Any 8%+ Reguler Savers

masonic

Kazza242 wrote:

In your example above, you seem to be saying that in Year 2 you would be feeding £6K capital into the 6.5% account and then you go on to compare it to feeding £12K capital (2x £6K) into an 8% account. How is that a fair comparison?

I think that is a fair comparison. You may not be feeding £12k of capital into the long-term account, but you are utilising £12k of capital to maintain it.

When money is dumped out of a short-term regular saver, I see no problem in recycling it through another regular saver, rather than holding it in a 5% savings account. In any case, it makes no difference to the outcome after compounding is taken into account; the long-term saver still wins out overall as far as I can calculate.

Edit: Besides which, the OP has already stated in another thread that "An equation with more than four brackets is not worth the hassle". I would imagine juggling six regular saver accounts over three years in order to invoke this small benefit is not something he would actually desire to do.

Kazza242

masonic wrote:

I think that is a fair comparison. You may not be feeding £12 of capital into the long-term account, but you are utilising £12 of capital to maintain it.

When money is dumped out of a short-term regular saver, I see no problem in recycling it through another regular saver, rather than holding it in a 5% savings account. In any case, it makes no difference to the outcome after compounding is taken into account; the long-term saver still wins out overall as far as I can calculate.

This is what I calculate also. When I made my calculations last night, I factored in some of the info you posted in post 17 of this thread where you mentioned holding the matured funds in a 5% account before feeding a separate £6K into an 8% regular saver. Assumptions are important, the figures do differ when different factors come into play.

OP et al, in the vast majority of cases a long-term RS, such as a 6.5% account, will make more interest than short term RS accounts (after year 1).

Compounding is the key here. You earn interest on your interest on your interest each year...etc. Illustrated perfectly by a mini cash ISA that a saver has paid into over a number of years. Yes, they pay tax free interest, but compound interest really comes into play here, just like it does for a long term RS account.

I also wonder, realistically, how many "clean" 8%+ regular savers are available that allow one to deposit 2 x £500 p.m. now. There are not many that do not require you to open a current account or fund it etc.
C/A Funding: NPBS , HSBC, A&L & Barclays... all £250 p.m each
Clean: Ipswich BS (£250)
Open C/A: LTSB (£250 after initial larger opening deposit)

Whereas, in my opinion, the assumptions I made above (in my 12:11am post) based on the types of account available now, were realistic. If I did consider accounts paying 8% above at 2 X £500 pm, then I would have to also factor in the amount of interest lost to funding some of the current accounts attached to them. As I stated before, I make maximum monthly deposits into a lot of short-term 7%+ regular savers each month, but I also have a number of 6%-8% long(er) term monthly savers, the latter will (almost always) make me the most interest on my money.:D

stphnstevey

masonic wrote:

I think that is a fair comparison. You may not be feeding £12k of capital into the long-term account, but you are utilising £12k of capital to maintain it.

You are utilising the interest on 12K in the second year of the 6.5% RS.

But in the second year of the 8% RS in Kazza's example below, 6K is being put back into a normal savings account which is bound to lower the interest you get on that 6K compared to a higher rate RS.

You are untilising the 12K to it's full potential in the 6.5% RS so why not be fair and use it to the full potential in the 8% RS.

Whether or not you could get two 8% RS is not the issue. We are trying to compare two products as close to each other as possible, by minimising the variables. You have already altered the current marketed products by increasing the monthly payments of the 8% RS to £500 rather than £250 and it's length from 2yrs to 1yr. There are also lots of other products around this rate - 7, 8.25, 10, 12 %, which you could use alongside an 8% RS, but we won't go into that as it could get more complicated.

I do note that you are picking the current highest LONG TERM RS to compare against an 'average' SHORT TERM saver and then 'suggesting' that all LONG TERM savers perform better than all SHORT TERM savers.

