How much interest will I make

Miss_Sparkly_Star

Am going to open the Britannia 1 year fixed rate regular saver account. The rate is 7.5% and I plan to save the max - 250 per month every month for a year and make no withdrawals.

I'm a 20% tax payer, can somene please explain/work out how much interest I will make when the bond matures.

Thankyou

YorkshireBoy

£3,000 x 7.5% / 12 x 6.5 x 0.8 = £97.50

Stargazer_Lily

I make it £95.70...

Lil

Liz_the_Whizz

YorkshireBoy wrote: »

£3,000 x 7.5% / 12 x 6.5 x 0.8 = £97.50

Which equates to an annual interest rate of 3.25%.

This is why if you can you should invest it as a lump sum. If you put £3k into a 1 year fixed term bond at 6.5%, you would get back £195, double the return.

Or at least invest in a regular saver which allows you to roll the money over from year to year so that you can build up a decent balance to benefit from the high interest.

Miss_Sparkly_Star

What about if you put the 3k in to a fiixed rate isa with a rate of 6.5% this week. There are only 6 months left till the end of the financial year - i presume you won't get the full rate of 6.5% come April.

Liz_the_Whizz

Miss_Sparkly_Star wrote: »

What about if you put the 3k in to a fiixed rate isa with a rate of 6.5% this week. There are only 6 months left till the end of the financial year - i presume you won't get the full rate of 6.5% come April.

No, but then tax years are only significant for your ISA in terms of when your new ISA allowance starts.

If you do a one year fix for this year's ISA money, the rate simply continues into the next tax year, just as for your 1 year Britannia Fixed Rate Regular Saver.

RayWolfe

Liz_the_Whizz wrote: »

Which equates to an annual interest rate of 3.25%.

No it doesn't.
It equates to a rate of 7.5% on a deposit of £1,500 ... which is what you have invested, on average.

Retired_I.F.A.

None of the above are right.
£250 per month is the amount to be save so it's only the first months deposit that will earn a full years interest. the 2nd deposit will earn 11 months interest and so on.

Theres a savings calculator on this site but it assumes deposits are made at the end of the month so put the figures into it and you'll see it calculates 11 months deposits with interest. To get the answer for 12 months deposits (ie made in advance or made in arrears and the value is given 1 month after the 12th deposit) enter a term of 1 year and 1 month and then take off 1 months deposit.
http://www.moneysavingexpert.com/savings/savings-calculator
so with 12 months interest at 7.5% (annual earnings rate / aka APR) the answer for a 20% tax payer is £96.83 nett interest. and the annual nett aer/apr is simply 7.5%-20%=6%

Miss_Sparkly_Star

Thanks Retired ifa

There seems to be .15% difference from putting the money into an isa with a fixed rate of 6.15%, compared to your calculations of 6% on the britannia saver after tax.

Think I will stick with the britannia option then look for a new good rate of an isa in april and strick some other funds in that, and then forget about it for a year so they get as much as interest as possible.

Retired_I.F.A.

Miss_Sparkly_Star wrote: »

Thanks Retired ifa

There seems to be .15% difference from putting the money into an isa with a fixed rate of 6.15%, compared to your calculations of 6% on the britannia saver after tax.

Erm , you mean someone else's calculations dont you ?

Anyways check out the alliance and leicester website they are doing a simlar thing paying 12% although you have to open some other account too.

YorkshireBoy

Retired_I.F.A. wrote: »

None of the above are right.

You're quite correct. In fact, your own answer is also wrong.

The correct answer* is £97.46...which is 4p less than my own 'coarse formula' result in post #2. I think most people would be happy with that level of accuracy.


* Assumptions:
1st deposit 1st December 2007
Interest calculated daily on the closing balance at CB x 7.5% / 366
Interest paid and tax deducted on 1st December 2008
Basic rate tax payer


I wouldn't rely on the MSE calculator (or your method of calculation, using months not days)...at least until they iron out all the creases!