Is this the end of the regular saver? - blog discussion

Former_MSE_Stephen_B

[FONT=&quot]Earlier this month, First Direct and HSBC cut their market-leading regular savings rates to 2.75% on new accounts, leaving M&S Bank as the sole survivor at 5%. The cut means that, excluding M&S, the next best rate that's easily accessible to all is 3% from Virgin Money, much closer to rates offered on other type of savings accounts. So, are regular savers still worth saving in? We run the numbers to find out...[/FONT]

Read the full blog: Is this the end of the regular saver?

eskbanker

MSE_Stephen_B wrote: »

the next best rate that's easily accessible to all is 3% from Virgin Money, much closer to rates offered on other type of savings accounts

Of course lower regular saver rates will erode the gap to other types of savings account (it really doesn't need a blog entry to be published for that!), but VM's 3% is an easy access account.

The MSE analysis is flawed in its presentation of comparative figures between regular savers and fixed or notice accounts, as it's disingenuous to imply that these can all be sensibly evaluated on interest rates alone - there's a reason why fixed-term and notice accounts can afford to pay better interest than easy access ones....

And anyone thinking that regular savers are anywhere close to dying on the basis of lower rates should read the RS thread on here where hardcore money-savers chase every penny - question one for every new account seems to be 'can we get a 13th payment in to squeeze a fraction more interest out of the deal?'.

talexuser

I'm closing Bank of Scotland this month as my regular saver matures and the new one is 2% down from 2.5% (which was just about worth it).
The new regular saver is around £8.12 a year more than the same amount into Marcus, but since the Vantage has gone down to effectively 1.2% on 5k, that 5k in Marcus is £15 a year more, so my BoS is nearly £7 a year worse off than Marcus overall. The DDs have gone to Santander lite.

polymaff

MSE_Stephen_B wrote: »

[FONT=&quot] ... the next best rate that's easily accessible to all is 3% from Virgin Money[/FONT]

Oh, ha, ha, ha. Tell that to those not near a Virgin branch - and, especially, the disabled, Stephen.


MSE should campaign on this issue - instead of being part of the problem.

polymaff

MSE_Stephen_B wrote: »

Read the full blog: Is this the end of the regular saver?

A reasonable synopsis of what has already been said, but please explain:

"If you're moving money from other savings, it's still worth getting a regular saver provided it pays more than 2.25%."

When you dripfeed a regular from a non-regular saver the effective interest rate is just about the average of the two rates involved. What is the rationale behind the 2.25% condition, Stephen?

eskbanker

polymaff wrote: »

When you dripfeed a regular from a non-regular saver the effective interest rate is just about the average of the two rates involved. What is the rationale behind the 2.25% condition, Stephen?

It's explained slightly better a bit further up the article:

MSE wrote:

If you use this 'dripfeeding' technique, you'd need regular savers to get down to around 2.25% (and all other accounts to stay the same) before you start hitting parity with the notice account's 1.8% in terms of actual interest paid out.

i.e. it's a bogus comparison with a different, less accessible, type of account, in that averaging a 2.25% regular saver and a 1.45% easy access feeder account beats the 1.8% notice product, but once the regular saver drops much below that then that would skew the comparison in favour of the notice account, if interest return for a year is the only measure.

All pointless and irrelevant hypothesising of course, as per earlier post, but mathematically 'correct'....

polymaff

talexuser wrote: »

I'm closing Bank of Scotland this month as my regular saver matures and the new one is 2% down from 2.5% (which was just about worth it).
The new regular saver is around £8.12 a year more than the same amount into Marcus, but since the Vantage has gone down to effectively 1.2% on 5k, that 5k in Marcus is £15 a year more, so my BoS is nearly £7 a year worse off than Marcus overall. The DDs have gone to Santander lite.

Yes, but if you dripfeed that £5k you've moved from the BoS bank account into the Marcus account, into a 2% BoS regular, you'll end the year with a return of about 1.75% on that sum.

polymaff

eskbanker wrote: »

....

As someone who firmly believes that people learn best by having to think for themselves, I addressed the question specifically to Stephen.


Stephen, the floor is yours...

talexuser

polymaff wrote: »

Yes, but if you dripfeed that £5k you've moved from the BoS bank account into the Marcus account, into a 2% BoS regular, you'll end the year with a return of about 1.75% on that sum.

But I have to keep the Vantage (at a loss) to have the monthly saver?

Ed-1

talexuser wrote: »

But I have to keep the Vantage (at a loss) to have the monthly saver?

You don't have to keep the Vantage or if you do keep it, keep any money in it.

talexuser

From BoS monthly saver terms, "You must have a Bank of Scotland current account".