Regular Saver Thread **New and Restarted**

1Foz

Unless I'm being dumb (probably), I'm pretty sure Saffron BS have their sums wrong on this :

https://www.saffronbs.co.uk/savings/fixed-rate-savings-accounts/12-month-fixed-rate-regular-saver-issue-4-gr1/

£41.93 interest on their example is actually more like 2.55%...not 3%.

I even did a double check in excel to make sure its not me going mad....I work out 3% as being £48.75 interest :



Forgive me if I overlooked something...but 48.75 interest is even quoted by HSBC for their regular saver that pays the same rate and for the same £250 pay in that Saffron offers (here : https://www.hsbc.co.uk/savings/products/regular-saver/ ).

So....I just thought I'd post this in case anyone happened to open an account with Saffron thinking they were getting 3%...when the £41.93 they are giving you is far from it.

pantaiema

1Foz wrote: »

Unless I'm being dumb (probably), I'm pretty sure Saffron BS have their sums wrong on this :

https://www.saffronbs.co.uk/savings/fixed-rate-savings-accounts/12-month-fixed-rate-regular-saver-issue-4-gr1/

£41.93 interest on their example is actually more like 2.55%...not 3%.

I even did a double check in excel to make sure its not me going mad....I work out 3% as being £48.75 interest :



Forgive me if I overlooked something...but 48.75 interest is even quoted by HSBC for their regular saver that pays the same rate and for the same £250 pay in that Saffron offers (here : https://www.hsbc.co.uk/savings/products/regular-saver/ ).

So....I just thought I'd post this in case anyone happened to open an account with Saffron thinking they were getting 3%...when the £41.93 they are giving you is far from it.

You are correct.
Based on this MSE calculator

https://www.moneysavingexpert.com/savings/best-regular-savings-accounts/?&_ga=2.109687429.1455349081.1567944795-1812503022.1567944795#savingscalc

2.55% with £250 monthly instalment you will get £41.28 interest after 1 year
3.0% with £250 monthly instalment you will get £48.53 interest after 1 year

eskbanker

It's not really a matter of right or wrong - these calculations are heavily influenced by the assumptions made, so if the monthly deposits were made late in the month rather than early then this could reduce the interest payable down to the level shown by Saffron. This is because in this scenario each of the interest payments calculated above is effectively delayed by a month, i.e. no interest in month 1 (if there was no balance from the start), only 0.625 in month 2, etc, so the net effect is to remove the final interest payment, dropping the annual total to £41.nn.

I have a vague recollection of another provider making a similar assumption previously, which is of course anathema to hardened MSEers chasing every penny of interest and correspondingly determined to optimise their schedule of deposits!

1Foz

But isn't the interest paid on the anniversary date (I.e 12 months from when the account is opened), thus 365 full days of accrued interest is ensured. I know my First Direct and Nationwide savers both pay the interest on the anniversary date. Unless Saffron is not doing the same, I guess this could be the case, would have to read there t&C's to see if it pays on an anniversary date or the first working day of month 12. Anyway I was just curious more than anything as to how two same products could pay differing amounts of interest

eskbanker

1Foz wrote: »

But isn't the interest paid on the anniversary date (I.e 12 months from when the account is opened), thus 365 full days of accrued interest is ensured. I know my First Direct and Nationwide savers both pay the interest on the anniversary date. Unless Saffron is not doing the same, I guess this could be the case, would have to read there t&C's to see if it pays on an anniversary date or the first working day of month 12. Anyway I was just curious more than anything as to how two same products could pay differing amounts of interest

The interest is paid at the end of the 12 month term from account opening, but my point is that if you open an account on the 1st of a given month but don't make the monthly deposits until the end of each month, that gives a lower return than paying in right at the start of each month because the first month is effectively wasted, with a knock-on effect throughout the term as the balance is almost always lower than it could be.

Paying in asap after opening obviously makes more sense for those wanting to optimise the interest, but modelling the deposits as being made after a delay is still perfectly valid, so for any regular saver account there will be a range of projected total annual return figures, depending on the assumptions used.

