Regular Savings Accounts

Section62

Money_Grabber13579 said:

Petriix said:

Despite the scathing responses, the OP has a reasonable point: that you should put your money in the account paying the highest interest available. In a period of rising interest rates it's likely that a regular saver started say 8 months ago won't be paying as much as one taken out today. As an example I've been paying into a Halifax regular savers for each of my children but I recently switched to putting the money into their HSBC savings accounts as this was paying higher interest than the older issue regular savers. Now they've reset, the interest in the regular saver is higher again so I'm paying into that again. 

I think the OP’s question has been completely missed by those who want to be pedantic about how regular savers work. Yes, they are frequently misunderstood and some of the OP’s comments may indicate an element of that misunderstanding but not to the extent that they arrive at the incorrect outcome (I.e. why is my interest only half of what I expected?)

To exaggerate the point I think the OP was making, if there was only £250 available each month and assuming there were at least 12 possible regular savers with decent interest rates, would it be better to open a regular saver and pay in £250 in month one, and then only pay in the minimum balance in each of the subsequent 11 months? For month two, they would then open a new regular saver (month one for that particular regular saver), pay in £250 and again, only the minimum amount in future months. Repeat.

To me, this seems like it would get the maximum possible amount of interest because in that case, the money will be in each regular saver for the maximum amount of time. Now, the OP is talking about whether it is better to adopt the above approach every 6 months and I think I’d agree that it is - in essence, if there is insufficient money to operate all the “good” regular savers, it seems to make sense to avail of them all anyway, but only pay into them for the first number of months (as appropriate).

If you take the words the OP posted and reassemble them in a different order you might be able to draw the conclusion you have.  But the OP's point wasn't what you are suggesting it is.

Here again are the actual words used - "Obviously the top rate is only paid on the first instalment..."

It isn't "pedantic" to point out that statement is wholly incorrect.  Believing different interest rates are applied to regular saver accounts is why people get confused about them.

Furthermore, people constructing complicated theories about how to maximise total interest paid that are based on the mistaken belief that RS accounts don't pay the headline rate of interest just adds more confusion into the mix.

This site is about helping people understand and make their money work harder. Incorrect theories about regular saver accounts don't help to meet this aim.  It doesn't help people to confuse them even more.  So it is right for forum members to point out where others have made errors or miscalculations, and you are in the wrong for calling other forum members "pedantic" for doing so.

If a new regular saver paying a higher rate of interest becomes available to someone it might make sense to stop paying into another one and pay into the new one instead.  Whether this is or isn't a good idea will depend on the circumstances of the case.  But global theories about stopping paying into RS accounts in later months because the interest rate is somehow lower are based on a fundamental misunderstanding which this forum sees on a far too regular basis.

RG2015

Reviewing your savings accounts regularly is a very good idea. Quite simply go for the best interest rate available.

In the past I always let my regular savers run their course. Now, if I can withdraw without any penalty for a better rate I will.

For example I have removed £2,000 from my Lloyds monthly saver paying 4.50%. As I am already going to breach the £1000 interest level for 2023/2024, I will only get 80% of the 4.50%, ie 3.60%

It is now in my Virgin Money ISA earning 3.75% tax free.