I guess what I want to know is, whats the lowest SHORT TERM RS rate that outperforms the current best LONG TERM RS rate. Thereby helping me choose which RS to use (after all I don't have an infinite amount of money and it would be nice to know which would rank the top ten).

PS - As I was quoted from another post, I only think equations with four brackets are worth it when the effort of working it out is balanced by the reward. Here the effort of opening multiple RS's is balanced by the substantial interest increase. I personally don't think the effort of arranging for manual BACS transfers of money compared to SO to gain a few days more interest, is.

masonic

stphnstevey wrote:

You are untilising the 12K to it's full potential in the 6.5% RS so why not be fair and use it to the full potential in the 8% RS.

Why are you asking me? I agree with you on this one.

stphnstevey wrote:

I guess what I want to know is, whats the lowest SHORT TERM RS rate that outperforms the current best LONG TERM RS rate. Thereby helping me choose which RS to use (after all I don't have an infinite amount of money and it would be nice to know which would rank the top ten).

Well, it would appear that it is more than 8%. A&L's 12% regular saver beats Lloyds 2 year 8% one by a whisker. You are looking at a substantial difference, but I'm going to leave you to work out a formula.

EDIT: Here is your big hint:- Lloyds 2 year 8% account might not be the best available and it still takes a short term 12% rate to beat it. The best long term regular saver might be unbeatable by an existing short term account.

stphnstevey wrote:

PS - As I was quoted from another post, I only think equations with four brackets are worth it when the effort of working it out is balanced by the reward.

What am I gaining by doing these calculations for you, then? :rolleyes:

stphnstevey

Your previous response before last sounded like you agreed with Kazaar - hence my question to you. (Interpreted as you saying you think it is a fair comparison after I said Kazaar's comparison wasn't)

Kazza242

EDIT: Removed top quote as you've answered this.

stphnstevey wrote:

Whether or not you could get two 8% RS is not the issue. We are trying to compare two products as close to each other as possible, by minimising the variables.

I do not agree here. I think when making a comparison, it is better to base it on what is actually available, at the time of doing the comparison, rather than basing it on products that do not actually exist now. There may be some newbie MSE's looking at this thread with a view to maximising the returns they can make on their capital. If you start comparing products, where some do not exist, then this is not a true or fair comparision and can be rather misleading. Most 8%+ RS accounts require a current account and in some cases that current account requires monthly funding. My Cheshire BS 8% RS account matured last week and the fact is, there wasn't another 8% account (allowing £500p.m) available* that I could use over the next 12 months. *I already have LTSB + Ipswich.

I know that a 6.5% RS long term account exists, as YBS run one, if it closed to new customers or was withdrawn, then I wouldn't mention a 6.5% account in my comparison, as one wouldn't exist. If comparisons are made on what isn't available, then what's to stop us comparing a 20% interest account etc.?

stphnstevey wrote:

You have already altered the current marketed products by increasing the monthly payments of the 8% RS to £500 rather than £250 and it's length from 2yrs to 1yr.

Hang on, you said in one of your earlier posts that I was utilising £12K capital regarding the 6.5% RS and in order to compare fairly, I should factor in the interest made by running two 8% regular savers, feeding in £12K capital in year 2. To feed in £12K capital in one year, both short term 8% regular savers would have to allow monthly deposits of £500 p.m (2x£500 p.m). Why are you saying that I altered the products by increasing the monthly payments of the 8% RS account? To my knowledge, it was you who initially did this. Perhaps, I am missing something here? I suppose to feed in £12K capital, you could compare 4 x 8% RS accounts (each £250 p.m.) but the results are still the same. Also, as before, where are these 4 "clean" 8% RS accounts - that don't require a C/A to be opened or C/A monthly funding? CONT...>>>

Kazza242

stphnstevey wrote:

There are also lots of other products around this rate - 7, 8.25, 10, 12 %, which you could use alongside an 8% RS, but we won't go into that as it could get more complicated.

