Help to calculate savings interest

Raxximus

Hello MSE peoples......

Wonder if someone can help me, I'm trying to figure out how much interest I will earn on a new savings account I am looking at, it's with Nationwide Regular Saver, I can't post the link but if you go to the Nationwide website>Savings>Instant Access>Regular Saver.

I was looking at their figures, it seems if one saves £500 per month then the rate is 2.5%AER so I got my calculator out and tried some sums, on their website is says "Interest calculated monthly and paid annually" so on £500 @2.5% (gross) that's £12.50 gross per month right? so over 12 months same investment =£150 gross interest? or am I going mad? becuase I read the last line the example it says:

"For example, if you saved £500 a month for 12 months without making any withdrawals, you would earn £81.50 gross interest by the anniversary of the first deposit based on the current variable rate of 2.50% gross p.a./AER"

How do they get £81.50 annual gross interest at 2.5% AER calculated monthly on fixed investment of £500 per month ?? :think:

Any advice appreciated......

ColdIron

£12.50 pcm on £500, I wish

Use the Regular Saver calculator to get an idea. Don't forget that to get the 2.5% you must pay in £500 -> £1,000 per month otherwise the rate drops
http://www.moneysavingexpert.com/savings/best-regular-savings-accounts#calculator

Mikeyorks

Raxximus wrote: »

.....so on £500 @2.5% (gross) that's £12.50 gross per month right? ......

Not right, I'm afraid.

That only applies to the first payment you make and which will be in the account a full year. Your 2nd payment is there for 11 months and your final payment less than a month. So you don't get interest on money not yet added to the account - which your calculation does.

Reasonably well explained here :

http://www.moneysavingexpert.com/savings/best-regular-savings-accounts#dripfeed

The actual calculation is : £6000 x 6.5 / 12 x 2.5% = £81.25

The 6.5 (months) is the average amount of time each £1 is in the account.

Raxximus

Hi ColdIron

Yes I know to get 2.5% one must save £500-£1000 and that's why I used that example. I tried that calculator in your link and yes it works out as on the Nationwide statement but what is the mechanism? I don't understand that bit, to me it looks simple, £500 saved, 2.5% ineterst= £12.50 gross earned but obviously I am doing something wrong and being baffled with more dark maths?

Thanks

Archi_Bald

If you have £500 a month to save, you can do a lot better than the Nationwide Regular Saver:

• put £300/mth into a First Direct Regular Saver (6%)
• put the other £200/mth into a Nationwide FlexDirect (5%), or Yorkshire/Clydesdale Bank Current Account Direct (4%)

There are also other Regular Savers that pay better AER than the Nationwide one. See first few posts of https://forums.moneysavingexpert.com/discussion/comment/6932895#Comment_6932895

Though the Nationwide one is beautiful if you have maxed all the others that are worthwhile doing.

YorkshireBoy

Raxximus wrote: »

what is the mechanism?

The "mechanism" is how the 6.5 figure (posted by Mikeyorks above) is derived.


First payment is in the account for 12/12ths of the year
2nd payment for 11/12ths
3rd payment for 10/12ths
etc
etc
with the last payment being in for only one month, ie 1/12th.


So, mathematically, this is...


1/12 + 2/12 + 3/12......+ 10/12 + 11/12 + 12/12 = 78/12 = 6.5


Any clearer?

Raxximus

Mikeyorks; Sorry I posted my reply the same time you did hence I didn't see your explanation and yes that makes it a bit more clearer. Thank you.

Yorkshireboy; Thank you also for explaining that. It's obviously not clear enough on their website which I guess is their intention for simpletons like me!

Archi Bald; I need an instant access account that allows me to transfer via faster payments to either a Nationwide current account or external current account. I cannot find any higher interest instant access savings account that allows me to do this with unlimited withdrawals without limits. That first direct account does not allow partial withdrawals and a max saving of only £3600. I don't want the hassle of having a number of accounts to more complicate my life, one simple solution with the best benefit for my needs. I know interest rates are poor at the moment but I have savings in a standard current account sitting there doing nothing so need to move it to where it can at least make something. You also need a First Direct 1st account to have a savings account so again no good for me. The other option I had in mind that suits my needs was the Leeds BS E-Saver, interest rate is lower than the Nationwide but it's not dependant on how much you put in and allows me to put in lump sums higher than £1000, say if I get some money from family or bonus from work (rare but you never know!)

Any other suggestions for a instant access, unlimited withdrawals to external accounts, no max limit, no withdrawal limit with the best interest rate I can get?

Thanks again for all input, greatly appreciate it.

Archi_Bald

Nothing better really for your now more detailed requirements than some current accounts. Apart from the ones already mentioned, you could also look at Santander 123, Lloyds Vantage, BoS Vantage, TSB Enhance.

You don't have to give up your existing current account - just add some new ones.

Though if you want no hassle and just a simple solution, you need to settle for some mediocre savings account. Max you can get there atm is 1.5% before tax.

The Nationwide Regular Saver doesn't appear to be particularly suitable for your requirements since you only get the 2.5% if your balance increases by at least £500 a month. That sound incompatible with your requirements for withdrawals.

Raxximus

Thanks Archi Bald. Yes I think you're right if I put in £500 then take out some it will I guess affect the rate. So I think the Leeds BS is good for my needs I think it's 1.35% so compared to your comparison of the best I am looking at for my needs will probably max at 1.5% and balanced with the type of outfit and reputation I think Leeds BS might be a good bet?

Santander; don't like them, wife used to have accounts with them, terrible outfit.

Any Scottish located outfits I am nervous since there is a lot of talk about independance and losing the pound what would happen to money saved in that instance with a Scottish outfit.......

Lloyds and TSB nervous about their history........

Raxximus

Just had a quick check;

Lloyds & TSB ones you mention max balance of £5k, no good.
Santandar 123, monthly account fee £2 per and fund the account with £500 per month. With a £2 per month fee that's £24/yr down the drain off any interest earnt right away.........

Some months I may not be able to save anything, some months up to £500.

PeacefulWaters

Raxximus wrote: »

Any Scottish located outfits I am nervous since there is a lot of talk about independance and losing the pound what would happen to money saved in that instance with a Scottish outfit.......

There would be a transitional period which would allow you to move your money elsewhere.

Lloyds and TSB nervous about their history........

In what way?

!It's obviously not clear enough on their website which I guess is their intention for simpletons like me!

"For example, if you saved £500 a month for 12 months without making any withdrawals, you would earn £81.50 gross interest by the anniversary of the first deposit based on the current variable rate of 2.50% gross p.a./AER"

It's not a phrase designed to mislead. I think your criticism of them is harsh.