How to work out interest?

slopemaster

If you have a savings account with a varying amount in it, is there a simple way to calculate the interest? (Some sort of average?)
Or do you literally have to go
£X in the account for 5 days@ x% times 5/365
£Y in the account for 10 days @ x% times 10/365 etc etc...?


I ask because I was a bit shocked to discover that my interest on one account for a whole year was £3.02.
I know the rate is only 0.25%.
That would suggest an average balance of £1200, and I thought I had more than that.
looking back at those statements which are still available, I find
May 09 - Sept 09 between £500 and £18000, mostly around £2000.
Sept 09 - Jan 10 between £18 and £20000, mostly around £3-4000
Jan 10 to April 10 between £330 and £14000, mostly around £1200
So I would have expected the interest to be more.

I asked them whether there is something in particular about the way they calculate the interest that gives this result?
They replied to say the interest was calculated daily, and is correct.
(Tho they also said, it is less because of tax - which it isn't, I don't pay tax. But I imagine its just a standard reply.)

I know the amount isn't worth bothering about, but I am curious how to do it.

talana

Tho they also said, it is less because of tax - which it isn't, I don't pay tax. But I imagine its just a standard reply.

Tax will be deducted by default unless you tell them you're a non-taxpayer. Have you filled out your R85 form?
Sounds like they think you are a taxpayer.

Also, doesn't answer your question, but why are you putting up with a paltry 0.25%?

oldfella

you need to accumulate the daily interest payments. If you use your average amounts you get about £5.60, so it looks reasonable.

blinko

slopemaster wrote: »

If you have a savings account with a varying amount in it, is there a simple way to calculate the interest? (Some sort of average?)
Or do you literally have to go
£X in the account for 5 days@ x% times 5/365
£Y in the account for 10 days @ x% times 10/365 etc etc...?


I ask because I was a bit shocked to discover that my interest on one account for a whole year was £3.02.
I know the rate is only 0.25%.
That would suggest an average balance of £1200, and I thought I had more than that.
looking back at those statements which are still available, I find
May 09 - Sept 09 between £500 and £18000, mostly around £2000.
Sept 09 - Jan 10 between £18 and £20000, mostly around £3-4000
Jan 10 to April 10 between £330 and £14000, mostly around £1200
So I would have expected the interest to be more.

I asked them whether there is something in particular about the way they calculate the interest that gives this result?
They replied to say the interest was calculated daily, and is correct.
(Tho they also said, it is less because of tax - which it isn't, I don't pay tax. But I imagine its just a standard reply.)

I know the amount isn't worth bothering about, but I am curious how to do it.

£3.02 and interest rate 0.25% you cant seriously be questioning there interest calculations !

and tax is taken at source unless you fill out an R85 form or wahtever it is

slopemaster

Thanks all.Yes, I have done the R85, and on the actual certificate it's shown as gross - its just the person sending the e-mail who seemed to assume I'm a taxpayer.

As to why I have an account for a paltry 0.25% - it is for convenience as it is linked to my current account (I have an interest-free overdraft on my current account) and I can move money around through this account and do instant transfers. It doesn't sit there for long though. Most of it is actually in two Lloyds-TSB accounts @ 4%.
At the moment I've got £65 in the savings account, plus £1000 which goes out to the Lloyds-TSB accounts and then comes back. Shortly to be adding another Lloyds a/c, and the Santander a/c @5% to the loop.

But it makes you think - what if they did get it wrong on a more substantial amount - it would be v hard to challenge as it would take HOURS to work it out