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Nationwide "Start to Save" Instant Access 1% AER With Chances To Win £100
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Mr.Saver
Posts: 521 Forumite

It works like a combination of variable rate instant access savings account, regular saver and premium bonds.
See https://www.nationwide.co.uk/products/savings/start-to-save/features-and-benefits
What's the annualized interest rate range if £50 is paid in each month and the prize draws is taken into consideration? Is it better than other easy access savings accounts?
Obviously new opened accounts won't be qualified to the next prize draw on 21 July 2020, this needs to be taken into consideration too.
Prize draws
- Prize draws will take place on 21 July 2020; 21 October 2020; 22 January 2021 and 23 April 2021.
- To be entered into a prize draw, you’ll need to increase your account balance by at least £50 (but by no more than £100) in each of the three calendar months leading up to the month of the prize draw. For example, to qualify for the prize draw on 21 October, the total balance in your account needs to increase by at least £50 in July; at least £50 in August and at least £50 in September.
- If you increase your balance by more than £100 in a month running up to a prize draw, you will not be entered for that prize draw.
- If you take money out of your account during a calendar month, then you may need to pay some or all of it back in. For example, if your account balance is £100 at the beginning of the calendar month and you then take out £50, you’ll need to pay in at least £100 to increase the balance to at least £150 by the end of the calendar month.
- Interest and any prize draw winnings added to your account will not count towards your minimum £50 balance increase.
- We’ll select the winners at random from all accounts that qualify for the prize draw.
- Your account must still be open and you must be living in England, Wales or Scotland on the day of the prize draw.
- Each winner will receive £100.
- The number of winners will depend on how many £100 prizes can be made up from the prize fund for each prize draw.
- The prize fund is equal to 1% of the total increase in the balances of all accounts that qualify for the draw across the three calendar months leading up to the month of that prize draw.
- Depending on how big the prize fund is, your chance of winning is between 1/34 and 1/67.
- If you win, we’ll let you know by email or post and pay the £100 into your account within 30 days of the draw.
See https://www.nationwide.co.uk/products/savings/start-to-save/features-and-benefits
What's the annualized interest rate range if £50 is paid in each month and the prize draws is taken into consideration? Is it better than other easy access savings accounts?
Obviously new opened accounts won't be qualified to the next prize draw on 21 July 2020, this needs to be taken into consideration too.
1
Comments
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Already discussed at length: https://forums.moneysavingexpert.com/discussion/6105019/nationwide-start-to-save-account1
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I did my calculation. It turns out is not a bad product at all.
The chance of winning is between 1/34 and 1/67, and each win will receive £100. To keep it simple, I will use the minimal probability of 1/67 in the calculation below.
The probability of winning all 4 prize draws (£400) in a year is:
1/67^4 (about 1 in 20 million)
The probability of winning 3 prize draws (£300) in a year is:
4*66/67^4 (about 1 in 76 thousand)
The probability of winning 2 prize draws (£200) in a year is:
6*66^2/67^4 (about 0.13%)
The probability of winning 1 prize draw (£100) in a year is:
4*66^3/67^4 (about 5.7%)
And, for reference, the probability of winning nothing in a year is:
66^4/67^4 (about 94%)
The prize draw mean average annual return is:
£400*1/67^4 + £300*4*66/67^4 + £200*6*66^2/67^4 + £100*4*66^3/67^4 ~= £5.97
To maximize the interests received from a regular saver account, one would prefer to make the regular monthly deposits as early as possible - i.e., the first day of each calendar month. But to minimize the lost of interest from drip feeding the lower interest "regular saver", and remain qualified for the prize draws, one would prefer to make the monthly deposits as late as possible - i.e. the last day of each calendar month.
Because only 4 dates for the prize draws are available, I'm going to back date the example to March.
In March 2020, open the account with £0 balance, and then deposit £50 on the end of April 2020, May 2020, ..., March 2021 to qualify for all 4 prize draws.
The annual average balance between 1 April 2020 and 1 April 2021 (on 1 April 2021 you can withdraw all the money and still qualifying for the 23 April 2021 prize draw) is roughly £50*11/2 ~= £275 (the accurate number is going to be slightly above this, because we started in March, and February is shorter)
So the £5.97 is equivalent to 2.17% interest rate on the average balance of £275. Add this to the 1% normal interest rate, it gives 3.17%, even better than those 2.75% regular savers.
Mathematically this is a good product, but please do take the 94% chance of winning nothing in a year into consideration. So in a year, 94% savers would only receive 1% interest, and the other 6% savers would receive at least 36% prize winnings (£100/£275) plus the 1% interest on the £275 average balance and the amount won.
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*interest, not interests. The problem is that there is no really big prize. The likelihood is that you'll earn 1% and if you're really, really lucky you'll make another £100. Meh.1
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Since ~1% is the new normal for rates at the moment, I'm chucking £50 a month into this from my Lloyds Club (which pays 1%)Retired 1st July 2021.
This is not investment advice.
Your money may go "down and up and down and up and down and up and down ... down and up and down and up and down and up and down ... I got all tricked up and came up to this thing, lookin' so fire hot, a twenty out of ten..."1 -
Thanks all for highlighting this saver, like others might consider having an account and chucking in £50 until April0
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