Club Lloyds Monthly Savings Account Maturation - Less interest than I thought

Irishgal00

Hi all,

I opened a Club Lloyds Monthly Savings Account in feb 2015. The interest rate is 4.00% gross/AER fixed for the first 12 months. I deposited £400 into the account every month. It has now reached maturation and the interest is approx £78 net. It is exactly half what I was expecting; £156 net (£196 gross).

Can anyone offer an explanation?

Thanks

redux

The larger amount would be the interest earned at 4% on a balance of £4800 or so.

But this would be only if that was the balance throughout the year.

For a monthly savings account, with £400 at the start and £800 by month 2, etc, the average balance is roughly half the final amount, with perhaps small variations if the pay in dates within the month vary.

ceredigion

You were expecting interest on money you hadn't deposited ?

JoeyG

Irishgal00 wrote: »

Hi all,

I opened a Club Lloyds Monthly Savings Account in feb 2015. The interest rate is 4.00% gross/AER fixed for the first 12 months. I deposited £400 into the account every month. It has now reached maturation and the interest is approx £78 net. It is exactly half what I was expecting; £156 net (£196 gross).

Can anyone offer an explanation?

Thanks

I had exactly the same thing. I opened the same account in Feb 2015 and paid £400 (the maximum) every month. My interest has come out at £81.82

I had falsely assumed because the interest is paid in a lump at the end of the year, it is on the full amount.

If you plug the figures into the calculator here: http://www.thisismoney.co.uk/money/saving/article-1633419/Monthly-lump-sum-savings-calculator.html it comes out at roughly the same amount.

Aretnap

If you had a normal savings account which paid 4%, and you put just £1 into it today, then another £999 in January of next year, would you expect to get £40 of interest next February?

The regular saver works on exactly the same principle - 4% is the annual rate, but you only get paid for the amount of time the money is actually in the account.

You had £400 deposited for 12 months = £16 of interest.

You had another £400 which was only deposited for 11 months = £14.66 of interest

You had another £400 which was only deposited for 10 months = £13.33 of interest

And so on and so on - giving you an expected amount of £96 gross/£76.80 net at the end of the year.

This calculation will not be precisely correct as the calculation is actually done daily and some months are longer than others, and also it ignores the effect of compounding, but it's a reasonable approximation and roughly corresponds to what you've received.

kidmugsy

Calling herself "Irishgal" and asking a dim question? A joke in bad taste, I think.