You've modelled the maximum and I believe Saffron have calculated the minimum, but that doesn't make either or them right or wrong, and there will be plenty of other valid answers in between!

I found the thread I was thinking of earlier, where this same subject was discussed in the context of the TSB regular saver, although at least they made their assumptions clear in their published summary box, unlike Saffron: https://forums.moneysavingexpert.com/discussion/5979497/tsb-monthly-saver-interest-correct

pantaiema

1Foz wrote: »

But isn't the interest paid on the anniversary date (I.e 12 months from when the account is opened), thus 365 full days of accrued interest is ensured. I know my First Direct and Nationwide savers both pay the interest on the anniversary date. Unless Saffron is not doing the same, I guess this could be the case, would have to read there t&C's to see if it pays on an anniversary date or the first working day of month 12. Anyway I was just curious more than anything as to how two same products could pay differing amounts of interest

If you are using the RSA calculator most of them are calculated based on the assumption that you deposit the same amount each month right from the account opening date. You keep depositing the same amount of money on the same date each month. But all of the assumptions are not always true as in some cases you might vary the date you deposit the money. Many RSA are paying intrest in the annyversary date a few are not.

You could optimise return and get more than the one predicted by the calculator by changing the date to day one each month. For example you open the RSA in August 30, as soon as you manage to pay the first deposit in August 30, you immediately change the date for SO to September 1 for the next payment and you keep paying on day one each month until maturity. You could easily see this without calculating it because the money will be in the account for a little longer.

Poor_Leno

gotcha,

Though anyone opening an account on say 1st of month, and then not paying in til the end, would be pretty stupid to do that. Though I appreciate that for 'illustrative' purposes, can see how a lower return was made. Though, it surprises me that Saffron wouldn't use the best case example of return than one of the worst. I guess its down to the individual to do the sums on what the return should be with consistent payments on the same day of every month, but even still, why wouldn't you assume first that's what most customers would do

Cheers for the replies guys. (pseudonym change, btw).

eskbanker

Poor_Leno wrote: »

I guess its down to the individual to do the sums on what the return should be with consistent payments on the same day of every month, but even still, why wouldn't you assume first that's what most customers would do

Why would you assume that you know what most of their customers do?

surreysaver

Poor_Leno wrote: »

gotcha,

Though anyone opening an account on say 1st of month, and then not paying in til the end, would be pretty stupid to do that. Though I appreciate that for 'illustrative' purposes, can see how a lower return was made. Though, it surprises me that Saffron wouldn't use the best case example of return than one of the worst.

If Saffron used the best case scenario, then everyone would be whinging that they didn't receive as much as was claimed. It would seem sensible to use an illustrative example where it is assumed the money is paid in on the same day every month.
I would assume that this is what most 'ordinary' folk would do.

eskbanker

surreysaver wrote: »

It would seem sensible to use an illustrative example where it is assumed the money is paid in on the same day every month.

At the risk of labouring the point, I believe that both best (1Foz) and worst (Saffron) cases will already be based on the assumption that deposits are made on the same day of each month! For the best case, that date will be assumed to be asap after opening (and monthly thereafter on the same day of the month), whereas the worst case will involve initial funding nearly a month after opening (and monthly thereafter on the same day of the month).

Having said that, Saffron do include an odd provision in their high-level summary box terms (there don't appear to be detailed account-specific Ts & Cs published):

To ensure you receive the maximum monthly interest your payments need to reach your account by the 28th of each month for them to be counted. Any missed payments cannot be backdated.

There is no monthly interest on this account, it's paid on maturity, so this makes no sense to me, as the interest is calculated daily and is maximised by paying in as soon as possible after opening and on the same day of the month thereafter - I presume it's been sloppily copy/pasted from another product, which is perhaps why their interest illustration is similar devoid of detail about assumptions made. They could perhaps mean that payments need to be made by the 28th to count as that calendar month's deposit (which would ultimately avoid missing some interest), but that's not what they actually say!