Regular Saver Thread **New and Restarted**

oli356

Silly question (don't laugh!) and it's probably explained somewhere on the forum, though its all new to me.



How is the interest calculated on these saving accounts? For example according to MSE
the HSBC account will earn £44.69 interest if you saved the max.

The MSE calculator says £44.50 (saving £250 for 12 months).

HSBC website says £44.69


However I don't understand how this number is created as 2.75% of £3000 is £82.5 so how do we get to 44.69 and why does the calculator on the site differ (albeit only by 19p)

schiff

oli356 wrote: »

However I don't understand how this number is created as 2.75% of £3000 is £82.5 so how do we get to 44.69 and why does the calculator on the site differ (albeit only by 19p)

1. The £3000 is not the balance for the full 12 months; you get the interest on the actual daily balance throughout the year and the balance early on is only £250/£500 etc. It's not a silly question, many others have asked about it before

2. It is to do with how the different calculation methods work out. It's only pence so is it worth bothering about? If you get £44.69 then you are allowed a little smile

colsten

oli356 wrote: »

.... so how do we get to 44.69 and why does the calculator on the site differ (albeit only by 19p)

It's again to do with the length of time how much money is assumed to be in the account for. Different calculators use different assumptions.

Taking the example of an RS which operates on a calendar month basis (most do): You can get a different result if you assume the max monthly amount gets always deposited on the 1st of a month, versus assuming that such a deposit is made on the 1st working day each month. The latter result would be more accurate as deposits are only made on working days. If you choose to make your deposits later in the month, your actual result will yet again be different (i.e. lower).

oli356

Thank you both

As of this year I will be a 40% tax payer (just, after work bonuses at least), so I am trying to calculate how much interest each account will be earning as my PSA will be of course £500. As I've got around £60k to play around with, regular savings / saving accounts will not get me too far as I would exceed the PSA, so figuring out how much could go in these and then how much would need to go into an ISA (or something else...)

eskbanker

oli356 wrote: »

As of this year I will be a 40% tax payer (just, after work bonuses at least), so I am trying to calculate how much interest each account will be earning as my PSA will be of course £500. As I've got around £60k to play around with, regular savings / saving accounts will not get me too far as I would exceed the PSA, so figuring out how much could go in these and then how much would need to go into an ISA (or something else...)

You might wish to find out from your employer if you can sacrifice some salary to make additional pension contributions, as this can keep you at basic rate tax while also providing long term benefits.

oli356

eskbanker wrote: »

You might wish to find out from your employer if you can sacrifice some salary to make additional pension contributions, as this can keep you at basic rate tax while also providing long term benefits.

I pay 3% already (company 8%), I think after bonuses I might be on £53k gross a year.

6% pension contribution I think would keep me in basic rate tax. Though I also have private healthcare as a benefit in kind so not sure how that comes into play as I believe my gross is therefore higher still.

I've never really paid paid attention and understood all the tax stuff, I just go with the flow and never had to think about it.

I only have 4 days left for the ability to change my pension contribution so will probably leave it alone for the time being as I don't know what I'm doing I had thought about seeing a IFA to go through all of this with someone.


Back to my original question then. So whilst with the HSBC account you pay in monthly so will not always have £3000 in the account. A Nationwide FlexDirect (5% up to £2500) can have the money paid in as a bulk payment and therefore get interest on the full amount from day 1, so this would be £125 interest for 12 months?

xylophone

private healthcare as a benefit in kind

https://www.litrg.org.uk/tax-guides/employment/employment-benefits-and-expenses/what-are-benefits-kind

A Nationwide FlexDirect (5% up to £2500) can have the money paid in as a bulk payment and therefore get interest on the full amount from day 1, so this would be £125 interest for 12 months?

If you credit the account with £2500 when you open the account and pay in/out £1000 a month then you earn interest as here

https://www.nationwide.co.uk/products/current-accounts/flexdirect/rates-fees-overdrafts

It is paid monthly and as I recollect works out at around £10 or so a month.

YorkshireBoy

oli356 wrote: »

A Nationwide FlexDirect (5% up to £2500) can have the money paid in as a bulk payment and therefore get interest on the full amount from day 1, so this would be £125 interest for 12 months?

Nearly. You will earn at 4.89% (equates to a notional 5% AER), so £2,500 x 0.0489 = £122.25

However, if you switch an account in you could almost double this with a switching incentive to £222.25 over the year.

oli356

YorkshireBoy wrote: »

Nearly. You will earn at 4.89% (equates to a notional 5% AER), so £2,500 x 0.0489 = £122.25

However, if you switch an account in you could almost double this with a switching incentive to £222.25 over the year.

Thanks for clarification. I'm switching to HSBC (from a now unused Natwest account, since I joined Monzo last year). So will get the £175 switching incentive from then

YorkshireBoy

oli356 wrote: »

Thanks for clarification. I'm switching to HSBC (from a now unused Natwest account, since I joined Monzo last year). So will get the £175 switching incentive from then

You can switch in later to Nationwide as an existing customer. No need to do it now when you open and fund the account initially. Just grab yourself a donor account elsewhere, set up a couple of DDs, and then find a friend or family member to refer you...several months down the line isn't a problem providing their long-running offer is still on of course.