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

isasmurf

stylus360 said:

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....

On a RS, if funding from existing savings you need to consider what interest you're accruing on the money waiting to go into the RS. So, if you fed the RS from Santander esaver

Month 1: 250 @ 4.5% + 2750 @ 2.75%
Month 2: 500 @ 4.5% + 2500 @ 2.5%
On so on

jimexbox

stylus360 said:

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....

I just did the 3k drip feed calc from santander 2.75 AER, to Lloyds for 12 months using the mse tool.

£82 interest if you have left it in Santander.

£111 if you drip feed into the Lloyds account. 73 from lloyds, 38 from santander. 

phillw

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.

I think what people struggle with is they think they either get

£3000 in santander at 2.75%
or
Withdraw the money from santander into an account earning 0%, then save £250 a month in the regular saver.

Once you realize you can leave the money in santander until you withdraw each months £250, so you get both the higher interest for the regular saver as well as interest from the money waiting in santander, then it makes more sense.

For the 4.5% account it's worth around £29, the question is whether the time opening a regular saver and setting up a standing order (plus making sure that there are funds for the standing order every month) is worth £29.

If you have a club lloyds account and also open the 5.25% regular saver, which allows £400 a month then that is worth a further £65. The time to fund the standing order each month can be combined. I also just increased my lloyds overdraft to cover the £400+£250, which only took a few minutes.

Imvrasos

Formula I use to calculate the benefit of an RS in contrast to leaving the funds in the easy access account is [max amount in RS at year end] x [interest differential between RS and feeder account] x 0.54

Therefore for a Club Lloyds and Santanter 2.75% holder, using the Lloyds RS would bring a benefit of 4800x[0.0525-0.0275]x0.54= about 65£ = 5.4 £/month.

I personally made the move, as factoring in the 4.5% Lloyds RS, my benefit was in the range of 7.5 £/month.

Of course the above is subject to rounding and assumes feeder account interest remains at 2.75% for the year.

AntoMac

My current Club Lloyds monthly saver is paying 1% (don’t laugh) Reading the T and Cs it says you can only open one to get the 5.25% if you haven’t opened one of these accounts in the last 12 months. I opened this one in January. 

Has anyone successfully got the 5.25% by renewing an existing account to a savings account and the opening a new monthly saver? 

stylus360

So why does their AER, which accounts for compound interest differ from mine an the tool calc.

It's not 4.5% if AER f it drip fed 250 monthly and accrued interest added.

Sorry for the replies but i have to run my relies through a spellcheck as i have Dysgraphia.....

It does seem its not worth the hassle tbh, i have way over the £3k amount and can easily set up a SO to it...

Thanks for the great replies even tough i'm still just slightly confused and not totally now.

financialbliss

AntoMac said:

Has anyone successfully got the 5.25% by renewing an existing account to a savings account and the opening a new monthly saver? 

Yes. See my post on the previous page.

AntoMac

financialbliss said:

AntoMac said:

Has anyone successfully got the 5.25% by renewing an existing account to a savings account and the opening a new monthly saver? 

Yes. See my post on the previous page.

All done. Surprisingly easy.

Thank you so much for the tip

dcs34

stylus360 said:

So why does their AER, which accounts for compound interest differ from mine an the tool calc.

It's not 4.5% if AER f it drip fed 250 monthly and accrued interest added.

Sorry for the replies but i have to run my relies through a spellcheck as i have Dysgraphia.....

It does seem its not worth the hassle tbh, i have way over the £3k amount and can easily set up a SO to it...

Thanks for the great replies even tough i'm still just slightly confused and not totally now.

If you're assuming the 4.5% AER means 4.5% on £3,000 then that won't be what the Lloyds regular saver will earn, as your £3,000 is not in the account for a year.

There's £250 in there for a year (earning £250 * 4.5%), then another £250 for 11 months (earning £250 * 4.5% * 11/12), then another £250 for 10 months...and so on. The final £250 will only be in there for one month so will only earn 1/12th of the 4.5% rate.

So each £1 in the account will earn 4.5% AER, but the key is that most of the £s aren't in there for a full year so for the duration they are in the account they will only make the fractional proportion.

stylus360

financialbliss said:

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.

dcs34 said:

stylus360 said:

So why does their AER, which accounts for compound interest differ from mine an the tool calc.

It's not 4.5% if AER f it drip fed 250 monthly and accrued interest added.

Sorry for the replies but i have to run my relies through a spellcheck as i have Dysgraphia.....

It does seem its not worth the hassle tbh, i have way over the £3k amount and can easily set up a SO to it...

Thanks for the great replies even tough i'm still just slightly confused and not totally now.

If you're assuming the 4.5% AER means 4.5% on £3,000 then that won't be what the Lloyds regular saver will earn, as your £3,000 is not in the account for a year.

There's £250 in there for a year (earning £250 * 4.5%), then another £250 for 11 months (earning £250 * 4.5% * 11/12), then another £250 for 10 months...and so on. The final £250 will only be in there for one month so will only earn 1/12th of the 4.5% rate.

So each £1 in the account will earn 4.5% AER, but the key is that most of the £s aren't in there for a full year so for the duration they are in the account they will only make the fractional proportion.

So i can just log in and close one account and then the the new account/more interest/more payment allowance.?