Lloyds monthly saver offering me 4.5% AER/GROSS - Am i better off with Santander @ 2.72 AER?

Qyburn

Our account manager (or whatever Lloyds calls them) mentioned that these were coming up shortly. However I still have monthly savers (one normal, one Club) from last year so can't open the new accounts until those mature.

AndyTh_2

Millyonare said:

* Santander = 365 days of interest on 100% of your cash
* Lloyds = 30 days of interest on 8% + 30 days on 8% (repeat for 12 months)

I think you mean 30 days of interest on 8% of the cash + 30 days on 16% etc

anyway, if drip feeding £3k from the Santander savings account, the formula is 250*12*0.045*13/12/2 for the Lloyds account (can actually be a bit more than that due to able to make a 13th payment on these monthly savers, and also pay in the 1st of the month), and 250*12*0.0275*11/12/2 for the Santander.

or in more algebra:

p = £250
t = 12
r1 = 0.045
r2 = 0.0275 (the AER, not the gross rate)

lloyds monthly saver interest = ptr1(t+1)/(2t) = £73.12

santander eSaver LE 1 interest = ptr2(t-1)/(2t) = £37.81

if no interest payment before maturity, so £110.93, compared with £82.50 if just sticking with the eSaver

financialbliss

Qyburn said:

Our account manager (or whatever Lloyds calls them) mentioned that these were coming up shortly. However I still have monthly savers (one normal, one Club) from last year so can't open the new accounts until those mature.

Close and reopen regular savers at the new rate. More actions, renew account. Change to Easy Saver. Log out. Log back in to internet banking and you can then close the Easy Saver accounts. Apply for new regular savers at 4.50% and 5.25% rates.

More info in recent posts on the regular saver thread.

Smidster

Think about what is the average in the account over the year.

In the monthly account the average over the year is around 50% of what is on at the end and so you can calculate the interest based on that average (1,500 * 0.45 = 67.50)

In the other one your average in the account is the full amount (3,000 * 0.0272 = £81.60

Qyburn

financialbliss said:

Close and reopen regular savers at the new rate. More actions, renew account. Change to Easy Saver. Log out. Log back in to internet banking and you can then close the Easy Saver accounts. Apply for new regular savers at 4.50% and 5.25% rates.

More info in recent posts on the regular saver thread.

That's excellent information, I knew the "Close account" option wasn't available, but hadn't thought about this roundabout way of doing the same thing. I'll get onto it.

jimexbox

Sea_Shell said:

Try thinking of each £ individually.

What's the highest % of interest that £ can earn today?

This is the simplest way to look at a regular saver. Although, it's not exactly hard to understand in the first place.

AndyTh_2

Smidster said:

Think about what is the average in the account over the year.

In the monthly account the average over the year is around 50% of what is on at the end and so you can calculate the interest based on that average (1,500 * 0.45 = 67.50)

In the other one your average in the account is the full amount (3,000 * 0.0272 = £81.60

roughly 54% (13/12/2)

also the monthly interest compounding on the 2.72% gives an AER of 2.75% so 3000 * 0.0275 = £82.50

but also if you were to compare them like for like on the balance increasing by £250 per month on the eSaver, 3000 * 0.0275 * 0.542 = £44.72

That's why it's actually best to do the drip feed formula instead if you have the £3000 already, since it gives you the overall return

Cisco001

Qyburn said:

Our account manager (or whatever Lloyds calls them) mentioned that these were coming up shortly. However I still have monthly savers (one normal, one Club) from last year so can't open the new accounts until those mature.

If you log in online banking, there is an option to 'renew' you monthly saver. 

Basically it change your existing regular saver to saving account.

Once you did that, you can open new regular saver with the latest rate.

stylus360

jimexbox said:

Sea_Shell said:

Try thinking of each £ individually.

What's the highest % of interest that £ can earn today?

This is the simplest way to look at a regular saver. Although, it's not exactly hard to understand in the first place.

Regular savings calc £250 month (£3000) for 1 year @ 4.5% gives me £73 interest with the calc

Leaving the £3000 for one year  

But that's the whole purpose of AER, it takes compounded interest into account.

There is no benefit in opening one in my case, i would lose money compared to kust letting £3k sit at 2.72% AER.

It's confused me as 4.5% is 4.5% no matter what amount yet their calc and the one provided comes out at less than letting £3k sit there....

RobM99

£3000 deposited for  a year = £3,000 average

£250 a month - £3,000 in a year's time. Average £1,500.