First Direct - Regular Saver Account 5%

SusanSpain

Firstly, Please do direct me to the thread if this has already been covered.

OK - I took out the great sounding 5% (paid at end of year), Regular Saver account with First Direct. I have just received 80 quid nett interest and was expecting it to be over 100 pounds.

I phoned FD and they explained that the interest is calculated daily, so ony 1.23 pounds pcm on the 300 I elected to put in monthly.
(The operator said something about take 300 pounds, divide it by 365 days and times by number of days in the month - 30/31 to get the monthly interest.)
She did admit that I am not the only one to have been confused by this and that with their new 8% account they have make it clear (???? not very clear in my books!)... that the interest is calculated daily and for example on 3600 pounds - at 300 pcm you will receive about 156 pounds Gross, 124 pounds nett.

This sounds a right scam to me as it was not clear in the initial selling of the product last year.

My question is has anyone else here complained directly to First Direct as I am about to do so, and think it would carry more weight if I can quote that other members are also of the opinion that they were misled.

The other matter is -
What is the REAL APR on the 8% account if it is paid daily (on the increasing amount one puts in)
It seems to me to be less than 2% and I might do better to put my money elsewhere!

Thanks for taking the time if you reply. (I am not that thick with maths, but sometimes if I have missed the small print it becomes confusing

opinions4u

This link from the top of the page is excellent.

The paragraph that refers to your situation is "Sadly regular saver accounts often receive negative publicity due to a flawed understanding. Many people say they've used regular savers, but only received around half the interest they thought they would... yet that's because they expected the wrong amount, not because they were underpaid."

In other words you expected the wrong amount, they paid exactly what they said they'd pay.

This sounds a right scam to me

Personally I find the use of the word "scam" grating. They pay you interest, calculated daily, on the money you have saved with them for the time it is saved with them. This is fair, reasonable, and far better than you would get drip feeding money in to any other savings account on the market.

I find it extraordinary that people expect to receive a full year's interest on money that they haven't had deposited for a full year.

What is the REAL APR on the 8% account if it is paid daily

The real AER is 8%.

dazeruk

I'm not sure from your post what you are complaining about.

If you had a regular saver paying 5% and fed in £300 per month for a year, you would expect to get £97.77 before tax and £77.53 after tax.

ffacoffipawb

SusanSpain wrote: »

Firstly, Please do direct me to the thread if this has already been covered.

OK - I took out the great sounding 5% (paid at end of year), Regular Saver account with First Direct. I have just received 80 quid nett interest and was expecting it to be over 100 pounds.

I phoned FD and they explained that the interest is calculated daily, so ony 1.23 pounds pcm on the 300 I elected to put in monthly.
(The operator said something about take 300 pounds, divide it by 365 days and times by number of days in the month - 30/31 to get the monthly interest.)
She did admit that I am not the only one to have been confused by this and that with their new 8% account they have make it clear (???? not very clear in my books!)... that the interest is calculated daily and for example on 3600 pounds - at 300 pcm you will receive about 156 pounds Gross, 124 pounds nett.

This sounds a right scam to me as it was not clear in the initial selling of the product last year.

My question is has anyone else here complained directly to First Direct as I am about to do so, and think it would carry more weight if I can quote that other members are also of the opinion that they were misled.

The other matter is -
What is the REAL APR on the 8% account if it is paid daily (on the increasing amount one puts in)
It seems to me to be less than 2% and I might do better to put my money elsewhere!

Thanks for taking the time if you reply. (I am not that thick with maths, but sometimes if I have missed the small print it becomes confusing

It's not a scam. It's common sense to those with brains - you only get interest on money when they have it in the account:

Approx 5% = 300 x 6.5 x 5% = £97.50 gross, £78 net

Approx 8% = 300 x 6.5 x 8% = £156 gross, £125 net

The money is in the account for 6.5 months on average - the average of 12, 11, 10, ...., 1.

Should they pay interest on money when it isn't in the account?

flimsier

I teach this to 13 year olds as part of the topic "compound interest" - which actually helps them understand why credit cards are so dangerous. But how the hell can you expect the have 5% on the £300 that's there for a month (else you'd just put several thousand pounds in the account just before the end of the year, wouldn't you?)

SusanSpain

Thank you both for your replies. Second is quite useful as a guideline - i.e if you see 5% advertised, then it is in fact 2.75%
So why don't they say this?

Not all of us are au fait with every nook and cranny of the techniques banks/building societies use to tempt us in.

My gripe is not that I didn't get interest on money I hadn't put in (I am not that daft)... but as a first time drip feeder saver it was a shock to think that I was going to get the percentage rate they state at the beginning. (But it turns out to be something else.)

Now you have spelt it out for me, then I now understand.

I must say that I feel that sometimes on this forum the replies from folk are a bit terse. Yes, we are dealing with facts, but there is a way to say what you have to say without being rude.
Forums IMO are there for people to help each other - and I think it should also be taken into account that we are people with emotions and not just numbers. :beer: and chill....

SnowMan

I have had both accounts.

The real AER on the 5% account is an AER of 5%
The real AER on the 8% account is an AER of 8%

Every £1 in the account earns 5% (or 8%) if left in the account for a year, or half those amounts if in the account for half a year and so on.

So there is no scam. It is an account advertised in about as straightforward and honest way as it could be.

I can't think of any other accounts where you can earn 8% AER. So it is a superb account also.

opinions4u

SusanSpain wrote: »

Thank you both for your replies. Second is quite useful as a guideline - i.e if you see 5% advertised, then it is in fact 2.75%
So why don't they say this?

Because regulations insist that they advertise a gross annual rate, a net annual rate and an AER (annual equivilent rate).

Many of these accounts allow you to vary the amount paid in each month. So how is a provider meant to guess what you're going to do before you do it?

Soubrette

SusanSpain wrote: »

Thank you both for your replies. Second is quite useful as a guideline - i.e if you see 5% advertised, then it is in fact 2.75%
So why don't they say this?

Because it's not.

jamesd

SusanSpain wrote: »

Thank you both for your replies. Second is quite useful as a guideline - i.e if you see 5% advertised, then it is in fact 2.75%. So why don't they say this?

Because it would be wrong. It's 5% on all of the money paid in to the account for as long as it's in the account. It's not 2.75%. The difference is important for people who don't put in the full amount every month but say put a lot in at the start then nothing more. Pay in one lump of £300 at the start and you'd get 5% on that money, not 2.75%.

I don't know whether they did it for your account but take a look at their description of their current 8% regular saver:

"How much it pays
8.00% AER/gross That's fixed for 12 months. So if you saved £300 per month for 12 months, you'd receive returns of approximately £156 gross (£124 net) in interest after 12 months. Interest is calculated daily and paid on the 12 month anniversary after account opening."

So they are saying there what interest can be expected if the account is used to the maximum limits.

dazeruk

SusanSpain wrote: »

Thank you both for your replies. Second is quite useful as a guideline - i.e if you see 5% advertised, then it is in fact 2.75%
So why don't they say this?

Because the rate is 5%. (And I'm struggling to understand where you've plucked the 2.75% figure from. If you'd quoted 5/2=2.5% then at least I know where you were coming from.)

SusanSpain wrote: »

My gripe is not that I didn't get interest on money I hadn't put in (I am not that daft)...

By saying the real interest rate is 2.75%, I think you are being that daft.