Skipton Building Society Questions and Answers

adindas

I think here you did not take into consideration where your current money to pay for the RSA come from bank a/c which pay rubbish interest (0%). In this case you need to move your money asap to earn some interest.

Let say you just happen to know in the middle of month, or you just have time to open it on that day e.g in the middle of the month. If you wait until the end date of the month you will loose the opportunity to earn some interest (e.g 15 day interest) as the interest is paid daily.

So in case your money come from bank a/c/ with rubbish interest rate (0%), I think the theory should read:
- Put it as soon as possible
- Change the date on the first day of the month in the following month.


ADINDAS

ultrawomble wrote: »

OK, let's assume that the rate stays at 5% for the year and I pay no tax on the interest so I receive it gross.

Option 1
If I open the account on the 1st December 2010 with £500 and make 11 further payments on the 1st of each month (total saved = £6000), and the account matures on the 1st Dec 2011 I'll receive about £161 gross interest (~£129 after 20% tax).

Option 2
If I open the account one day earlier on the 30th November 2010 with £500 and make 11 further payments on the 1st of each month (total saved = £6000), and the account matures on the 30th Nov 2011 I'll receive about £184 gross interest (~£147 after 20% tax).

So, I'm £23 better off with Option 2 than with Option 1

Here's how it works:

Basically, you only get interest on each £500 payment for the time it is in the account.

With Option 1, I have the 1st £500 earning interest for 12 months; the 2nd £500 earning interest for 11 months; the 3rd £500 earning interest for 10 months etc.

With Option 2, I have the 1st £500 earning interest for 12 months; the 2nd £500 earning interest for 12 months, less 1 day; the 3rd £500 earning interest for 10 months etc.

As you can see from above, the 2nd payment in Option 1 only earns interest for 11 months, whereas in Option 2 it earns interest for effectively 12 months.

Skipton_Building_Society_Representative

calypso_rhapsody wrote: »

I'd like to ask why Skipton (and, to be fair, many other BSs) insist on sending cheques out if savers decide to withdraw funds on the maturity of a fixed bond. The charge for an electronic transfer is an extortionate £25. They're happy to have our funds in by electronic transfer or even by debit card .... but not to return our money in the same way.

I think the whole issue of treating savers fairly at maturity or when they want to close accounts is an area that the FSA should look at - very often there are underhand attempts to keep the money, at low interest rates, for extra days (the Post Office was a particular case in point) etc etc. HSBC once insisted that i had to visit a branch in order to close an on-line savings account - what on earth is all that about? I don't expect the Skipton rep to deal with other banks' positions but some recognition that treating withdrawing savers fairly is proper business behaviour would be good - after all we might return sometime!

Hi calypso rhapsody,

That's a fair question.

We are currently looking into offering a BACS facility for maturing funds next year to make this process easier for customers.

I hope this helps,

Caroline

ultrawomble

adindas wrote: »

Dear ultrawomble

I could see the point this has also been explained in the previous thread.

Imagine the following case which applicable to alot of people.
- You just happen to know let say 10 November 2010.
- Your situation is your mony is currently in the current a/c which earn 0% interest rate.
- By waiting until the end of the month you will loose THE OPPURTUNITY COST" of potential earning interest for 20 days if you wait until the end date of the month.
- On the following month (December) you could still switch your SO back 1 December.

In this case, I think you will be better off if you pay as soon as possible and then later switch it on the 1st date in the following month.

This is just my though, please comment it.

ADINDAS

OK, we'll call your situation Option3 - here are the maths again with your scenario added:

Option 1
If I open the account on the 1st December 2010 with £500 and make 11 further payments on the 1st of each month (total saved = £6000), and the account matures on the 1st Dec 2011 I'll receive about £161 gross interest (~£129 after 20% tax).

Option 2
If I open the account one day earlier on the 30th November 2010 with £500 and make 11 further payments on the 1st of each month (total saved = £6000), and the account matures on the 30th Nov 2011 I'll receive about £184 gross interest (~£147 after 20% tax).

Option 3
If I open the account on the 10th November 2010 with £500 and make 11 further payments on the 1st of each month (total saved = £6000), and the account matures on the 10th Nov 2011 I'll receive about £169 gross interest (~£135 after 20% tax).

So, if I chose Option 3 I'm £8 better off than with Option 1, but if I chose Option 2 I'm £23 better off than with Option 1.

As you can see, I'd still rather have the £500 in the current account earning no interest and exercise Option 2 rather than opt for your scenario.

Added:

Option 2 works by compressing the early payments. For example, on the 4th Jan 2011 (35 days after opening the account on the 30th Nov 2010) I would have £1500 in the account earning 5% (payments on the 30th Nov, 1st Dec and 1st Jan). However, you with Option 3 would only have £1000 earning 5% after 35 days on the 15th Dec (payments on the 10th Nov and 1st Dec).

