Lloyds TSB Monthly Saver

rupert654

I signed up for a monthly saver with Lloyd's TSB during a period when they were offering a fixed rate 5% gross interest (I don't pay tax) paid on maturity after a year. I would give the exact details but I'm not allowed to post links!

I assumed that this would mean that they would look at how much money was in my account at the end of the year, work out 4% of that and give me that percentage. Unfortunately, I now realise this is not the case as I have been paid far less than I expected.

Could someone please explain to me how they do, in fact, calculate this interest rate? I saw elsewhere on this forum that it is calculated monthly but this makes no sense to me as if they were to do this, then it seems this amount would be more than if it were calculated yearly.

For example, if I put £100 into the saver at the beginning and then nothing else and they took 4% of this 12 times, totalled it up then this should be more than if they just did it once at the end of the year.

Do they instead look at just the money I put into the account each month and give me 4% on that? So then I would get 4% on the £100 once and then receive nothing for each of the subsequent months. But then surely this is identical to totalling the months and giving me 4% on the entire amount at the end.

In my specific circumstances, I had £1250 in the account at the end of the year and was paid £15.14 in net interest.

Thanks!

xrjtg

When they say that interest is paid (or calculated) monthly they mean, roughly, that you get 4% / 12 of the balance of the account each month in interest. Think of it as 4% a year (which is in fact what AER—Annual Equivalent Rate—means), rather than 4% total.

LittleVoice

rupert654 wrote: »

I signed up for a monthly saver with Lloyd's TSB during a period when they were offering a fixed rate 5% gross interest (I don't pay tax) paid on maturity after a year. I would give the exact details but I'm not allowed to post links!

I assumed that this would mean that they would look at how much money was in my account at the end of the year, work out 4% of that and give me that percentage. Unfortunately, I now realise this is not the case as I have been paid far less than I expected.

Could someone please explain to me how they do, in fact, calculate this interest rate? I saw elsewhere on this forum that it is calculated monthly but this makes no sense to me as if they were to do this, then it seems this amount would be more than if it were calculated yearly.

For example, if I put £100 into the saver at the beginning and then nothing else and they took 4% of this 12 times, totalled it up then this should be more than if they just did it once at the end of the year.

Do they instead look at just the money I put into the account each month and give me 4% on that? So then I would get 4% on the £100 once and then receive nothing for each of the subsequent months. But then surely this is identical to totalling the months and giving me 4% on the entire amount at the end.

In my specific circumstances, I had £1250 in the account at the end of the year and was paid £15.14 in net interest.

Thanks!

Here are a few points:

If the account was paying 5% then it would be at the rate of 5% (5p) for each whole pound in the account for one year. If it were 5% of the balance on the last day of the savings period then we would all be putting in a minimum amount until the last week and then putting in as much as possible.

If you don't pay tax because you do not earn enough (from employment and savings interest etc), then you should register for gross payment of interest.

If you had £1,250 at the end of the year and received £15.14 interest after tax, then most of that money must have been put in in the latter part of the account year. If you had put it in in equal instalments (£104/month approximately), you would have received £25 interest.