of 26th Sept 2013.

afmfifgh

Which account do you have specifically?

The First Home Saver Special Issue 1 is still paying 3% and has done since 12 November 2012 on balances up to and including £49,999.99. Money above that earns 0%.

First Home Saver is 0.6% when £100 is paid in per month and no withdrawals per year and has been paying this rate simce 2nd April 2009.

Do you have the Special Issue 1 version?

afmfifgh

I am awaiting changes to this account though as they are 'axing' 95 savings accounts from 100 or so to simplify their range of closed to new customer accounts down to just 5 accounts.

This news was announced in June. See:

http://www.telegraph.co.uk/finance/personalfinance/savings/10112464/Savers-lose-out-as-Santander-axes-95-savings-accounts.html

big_mortgage

I do have the special issue one. My statements say 3% and I have not been notified otherwise. (other than the call). The savings account changes webpage does not seem to differentiate between these accounts and implys all accounts will switch down...