Halifax Kids' Regular Saver account whopping 6% misleading

monkeymoomoo999

Having opened a Halifax Kids' Regular Saver account under the whopping 6% advertised we found it very confusing that having put approximately £1200 in over the year the account only earned £25. The maximum deposit each month being £100.


We asked in branch for this to be explained to us. The Manager showed us the deposits for each month and agreed with me that 6% of each deposit totalled over £60 interest accrued. This appears in reality not to be the case.


We are very disappointed as we could have invested the money elsewhere and made them more interest.


Has anyone else found the Halifax website misleading and not easy to understand for the ordinary person, when a branch manager doesn't seem to understand it either.

AlanP_2

Interest on £100 pm in a Regular Saver can be calculated as:

(12 x monthly deposit) x AER / 12 x 6.5

So (12 * 100) * 6% /12 *6.5 = £39.

Cannot see how they arrived at £25 if the £100 was paid in each month for 12 months.

Remember that only 1 months deposit is in there for 12 months and earns the full 6%. Month 2's money earns 11/12th as much as Month 1 and so on until Month 12's which earns 1/12th.

A quick calculation is half the money earns the 6% so £600 @ 6% = £36.

I suggest you contact them at HQ formally and ask for an explanation / breakdown.

Archi_Bald

Oh no, not again!

There is nothing misleading. There are just people who misunderstand, or don't bother reading the information published by Halifax.

The account is excellent value - in fact, the very best in the market - if used for the purpose it's been designed for, i.e. as a Regular Saver.

It is, by definition, not possible to deposit more than the monthly maximum into a Regular Saver, and clearly, you can't expect to get interest for money that isn't in an account.

There is more information about Regular Savers: http://www.moneysavingexpert.com/savings/best-regular-savings-accounts

jimjames

monkeymoomoo999 wrote: »

We are very disappointed as we could have invested the money elsewhere and made them more interest.

I'm fascinated to know where you can get more than 6% interest on a savings account. Can you enlighten us?

mrssjs

My children got £39.39 for 13 payments in at £100 per month.

It isn't misleading, it even tells you on the website:-

"Kids' Regular Saver example - If you save £50 each month, you'll earn £18.97 gross (£15.18 net) interest after 12 months.

The interest is calculated on the balance of the account each month, so using the example above, the first month's balance would be £50, the second month £100 etc. and therefore the amount of interest paid will increase over the year in line with the balance of the account."

colsten

monkeymoomoo999 wrote: »

The Manager showed us the deposits for each month and agreed with me that 6% of each deposit totalled over £60 interest accrued. This appears in reality not to be the case..

6% is the AER (Annual Equivalent Rate), not the monthly rate. I find it very hard to believe that anyone working in a bank would not know that.

AlanP wrote: »

Interest on £100 pm in a Regular Saver can be calculated as:

(12 x monthly deposit) x AER / 12 x 6.5

It's actually the gross rate that is used for interest calculations, but on the Halifax Kids Regular Saver gross and AER are the same. Also, interest is calculated based on the balance of an account at the end of each day but your formula gives an approximate value.

xylophone

Has anyone else found the Halifax website misleading and not easy to understand for the ordinary person, when a branch manager doesn't seem to understand it either.

The Halifax web site makes it perfectly clear - it is worrying that the Branch Manager doesn't understand it!

http://www.halifax.co.uk/savings/accounts/kids/kids-regular-saver/

bsms1147

Sounds like the account paid some tax too.

Flobberchops

Caveat Emptor and all that. Regular Savers vs flexible savings accounts are an example of not being able to compare apple and oranges.

The good thing is that Reg Savers encourage regular deposits, and, if you only had £100 spare each month to save anyway, they'd be an obvious choice. The downsides include the headline rate being almost halved in practice if size of deposit is no object, and also (usually) the lack of compounding interest.

You can make the best of it by pairing the Halifax Reg Saver with a JISA. Use the reg saver to generate an initial lump sum, chuck that in the JISA on the anniversary each year, and repeat the process. You won't be able to access the funds yourself but across several years it'll compound nicely.

Eco_Miser

Flobberchops wrote: »

The downsides include the headline rate being almost halved in practice if size of deposit is no object, and also (usually) the lack of compounding interest.

The rate isn't halved, the average amount in the account is.
If size of deposit is no object than the excess should be kept in the best paying account available.


The lack of compounding interest is also not a problem (it's actually an advantage if you pay tax), as the gross rate and AER are the same, while in an account that adds interest monthly the gross rate is reduced, so that it compounds to the AER if no tax is deducted from the payments.

kidmugsy

The account pays 6% interest on every £ that is in it for a year. If a £ spends only part of a year in it, it earns proportionately less.