Savings Account Interest

LegalCashier

Hi,

Probably a silly question and I've most likely done my maths wrong but thought I would see if someone could explain!

I have a Defined Access E-Saver Issue 2 with Virgin with 1.20% net interest.

As of 22nd February my savings balance was £10,100.00. My interest was paid yesterday as £70.23 then £14.02 deducted for tax. I would of made my interest £121.20 then £24.24 deducted for tax?

Interest and VAT have always been my downfall and I would appreciate any help please

Thank you

Flobberchops

Is interest paid monthly or annually?
Is the 1.2% APR or AER?
Was your balance £10,100 for the whole period or have you added to it since you last received interest?

LegalCashier

Flobberchops wrote: »

Is interest paid monthly or annually?
Is the 1.2% APR or AER?
Was your balance £10,100 for the whole period or have you added to it since you last received interest?

Thank you for response -
Annually
It says 1.50% gross, 1.20% net and 1.51% AER
I opened the account last August with the following deposits:

11/03/2016TAX DEDUCTED - £14.04
11/03/2016INTEREST EARNED + £70.23
22/02/2016Payment + £450.00
20/01/2016Payment + £650.00
29/12/2015Payment + £1,550.00
12/10/2015Payment + £450.00
22/09/2015Payment + £900.00
26/08/2015Payment + £1,000.00
05/08/2015Payment + £1,000.00
05/08/2015Payment + £4,000.00
04/08/2015Payment + £100.00

eskbanker

As with any other interest-bearing account, interest is earned on the basis of what the balance is each day, i.e. you'll only get interest on £10,100 for the days on which that was the balance, not for the entire period, which in itself is less than a year anyway.

Without plugging it all into a spreadsheet, the average balance over that period of seven months looks like roughly £8K so the gross interest should be approximately £8K * 1.5% * 7/12 which is indeed the £70 you refer to pre-tax, so that sounds right to me....

mathsmaster

The calculation by Virgin is correct. You might have £10,100 in the account now but for most of the year you had far below that amount. Interest is calculated daily and paid at the end of the year - your question implies that you think it is calculated on the final day of the year and then added, which it is not.

YorkshireBoy

You earn interest each day at...

closing balance x 1.51% / 365

So your first calc is...

£100 x 1.51% / 365 x 1 (1 day interest for 4th August)

The second one is...

£5,100 x 1.51% / 365 x 21 (21 days...5th - 25th August)

And so on

Add up all 8 interest figures for gross
Multiply this by 0.2 for your tax
And the first less the second is your net interest

LegalCashier

Thank you all it makes sense now!