How much interest on £3000 in A&L Premier Regular Saver?

soonparted

Sorry for being dumb but I have been paying £250 per month into a A&L Premier Regular Saver account (10% interest) since feb 06. I got a letter saying the account will mature next month (feb 07) and that the balance will be £3130.52 after tax i.e interest of £130.52. is this correct? i thought it would be 10% of 3000 which is £300. then minus some tax at 20%?

Can anyone out there confirm if the figure in the letter is correct please?

masonic

Yes, it is correct. The reason you do not get 10% of £3000 is because you only have £3000 in the account in the last month. Your average account balance over the 12 months is just over £1500.

happy_snapper

soonparted wrote:

Sorry for being dumb but I have been paying £250 per month into a A&L Premier Regular Saver account (10% interest) since feb 06. I got a letter saying the account will mature next month (feb 07) and that the balance will be £3130.52 after tax i.e interest of £130.52. is this correct? i thought it would be 10% of 3000 which is £300. then minus some tax at 20%?

Can anyone out there confirm if the figure in the letter is correct please?

its not neccesarily dumb but what u are wrongly assuming is that the 10% interest rate has been calculated for a twelve month period on the whole 3000 quid but alas at the start of that period you didnt have 3000 quid in your account you had 250, then 500,750,1000 and so on so the interest is being paid on a lesser amount at month one than it is at month 12 and so on...get me...?

tom188

Yes

Do a search and there are hundreds of similar threads, this misunderstanding seems extremely common. Perhaps we need a Sticky?

You didnt have the £3000 in for the whole year. Therefore 1st payment gets 10% * 12/12, 2nd payment 10*11/12, 3rd payment 9*10/12 etc. Add them together and thats about what youll get.

Unfortunately you only get interest is only calculated on money that is actually in the account, not money that is going to be in the account in a few months time.

The whole balance wasnt there for a year so you wont get interest calculated on it for the whole year.

Mikeyorks

tom188 wrote:

Do a search and there are hundreds of similar threads, this misunderstanding seems extremely common. Perhaps we need a Sticky?

Not a criticism of the OP ... but regrettably people don't bother to read them. The top and bottom Sticky on this thread .. both cover the subject. Although you do have to search a bit in the bottom one - but 'how is interest calculated' is clear enough? And there is a direct link to the main site article on Regular Savers - also at the top of this thread. And where this subject is more than covered. Including the fact that if the contribution to Reg Savers is from existing savings (as opposed to new money) ... you need to add in that should be earning at least 5% before it's dropped into the 7% - 12.5% Reg Saver.

metrobus

Ive had the the same letter today,if you are not a tax payer you should get
£3162.50, my reg saver ends on feb 1st