Option 2 also has the bonus of expanding the final interest earning period. For example, both our final payments would fall on the 1st Oct 2011. Your scenario Option 3 would have the accrued £6000 earning interest until the 10th Nov 2011, whereas in Option 2 my £6000 will be earning interest until the 30th Nov 2011 - an extra 20 days of 5% interest on the full amount.

Skipton_Building_Society_Representative

lkmc01 wrote: »

I understand its 12 payments of £500, but is there a best time of the month to open the regular savers account with skipton?

Hi again lkmc01,

Sorry if my first response wasn't very clear. I have asked for further clarification of how this product works. Here is the response:

The product runs for 1 year from the date of account opening. For example, if I open one today (25th), it will end at midnight on 24 November 2011.

As interest is accrued daily, the customer should pay in the maximum amount on the day they open their account and then the monthly anniversary of the date that they opened their account thereafter (ie I open the account with £500 today (25 November), then add £500 on the 25th of each subsequent month). This then ensures that the customer gets the full months interest on that money. The account then ends on 24 November 2011 to ensure that the account only runs for 12 months – (so a customer is able to deposit a total maximum of £500 per month which is £6,000 over the 12 month term).

I hope this helps!

Caroline

ultrawomble

Skipton_Building_Society_Representative wrote: »

Hi again lkmc01,

Sorry if my first response wasn't very clear. I have asked for further clarification of how this product works. Here is the response:

The product runs for 1 year from the date of account opening. For example, if I open one today (25th), it will end at midnight on 24 November 2011.

As interest is accrued daily, the customer should pay in the maximum amount on the day they open their account and then the monthly anniversary of the date that they opened their account thereafter (ie I open the account with £500 today (25 November), then add £500 on the 25th of each subsequent month). This then ensures that the customer gets the full months interest on that money. The account then ends on 24 November 2011 to ensure that the account only runs for 12 months – (so a customer is able to deposit a total maximum of £500 per month which is £6,000 over the 12 month term).

I hope this helps!

Caroline

That's quite misleading. It's financially advantageous for the customer to make the second deposit on the 1st of the following month (and subsequent months) rather than lose 25 days of interest waiting until the 25th of the next month.

ctdctd

ultrawomble wrote: »

That's quite misleading. It's financially advantageous for the customer to make the second deposit on the 1st of the following month (and subsequent months) rather than lose 25 days of interest waiting until the 25th of the next month.

Yep - Caroline confirmed the account runs per calendar month in an earlier reply so you are quite right.

Skipton_Building_Society_Representative

ultrawomble wrote: »

That's quite misleading. It's financially advantageous for the customer to make the second deposit on the 1st of the following month (and subsequent months) rather than lose 25 days of interest waiting until the 25th of the next month.

Hi ultrawomble,

If I open an account today (25 November 2010), the interest will only be credited to my account on 24 November 2011. By paying in the full subscription on the monthly anniversary of the account opening, I am allowing the maximum amount of money to be in my account for the longest time possible, giving me the most interest possible (because interest is calculated daily).

So, the 'month' runs from the monthly anniversary of the account opening, to the day before the next monthly anniversary. So I will only ever have the account for 12 months (there's no way to have it for 13 'months').

I hope this helps,

Caroline

Skipton_Building_Society_Representative

ctdctd wrote: »

Yep - Caroline confirmed the account runs per calendar month in an earlier reply so you are quite right.

Very sorry for the confusion. The 'month' works on the monthly anniversary of the account opening.

My response to ultrawomble (see above) should clarify the situation following more investigation.

Thanks,

Caroline

Rollinghome

ultrawomble wrote: »

That's quite misleading.

Let's be fair. We can expect Caroline to advise on the terms, conditions etc. of Skipton products and how they're intended to be used.

We can't expect her to advise on, or even necessarily know, the additional little wheezes for possibly maximising interest by those with more funds available than the intended maximum allowable monthly contributions. Fielding questions from all directions on a forum isn't easy and she's doing that extremely well.

ctdctd

Skipton_Building_Society_Representative wrote: »

Very sorry for the confusion. The 'month' works on the monthly anniversary of the account opening.

My response to ultrawomble (see above) should clarify the situation following more investigation.

Thanks,

Caroline

Hmmmm, not convinced here Caroline,

I opened my account on the 23rd Nov with £500.
When is the earliest I can pay the next months subscription without breaching the T&C's - Dec 1st or Dec 23rd?

Dec 1st would be the date most RS accounts would allow, including earlier Skipton ones. If it's not Dec 1st, you need to make it very clear or you will be closing lots of accounts on Dec 2nd!