Any 8%+ Reguler Savers

Kazza242

stphnstevey wrote:

I will consider LONG term savings - maybe do both.

I hold both types of account, those that allow a lump sum to be built up and those that last for 1 year. I do prefer the former more though and I explain why below.

stphnstevey wrote:

I work out that an 8% saver is actually about 5.4% net, were as the second year of a 6.5% saver is 5.2% net. Both beat the ICICI 4.02%.

Therefore, 8% or above reguler savers would beat the long term savers, even if you have to start from scratch again each year.

I disagree with this. Using the Smile Bank's regular savings calculator:

A) Comparing £500 saved per month in the 6.5% YBS regular saver for 3 years.
Capital = £18,000 - Interest (For a basic rate taxpayers) = £1,486.

To £500 saved per month in an 8% regular saver that lasts for 12 months. The funds + interest are swept out after 1 year and it is then repeated for another 2 years.
Capital = £18,000 - Interest per year (for basic rate taxpayers) = £208 multiply that by 3 gives you total interest of £624.

Option A therefore wins hands down. If you compare this based on a 2 year period, the YBS account would accrue £658 interest (BR) while the 8%, 12 months regular saver (repeated for the 2nd year) would accrue £416. Only if comparing savings for the 1st year only, does the 8% regular saver beat the YBS one, by just £39. The YBS account and accounts like it, earn more interest for those savers wishing to save for more than 12 months.

stphnstevey

Kazza242 wrote:

I hold both types of account, those that allow a lump sum to be built up and those that last for 1 year. I do prefer the former more though and I explain why below.



I disagree with this. Using the Smile Bank's regular savings calculator:

A) Comparing £500 saved per month in the 6.5% YBS regular saver for 3 years.
Capital = £18,000 - Interest (For a basic rate taxpayers) = £1,486.

To £500 saved per month in an 8% regular saver that lasts for 12 months. The funds + interest are swept out after 1 year and it is then repeated for another 2 years.
Capital = £18,000 - Interest per year (for basic rate taxpayers) = £208 multiply that by 3 gives you total interest of £624.

Option A therefore wins hands down. If you compare this based on a 2 year period, the YBS account would accrue £658 interest (BR) while the 8%, 12 months regular saver (repeated for the 2nd year) would accrue £416. Only if comparing savings for the 1st year only, does the 8% regular saver beat the YBS one, by just £39. The YBS account and accounts like it, earn more interest for those savers wishing to save for more than 12 months.

I think I know what I did wrong. The 8% rate was derived from a calculation that took into account the interest you recieve from another bank account whilst you drip feed this into the monthly saver.

RayWolfe

I think we are all agreeing really but you are emphasising using the longer-term jobies first. Quite right. I think what I was kicking at was the view that we MSE's would be naive enough to be persuaded that one loss leader means that we may be tempted to buy all our shopping at the same store.
Ray

Kazza242

stphnstevey wrote:

I think I know what I did wrong. The 8% rate was derived from a calculation that took into account the interest you recieve from another bank account whilst you drip feed this into the monthly saver.

Equally, if you also factor in the interest you would receive from another savings account used to drip feed into the YBS monthly saver, option A using the 6.5% regular saver would still make more interest than option B, from year 2 onwards. Still, each to their own. I posted the above, as I thought it may be useful to others reading this forum.

RayWolfe wrote:

I think we are all agreeing really but you are emphasising using the longer-term jobies first. Quite right. I think what I was kicking at was the view that we MSE's would be naive enough to be persuaded that one loss leader means that we may be tempted to buy all our shopping at the same store.

RayWolfe - I agree with your view on it.

Dagobert

Abbey was offering their Fixed Rate Monthly Saver at 8% under certain conditions, [thread=226561]see[/thread]. I don't know whether the offer is still on.

masonic

Kazza242 wrote:

I disagree with this. Using the Smile Bank's regular savings calculator:

A) Comparing £500 saved per month in the 6.5% YBS regular saver for 3 years.
Capital = £18,000 - Interest (For a basic rate taxpayers) = £1,486.

To £500 saved per month in an 8% regular saver that lasts for 12 months. The funds + interest are swept out after 1 year and it is then repeated for another 2 years.
Capital = £18,000 - Interest per year (for basic rate taxpayers) = £208 multiply that by 3 gives you total interest of £624.

I disagree with this. In scenario B, you are only using £6000 capital to generate that return. You are not comparing like with like.

Supposing you consign each years capital to a savings account (at 5%, this would earn an additional £480 net) when it is spat out of the 12 month saver, you would end up with something more like £1,100 overall. If the money was re-cycled through other regular savers, that interest would be even higher.

I agree with the principle of what you are saying, though.

Kazza242

masonic wrote:

I disagree with this. In scenario B, you are only using £6000 capital to generate that return. You are not comparing like with like.

Supposing you consign each years capital to a savings account (at 5%, this would earn an additional £480 net) when it is spat out of the 12 month saver, you would end up with something more like £1,100 overall. If the money was re-cycled through other regular savers, that interest would be even higher.

I agree with the principle of what you are saying, though.

. Even adding in the extra info, regarding using a 5% account to hold the capital + interest vs option A (also dripfed via a 5% account): I still think Option A, would still generate more interest, because it benefits from compound interest. I was just using an example to illustrate that a 6.5% regular saver, if funded over time, can make a lot of interest, a lot more than some people may think. As I said before though, each to their own.

:beer:

masonic

Kazza242 wrote:

I still think Option A, would still generate more interest, because it benefits from compound interest.

You don't even need to invoke compounding, even cascading the scenario B money through six 8% regular savers over the 3 years would only generate £1260, which is still somewhat short of the £1486 generated by scenario A.

Even a 2 year 8% account comes within a whisker of A&L's 12% account. I've never done a comparison between long and short term accounts before yesterday and I'm pretty surprised just how much higher the short term rates need to be.

ED

RayWolfe wrote "I'm so fixated that I don't even use standing orders but bank transfers so that I never lose out the weekend days. ;-)"

Smart idea, RayWolfe! So, do you keep careful diary notes to make a BACS transfer once a month to each regular, monthly savings account?

I guess this arrives in the destination account with precisely the same 'statement entry' as a Standing Order, so no 'rules' are broken? I know from my experience each "ad hoc payment" (as Coventry Bdg Soc term BACS) arrives in the same number of days (leaves Monday, arrives Wednesday as cleared funds).

Anyone here had any problems by using BACS instead of Standing Orders to feed monthly savings accounts?

mary

ED wrote:

Anyone here had any problems by using BACS instead of Standing Orders to feed monthly savings accounts?

I have about a dozen regular savers, but many of them state specifically you have to have a Standing Order. So Ihaven't wanted to rock the boat and try to change to a BACS payment in case I fall foul of the rules and then drop to an abysmal rate.