Lloyds TSB 5% Monthly Saver

anna42hmr

thanks for the reply, it arrived in the post today.

with ref to the 13 payments i was thinking of doing it as follows:

1st so 14 december
2nd so 1st January (which would actually go on 4th due to bank hol)
3rd 1st feb
4th 1st mar
5th 1st april
6th 1st may
7th 1st june
8th 1st july
9th 1st august
10th 1st september
11th 1st october
12th 1st november
13th 1st december

then maturity would be 9th Decemeber

but not really sure if it will make much difference interest wise getting the 2nd standing order in 2 weeks earlier or not.

oldfella

making the first deposit at the end of the month, and then all subsequent deposits on the 1st, makes about £9 more interest gross over the year in a 5% RS.

Rollinghome

anna42hmr wrote: »

thanks for the reply, it arrived in the post today.

with ref to the 13 payments i was thinking of doing it as follows:

...13th 1st december

then maturity would be 9th Decemeber

but not really sure if it will make much difference interest wise getting the 2nd standing order in 2 weeks earlier or not.

Most of the calculations on these savers and the whizzy timing of payments tend to make several unrealistic assumptions that are rarely mentioned.

Any calculation on how much you might gain by bringing forward the 2nd payment is entirely dependent on what interest you're currently earning on that money. The frequent assumption is that would be 0%. But if you do have money sitting around earning no interest then it shouldn't be and it's unlikely to make sense to have it continue sitting around earning nothing to the end of the month.

Similarly with the idea of a 13th payment. Especially if you lose several days interest when transferring money in and out, the gain, if any, by transferring money in on the 1st only to transfer it out again on the 9th will be minimal: just a few pence at most.

oldfella

the gain comes from having £3000 at 5% for nearly 2 months, compared with having £250 for a month and £3000 for a month

ffacoffipawb

oldfella wrote: »

the gain comes from having £3000 at 5% for nearly 2 months, compared with having £250 for a month and £3000 for a month

At best, the difference will be less than £10 net of basic tax


31/12/2010 250.00 .... 250.00 ... 31/12/2010 ... 250.00 ..... 250.00
31/01/2011 250.00 .... 501.04 ... 01/01/2011 ... 250.00 ..... 500.03
28/02/2011 250.00 .... 752.92 ... 01/02/2011 ... 250.00 ..... 752.11
31/03/2011 250.00 .. 1,006.04 ... 01/03/2011 ... 250.00 .. 1,004.93
30/04/2011 250.00 .. 1,260.09 ... 01/04/2011 ... 250.00 .. 1,259.10
31/05/2011 250.00 .. 1,515.32 ... 01/05/2011 ... 250.00 .. 1,514.16
30/06/2011 250.00 .. 1,771.41 ... 01/06/2011 ... 250.00 .. 1,770.45
31/07/2011 250.00 .. 2,028.76 ... 01/07/2011 ... 250.00 .. 2,027.56
31/08/2011 250.00 .. 2,287.19 ... 01/08/2011 ... 250.00 .. 2,285.98
30/09/2011 250.00 .. 2,546.38 ... 01/09/2011 ... 250.00 .. 2,545.48
31/10/2011 250.00 .. 2,806.95 ... 01/10/2011 ... 250.00 .. 2,805.70
30/11/2011 250.00 .. 3,068.23 ... 01/11/2011 ... 250.00 .. 3,067.35
31/12/2011 ............ 3,080.97 ... 01/12/2011 ... 250.00 .. 3,329.68
31/12/2011 ...............................................................3,343.06

INTEREST ...............80.97 ...........................................93.06

DIFFERENCE ...............................................................12.09
NET OF 20% TAX .........................................................9.67

EDIT: Of course if the money comes from a Vantage current account paying 4% then the gain is just £2.42 gross, £1.94 net of basic rate tax.

And if the £250 (early) transfer causes the Vantage to dip below £5,000 then there will be a loss due to the drop in interest on the Vantage as a result.

oldfella

At best, the difference will be less than £10 net of basic tax

---

not sure what point you are making; if you are going to take the trouble to make £81 interest you might as well time your payments to earn another £10

Rollinghome

oldfella wrote: »

At best, the difference will be less than £10 net of basic tax

---

not sure what point you are making; if you are going to take the trouble to make £81 interest you might as well time your payments to earn another £10

If you keep £250 more in any account for a year then you'll get more interest on that account, nothing mysterious about that. You will of course lose whatever interest that £250 would have earned elsewhere. That's the way interest works, there's no alchemy involved. Perhaps he means that the calculations are simplistic and the actual "gain" is likely to be far less than £10 in any realistic situation.

To "gain" that amount assumes:
That the money comes from an account that pays zero interest; but then oddly appears to assume that no interest will be lost by delaying transfers from an account paying no interest until a specific date. It assumes that no interest is lost during the transfers and that the account is kept with savings locked in until the last day and so makes the further assumption that no better savings offer will be around for a year.

In the unlikely event that those assumptions actually applied to anyone then it's likely all their savings arrangements would need sorting.

oldfella

To "gain" that amount assumes:
That the money comes from an account that pays zero interest; but then oddly appears to assume that no interest will be lost by delaying transfers from an account paying no interest until a specific date. It assumes that no interest is lost during the transfers and that the account is kept with savings locked in until the last day and so makes the further assumption that no better savings offer will be around for a year.

---

I agree with this, but you are making more of this than I intended - I was simply asserting that by timing your payments you can improve the return.

Yorkie1

Quick question for those who are better at calculations than I am.

I set this account up over the phone with the 5% interest rate and a SO for the maximum £250 per month.

On going online today I found out that a typing error meant that only £25 was put in. I have rung them up and they have amended the SO for January onwards to what I requested, but cannot put more than one amount in per calendar month, therefore I have lost the ability to save the additional £225 in the first month.

What is the loss of interest on that £225? They tell me that it is calculated at maturity and have made a goodwill gesture of £5 to cover that loss of interest and phone calls. Does this in fact cover it? I am a bit of a novice at interest rate calculations but it seems to me that after 12 months, the interest relating to the first month is £1.25 if deposit of £25 is made, and £12.50 if £250 is deposited. Is this correct or am I way off beam?

I have rung back to seek clarification and have ended up more confused than ever. The chap said that the interest on the maximum £3000 deposit would be in the region of £81 - but in my mind you can't just divide this by 12 (not that he was suggesting this as such), you have to take into account the length of time each amount is on deposit?

Edit:my figures, if I've added this up right, are:

Dec (12/12 months' interest) £25 = £1.25 int // £250 = £12.50
Jan (11/12 months' interest) £250 = £11.46
Feb (10/12 ...) £250 = £10.42
Mar (9/12) £250 = £9.38
Apr (8/12) £250 = £8.33
May (7/12) £250 = £7.29
Jun (6/12) £250 = £6.25
Jul (5/12) £250 = £5.21
Aug (4/12) £250 = £4.12
Sept (3/12) £250 = £3.12
Oct (2/12) £250 = £2.08
Nov (1/12) £250 = £1.04

Totals: £2775 dep = £69.95 int; or £3000 dep = £81.20

oldfella

225 at 5% = £11.25 gross