Agreed, factoring these in would make a comparison more complicated. Also, as I mentioned above, a lot of the 8%, 10%, 12% RS accounts require a linked current account with the same institition to be funded each month. Therefore, again this wouldn't be comparing fairly, as the 6.5% account required neither. I could've made a comparison against a 7% account, but I didn't because in your opening post, you wanted info on regular savers paying 8% and up.

stphnstevey wrote:

I do note that you are picking the current highest LONG TERM RS to compare against an 'average' SHORT TERM saver and then 'suggesting' that all LONG TERM savers perform better than all SHORT TERM savers.

No, that isn't what I said in my earlier posts. For the short term saver, I was using an 8% RS account. I didn't see the point in using a 10% or 12% account in the comparison because of the linked current acc funding factor. Failing to do this each month will result in the RS receiving a dismal rate of interest.

I never suggested that all LONG TERM savers perform better than all SHORT TERM savers. I said that:

Kazza wrote:

in the vast majority of cases a long-term RS, such as a 6.5% account, will make more interest than short term RS accounts (after year 1).

In most cases, my statement above (as I've quoted), is true. Because of compound interest, a long term 6.5% regular saver will make more interest, after Year 1, than most short term regular savers. The two types of accounts are not mutually exclusive. I use both types. My point was, it is not correct to disregard a long term (6.5%) RS account because you think an 8% short term account is better. On doing the calculations, and factoring in compound interest, which is key when looking at a long term RS, it is clear that this type of account can make more interest than first thought.

stphnstevey wrote:

I guess what I want to know is, whats the lowest SHORT TERM RS rate that outperforms the current best LONG TERM RS rate. Thereby helping me choose which RS to use (after all I don't have an infinite amount of money and it would be nice to know which would rank the top ten).

EDIT: I was going to take a look at this myself later. However, it might be more useful for you to take a look at this yourself. The time frame used to make the comparison is important here too. As the short term RS may make more interest in the beginning, but it's likely that the long term RS will catch up and beat the short term RS over time.

stphnstevey

If you read back - it was you who changed an existing product to £500 month (and 1 year if its Llloyds RS). You can't just make the figures fit your arguement when it suits you. You either compare existing products or not. If you are comparing existing products, then don't compare the best of the LONG TERM savers against a low SHORT TERM saver.

Also as most RS are £250 a month, it's not a good comparison to use the YB RS at £500 month, as obviously you can invest more. You would need to look at the actual RATE you get, rather than just the AMOUNT of interest. I have done this calculation.

Additionally, the main point was you were not using the money in the 8% RS in the second and third year wisely by simply putting it back in a 5% account. This defeats the object of using RS's. You would put that money into the next best RS, which is likely to be 7%.

Finally, you would only consider the 6.5% saver after using the top rate SHORT TERM savers, which you neglect to mention.

I am planning to use the 6.5% RS, but only for any excess cash after filling up the SHORT TERM RS's from 12 down to 7%. This is mainly just to beat my normal savings account of 5%. If I could drip feed from the 6.5% I would!!!

Kazza242

stphnstevey wrote:

If you read back - it was you who changed an existing product to £500 month (and 1 year if its Llloyds RS). You can't just make the figures fit your arguement when it suits you. You either compare existing products or not. If you are comparing existing products, then don't compare the best of the LONG TERM savers against a low SHORT TERM saver.

I didn't do that! If I wanted to make a comparison between the best LONG TERM saver to a "low SHORT TERM saver", then I would have chosen the Leek BS 6% 12 month regular saver. Instead I chose an 8% one, because, regular savers in the region of 8% (8.25% Ipswich) are the highest rate accounts one can get without having to open a current account and fund it etc.

