# Interest rates - savings accounts

Forumite Posts: 10
Forumite
Hello, I am seeking some advice regarding savings accounts.

For context, I am considering taking a voluntary redundancy package so I am weighing up the outcomes of different scenarios.

My company is offering an ex-gratia payment of roughly £30,000. Let's say - in the best case scenario - I take the voluntary redundancy and find another job within 3-6 months, and I am able to use this payment to pay off some of my mortgage early or to deposit the money into a savings account.

If I put this money into an easy access savings account offering a 4.35% interest rate (for the sake of argument, let's say this is fixed and I don't deposit any more into the account), would my annual interest payment be £1,305? what would I earn if I opted for monthly interest payments instead? would it be £108.75?

Sorry if this is a really silly question. Thanks in advance.

• Forumite Posts: 560
Forumite
edited 10 July at 2:50PM
You're correct the first year's annual interest would be £1305, if the gross annual rate/AER is 4.35% on a £30,000 deposit.

Monthly is a bit different - the gross monthly will be a little less than 4.35/12, because the monthly amount assumes you'll put it into the same account, therefore your capital will be a little bit higher so will earn more interest, and so on - so eventually over the course of the year the interest earned will be end up £1305. In practise it means the first payments will be less than £108.75 and the last payments more, if you're putting interest earned back into the same account.
• Forumite Posts: 42,586
Forumite
• Forumite Posts: 57,743
Forumite
edited 10 July at 2:55PM
I guess 4.35% is AER - the equivalent annual rate if the interest is credited monthly and left in the account.
The monthly rate is about 1.0435^(1/12)-1=0.3555%
If the interest is credited monthly and you withdraw it, the total annual interest will be about 0.3555%*12=4.27%
We are born naked, wet and hungry...Then things get worse.

.withdrawal, NOT withdrawel ..bear with me, NOT bare with me
.definitely, NOT definately ......separate, NOT seperate
should have, NOT should of
.....guaranteed, NOT guarenteed
• Forumite Posts: 2,867
Forumite
Also keep in mind that savings interest is classed as taxable income, unless sheltered in an ISA. Depending on your tax band, you will likely have a personal savings allowance of £500 or £1000, taxed at 0%, with any interest over the allowance taxed at your normal rate.
• Forumite Posts: 10
Forumite
Thank you all!
• Forumite Posts: 450
Forumite
You say your employer is offering an "ex-gratia" payment of £30k.  You only get a redundancy payment tax free at the statutory redundancy rate, anything over and above that will be taxable.  So under 40 it's 1 weeks pay per year employed and 41 and over 1.5 weeks pay per year employed.  You may not be getting all of that £30k
• Forumite Posts: 3
Newbie
Probably discussed previously but cant find it. My problem is that savings companies deliberately issue new accounts with higher interest rates but do not notify the current savers so one has to check on a weekly basis, say, to find out if there are better rates to be had. If so then you have to transfer on line and change all your details eg account nos. and name for your own records.
You also need to print out the old account records as you will not have access thereafter. To me this is blatant exploitation of current customers and the only reason I can see is to make extra money from us. Once the interest comes down I'm sure we wont have to change the account to a lower rate.
Surely we can start a chart here where we notify MSE which accounts do this so we can choose maybe not to use these companies and they may take notice if they want to keep their customers. How can we stop the blighters?
• Forumite Posts: 18,690
Forumite
You say your employer is offering an "ex-gratia" payment of £30k.  You only get a redundancy payment tax free at the statutory redundancy rate, anything over and above that will be taxable.  So under 40 it's 1 weeks pay per year employed and 41 and over 1.5 weeks pay per year employed.  You may not be getting all of that £30k
I do not think that is correct. The first £30K of redundancy payments are tax free, regardless of whether they are statutory or not . Excerpt from Gov.UK

You do not usually pay tax on the first combined £30,000 of:

• statutory redundancy pay
• non-cash benefits, for example company property you keep after your employment ends

You’ll pay tax on any amount over a combined total of £30,000.

Of course you may well not receive £30K in the first place, but that is a different issue .

• Forumite Posts: 18,690
Forumite
Probably discussed previously but cant find it. My problem is that savings companies deliberately issue new accounts with higher interest rates but do not notify the current savers so one has to check on a weekly basis, say, to find out if there are better rates to be had. If so then you have to transfer on line and change all your details eg account nos. and name for your own records.
You also need to print out the old account records as you will not have access thereafter. To me this is blatant exploitation of current customers and the only reason I can see is to make extra money from us. Once the interest comes down I'm sure we wont have to change the account to a lower rate.
Surely we can start a chart here where we notify MSE which accounts do this so we can choose maybe not to use these companies and they may take notice if they want to keep their customers. How can we stop the blighters?
This question is not relevant to this thread, and hijacking threads like this only causes confusion.
Best to delete it and start a new thread completely.

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