Whats wrong with my Reguler Saver Maths?

CLAPTON

working it out using slightly different assumptions but basically similar it works out at about 5.07% with no compounding over the three years (i.e. withdrawing the interest at the end of the first and second years ) .
If you leave the interest there then it works out slightly higher at 5.3

to work out the simple interest rate is
(total interest over three years) /(18000 x3)
in your case 5.09%

the reason that the halifax deal looks better is of course you are not committing 18,000 per year but much less so you are not comparing like with like.

as far as comparing with your mortgage it would seem you could make a marginal profit but you could improve on this by :

a. using a better a/c than the cahoot
b. if you kept the Yorkshire a/c going longer by just keeping it alive by just putting minimal amount into it and so earning the 7% indefinitely.

but thats another calculation.

MizRub

My problem is similar to the ones here perhaps a little bit simpler. I've got a Halifax regular savers at 7% and the maximum investment is £250/mth so in 1 year the max i can invest is £3000 right. OK, the current interest rate is 7%AER, 7% Gross pa and 5.60% Net pa.

So i presume that the amount of interest i will get back is the 5.60%. So how much shouold i really get back? My annual statement says i got back £113.33?? Is this amount correct? Considering 5.60% of £3000 = £168. ok add on 20% tax? = £134.40??? Am I doing this wrong? If I am wrong then am i really getting the 5.60% as stated? Not to mention that the Advertised rate is 7%?? Can I report them for false advertisment? Don't you think the FSA should take a look at these high street banks and do something about this?

tomstickland

Can I report them for false advertisment?

No, they are paying the correct rate on the money in the account.

Debt_Free_Chick

MizRub wrote: »

My problem is similar to the ones here perhaps a little bit simpler. I've got a Halifax regular savers at 7% and the maximum investment is £250/mth so in 1 year the max i can invest is £3000 right. OK, the current interest rate is 7%AER, 7% Gross pa and 5.60% Net pa.

So i presume that the amount of interest i will get back is the 5.60%. So how much shouold i really get back? My annual statement says i got back £113.33?? Is this amount correct? Considering 5.60% of £3000 = £168. ok add on 20% tax? = £134.40??? Am I doing this wrong? If I am wrong then am i really getting the 5.60% as stated? Not to mention that the Advertised rate is 7%?? Can I report them for false advertisment? Don't you think the FSA should take a look at these high street banks and do something about this?

Read post #11 again.

The interest rate is 5.60% p.a. i.e. for a whole year. You only had £250 in the account for a whole year, followed by an extra £250 for 11 months, £250 for an extra 10 months etc.

Thomas_Crown

VeryTrying wrote: »

Found it! It's a great column for handy hints.

MM writes: I took out a Halifax Regular Saver Plan in April last year, with a £200 initial investment and a monthly sum of £200 for 12 months. In total, I invested £2,600. The interest rate quoted was 7% gross. ......... Am I missing something?

Yes. Banks really should learn how to explain these things properly. The point is, you only start earning interest on money once it is actually invested, and the interest rate quoted is an annual one. True, you ended up with £2,600 in the account at the end of the year, but you only had £200 invested at the start, creeping up by £200 every month. Roughly speaking, on average you had £1,300 invested for the full year – so Halifax’s calculation looks spot-on to me

With the Halifax Regular Saver there is no intial investment + 12 monthly payments. ie. £200 + (12 x £200) = £2,600.

The account is initially opened with a cheque deposit for (say) £200 followed by 11 x direct debit payments of (say) £200 which gives a total of £2,400.
The money remains in the Regular Saver until the anniversary of the account being opened when the entire balance is transferred into a low interest rate account.

I am half way through my fourth year with a Halifax Regular Saver & it has never had the option of an initial payment + 12 further payments.

However,the LTSB Regular Saver does have the option of an initial payment of up to £500.00.

tomstickland

The effective rate of interest on the whole sum for the year is very close to the average of the AER of the feeding and saving account.