I take offence to you saying that I've made up arguments to suit myself. This is nonsense. I looked into comparing a 6.5% long term RS to an 8% one. I wouldn't consider a RS paying 8% as a LOW rate, but oddly, you do. I didn't see the point in comparing the 6.5% account to a short term RS paying more than 8%, because other than Ipswich's slighthly higher rate of 8.25%, the other 8%+ accounts require a linked current account to be funded each month* to qualify for the RS. *Except LTSB & Ipswich.

stphnstevey wrote:

Also as most RS are £250 a month, it's not a good comparison to use the YB RS at £500 month, as obviously you can invest more.

In your opinion. I looked at the YBS RS at £500 per month and compared it to an 8% RS also at £500 per month, I can't see the problem with that. masonic then did some calculations, taking into account 2 x £500 fed into an 8% account in Year 2 and still came to the conclusion that a long term RS would still come out on top. I made some comparisons and some assumptions and then posted my calculations based on them. masonic did something similar and made some useful suggestions, which I took on board. I am baffled by what it is exactly you wish to compare. To be frank, you could have posted your own set of comparisons, assumptions and calculations to support your argument, rather than (it seems), ripping into what someone else has written.

stphnstevey wrote:

You would need to look at the actual RATE you get, rather than just the AMOUNT of interest. I have done this calculation.

Huh. The amount of interest you receive at the end of it all is the only thing you need to look at! I think most "regular savings account loving" MSE's would disagree with your view there. This is what I was looking at and also I believe what masonic was looking at. Even taking into account your arguments earlier, when masonic factored in using 2 high interest RS accounts in Year 2, the long term saver was still the winner.

stphnstevey wrote:

Additionally, the main point was you were not using the money in the 8% RS in the second and third year wisely by simply putting it back in a 5% account. This defeats the object of using RS's. You would put that money into the next best RS, which is likely to be 7%.

masonic also raised this and according to what he said he made some calculations based on this and still came to the conclusion in favour of the long term saver.

stphnstevey wrote:

Finally, you would only consider the 6.5% saver after using the top rate SHORT TERM savers, which you neglect to mention.

I think you mean, YOU, yourself, would only consider the 6.5% saver after the top rate SHORT TERM savers. This brings us back to your opening post and why I (and baldbloke) raised the issue in the first place about the dangers of overlooking a long term 6.5% saver for a high interest, but short term saver.

stphnstevey wrote:

I am planning to use the 6.5% RS, but only for any excess cash after filling up the SHORT TERM RS's from 12 down to 7%. This is mainly just to beat my normal savings account of 5%. If I could drip feed from the 6.5% I would!!!

To be honest, I always got the feeling that you had already made your mind up in thinking that short term savers were better from post 1 in this thread. I felt I had to highlight what can be gained by using a long term saver, not just for your benefit, but so that people viewing this thread would be able to see that it isn't always about the rate, but rather the amount of interest you earn at the end of it all. If filling up short term savers before anything else is what you want to do, then do that. I still hold the same opinion, as I did earlier. Like masonic & baldbloke, I also think that the long term RS (might) still be unbeatable by (any) existing short term account. This might also explain why there are so few long term savers available paying 6%+, while there are numerous short term high interest RS accounts.

stphnstevey

So many blatantly wrong comments I want to reply to, but won't lower myself. You would like to 'think' that reguler moneysavers would agree with you, but so far the only agreement has been masonic who agrees with ME in post 64

QUOTE "The amount of interest you receive at the end of it all is the only thing you need to look at!"

According to you, the actual rate makes no difference, only the amount of interest. So I guess you would be more happy with 0.0001% interest of £1 on 1 million pound invested than the 90% interest of 90p on £1 invested. I have massively exaggerated this so you might finally get the idea.

I had not made my mind up at the beginning of the first post or I wouldn't have wasted my time debating with you. I done the calculation (partly helped by the Smile calculator I think you mentioned) after looking at the flaws in yours.

Just cause a RS requires a current account alongside it, you have discounted them so that you can use a lower rated RS to compare against. Why are you not so confident comparing it to a 12% RS? Because the difference is more blatant!