Lump Sum Saving & Regular Monthly Saving

colsten

I have not looked at your spreadsheet in great detail, but I noticed three things instantly:

1. you need to use gross interest rate, not AER, to calculate interest
   
   
2. you seem to have accounted twice for interest from FD and M&S Reg savers
   
   
3. your total annual interest is more than £1,000, so you will have to pay at least basic rate tax on some of your interest

Eco_Miser

AdamW85 wrote: »

@Eco Miser, can you provide more information on your statement:

'Also make plans for the accommodation of £24000 in a year's time when the regular savers mature'.

Maybe it is a typo or I am missing something?!

Yes, there was a typo, now fixed in red.

If you use all the regular savers, as I mentioned in that post, you'd be saving £1950 a month, (£1000 new money, £950 cycled from 3% accounts) which is £23,400 in a year. Then there's the interest, takes you to well over £24,000.

At that point, the £24k+ will be kicked out, into a low-paying account and you have to put it somewhere, it's as well to plan ahead.

What part did you think could be a typo?

AdamW85

Hi Colsten, I have only used AER as it is a direct comparison? At least that is what I have read from the MSE guides?

Regarding accounting twice for interest from FD and M&S Reg savers, I'm not sure where you see this? The info in the top left is just a list of accounts and their respective rates/cashback etc. It is the 2 tables at the bottom (LHS is current accounts and RHS table is savers) which are the accounts I plan to use and their respective interest gained.

Eco Miser, I wasn't accounting for the new money plus the 950 from 3% account.

Trumpeter

If the OP is new to regular saver accounts, it might be useful to point out that a one year 6% account only gives you that amount on the first payment. The next month's pay-in gets 11/12ths of 6%, then 10/12ths etc...

I'm sure there's a link somewhere to the actual aer of these accounts.

colsten

Trumpeter wrote: »

If the OP is new to regular saver accounts, it might be useful to point out that a one year 6% account only gives you that amount on the first payment. The next month's pay-in gets 11/12ths of 6%, then 10/12ths etc...

I'm sure there's a link somewhere to the actual aer of these accounts.

There is no such thing as an "actual AER", and therefore no link to it either. The AER is the AER, as published by the account provider. The amount and frequency of deposits don't change the AER of an account.

Interest is calculated daily, not monthly, on the balance of the account at the end of each day. The calculation uses the gross rate, not the AER - although if interest is only paid annually, gross and AER will be the same, as no compounding can happen.

Trumpeter

colsten wrote: »

There is no such thing as an "actual AER", and therefore no link to it either. The AER is the AER, as published by the account provider. The amount and frequency of deposits don't change the AER of an account.

Interest is calculated daily, not monthly, on the balance of the account at the end of each day. The calculation uses the gross rate, not the AER - although if interest is only paid annually, gross and AER will be the same, as no compounding can happen.

OK, let's get the terminology right. There's a link that shows you the equivalent rate of interest that you would earn if you had deposited the full annual allowance & kept in in the account for a full year. Maybe not technically the AER......but very close!

I only made the suggestion as we have seen a good few posts on the board from people who expected more interest that they had got.

Eco_Miser

The Annual Equivalent Rate is what you would get by depositing £100 for one full year (and ignoring any conditions that make this impossible for the particular account). 6% in this case, would get you £6.

The amount you get for depositing for a shorter time, is the amount deposited multiplied by the gross rate multiplied by the time deposited, expressed as a fraction of a year. 366/366ths for the first payment, 335/366ths for the second payment, 306/366ths for the third payment ... 31/366ths for the last payment (numerators may vary slightly depending on where in the calendar year you start saving). I=Prt, where I is the interest, P is the principal (the amount deposited), r is the rate as a fraction (percentage/100), and t is the time in years (as described above). The total received is the sum of those 12 calculations.

For a quick approximation for a regular saver (ignoring the varying month lengths) each deposit is in the account for an average time of 13/2 months, which is 13/24 years, so the interest is 13/24ths of what would have been earned had the whole amount been deposited for a whole year at the same rate.
£100 for 12 months = £6.00
£100 for 11 months = £5.50
£100 for 10 months = £5.00
£100 for 09 months = £4.50
£100 for 08 months = £4.00
£100 for 07 months = £3.50
£100 for 06 months = £3.00
£100 for 05 months = £2.50
£100 for 04 months = £2.00
£100 for 03 months = £1.50
£100 for 02 months = £1.00
£100 for 01 months = £0.50
Total = £39.00

£1200 for one year = £72.00

£72 * 13/24 = £39.00 - same figure.