How is this interest calculated ?

swift_gti

Hi all,

I've just received the interest on my Barclays Regular Saver account (should be 10%) - so I've saved the maximum £250 a month for 12 months thinking I'd get £300 interest minus a bit of tax...

On my calculator 10% of 1000 is 100.. so it stands to reason that £3000's worth should be £300 !

I'm sure I may well have missed something obvious here but I've only received £160 interest minus tax, leaving about £128!!! :eek:

Where have my calculations gone wrong??

Cheers!

masonic

You haven't had £3000 in the account all year!

Your interest looks correct considering your average balance would have been about £1600.

Indispensable_Hobbes

isnt it worked out that you get ..
10% on £250 for 12 months, 10% on £500 for 11 months, 10% on £750 for 10 months... and so on??

Lavendyr

Exactly as others have said. If you had had £3000 in there from the start of the year, you would have earned interest on the whole £3000. However, you haven't. You've started with £250 and increased that each month, so the interest is calculated according to the changing account balance throughout the year.

Regular savers are great if you are saving each month rather than investing a lump sum, but you've just discovered the key point that many people unfortunately miss when they open them because of the high interest rates.

MattB_4

jenyking wrote: »

isnt it worked out that you get ..
10% on £250 for 12 months, 10% on £500 for 11 months, 10% on £750 for 10 months... and so on??

Would it not be 10% on £250 for 1 month, 10% on £500 for 2 months and so on?

Beate

Erm... no. The 10% is an ANNUAL rate, not a monthly one. On a lump sum of £3,000, if kept in an account for a year, you get £300 before tax on an AER of 10% (AER = Annual Equivalent Rate). On a Regular Saver, because of the drip-feeding, you get about half that before tax, so yes, the £128 is right.

Indispensable_Hobbes

whatever the specifics of the calculation the general gist was there to explain why the interest wouldnt be 300

swift_gti

Thanks everyone.. that explains why its only £128, I thought they gave you the interest based on what you'd saved after 12 months but obviously not.
Is there a type of interest that works in that way ?

Thank for the help!

superstar_2

See, i have a question on this. I open another web saver last year and deposited [SIZE=-1]£10. The interest rate at that time was 4.75% and it has risen bit by bit to 5.30% atm. After one year[annual interest], i received [/SIZE][SIZE=-1]£0.40 as interest.

How did the calculations work? Even at a minimum rate of 4.75% at the time i opened it, that should give me [/SIZE][SIZE=-1]£0.475 = [/SIZE][SIZE=-1]£0.48 isn't it?
[/SIZE]

superstar_2

albertross wrote: »

you pay tax on it, multiply by .8

I dont get what you mean, how did you get the 20%

I am a student, so i dont pay tax. Furthermore, the rate is AER/Gross already.

Any help?

superstar_2

albertross wrote: »

Have you filled in a form to get the interest tax free?

20% is the rate of tax on savings, unless you are in the 40% tax bracket, in which case HMRC will take another 20% when you fill in your tax return.

£10 x 5% = 50p gross interest, thats 40p for you, and 10p for the taxman

I remember filling up the form, at least for my current a/c and the other web saver a/c. May have missed out this, but as far as my memory serves, i did - banks calculations usually dont go wrong, do they?

Say, IF i have forgotten, can i fill up now and get my 10p back? :T