Working out AER/Gross to monthly/daily...

Cmdr_Bond

Can someone guide me on this?

I know there are going to be subtle differences based on when interest is calculated (daily/weekly/monthly/quarterly/annually) and when it's paid (monthly/quarterly/annually).

Basically, I would like to work out the monthly values for a regular saver Vs a lump sum saver.

Both give annual AER, but I'm confused as to whether they apply the rate to the interest accrued during the year or not.

I'm aware of the drip feed calculator, but I'm trying to do something a little more complex and in struggling to explain it. But being able to work out the monthly will help a great deal.

YorkshireBoy

Interest is always earned daily at:

Closing balance x gross p.a.rate

It's as simple as that.

Cmdr_Bond

So can you explain this then?

Club Lloyds Monthly Saver, Fixed 2.5% AER/GROSS

Vs

Santander Regular eSaver, Fixed 2.5% AER/GROSS

Santander States the interest is calculated daily, and added annually.
Lloyds do not say.

Santander say, based on 12 monthly deposits of £200, interest would be £32.16

Lloyds say, based on 12 monthly deposits of £100, interest would be £15 (double all that= £30)

So considering they're BOTH claiming the same AER and GROSS rates, where does the extra £1.08/year per £100/month come from?

And I'm presuming that for these calculations, the gross rate, would be 2.5% DIVIDED by 365 for daily calculation?

YorkshireBoy

Cmdr_Bond wrote: »

Santander say, based on 12 monthly deposits of £200, interest would be £32.16

Lloyds say, based on 12 monthly deposits of £100, interest would be £15 (double all that= £30)

So considering they're BOTH claiming the same AER and GROSS rates, where does the extra £1.08/year per £100/month come from?

They qualify their figures by saying "this assumes that you make your deposits on..."

If you read them both you will see that they make different assumptions about funding.


I've found the closest figure to actual will always be:

Final balance x interest rate / 12 x 6.5

So with Santander that would be:

£2400 x 2.5% / 12 x 6.5 = £32.50

And I'm presuming that for these calculations, the gross rate, would be 2.5% DIVIDED by 365 for daily calculation?

Yes, although I believe they may be allowed to use 366 in a leap year.