Totally confused myself comparing interest rates-help

Peterpan18

I have some savings with my bank and with my Building Society, neither account has any penalties for taking out funds.

My bank pays 1.66% AER monthly and this amount had increased considerably in the past few months, so I assume the interest is variable. The interest is left in the account so I again assume this is compound interest..

My building society pays 3.75% Gross annually and again the interest is paid back into the account every 12 months, I can find nothing that says this is variable or not as the account is rather old.

I have now confused myself to the point of brain fade in trying to work out what account will give me the best return at the moment as I dont have a clue how to compare them, maths was never my strong point.

So my question is:- what account am I going to get the best return at the moment from? The bank savings ac @ 1.66% APR monthly or the building society ac @ 3.75% Gross yearly.
I do not pay tax on my interest.

If anyone can give me a simple answer I would appreciate it, thank you

Brie

I recently got a savings account that was headlining something like 5.5% APR (I think they said APR) but when I asked that the interest be paid monthly rather than annually the rate is 5.2%.  I am guessing that the compounding accounts for the difference.

On this basis I would suggest that the building society will be more profitable for you.

I'll let someone else come along with the maths to prove or disprove me.

wmb194

Peterpan18 said:

I have some savings with my bank and with my Building Society, neither account has any penalties for taking out funds.

My bank pays 1.66% AER monthly and this amount had increased considerably in the past few months, so I assume the interest is variable. The interest is left in the account so I again assume this is compound interest..

My building society pays 3.75% Gross annually and again the interest is paid back into the account every 12 months, I can find nothing that says this is variable or not as the account is rather old.

I have now confused myself to the point of brain fade in trying to work out what account will give me the best return at the moment as I dont have a clue how to compare them, maths was never my strong point.

So my question is:- what account am I going to get the best return at the moment from? The bank savings ac @ 1.66% APR monthly or the building society ac @ 3.75% Gross yearly.
I do not pay tax on my interest.

If anyone can give me a simple answer I would appreciate it, thank you

The 3.75% one. The 'A' in AER refers to, 'annual.' You can do better though:

https://moneyfactscompare.co.uk/savings-accounts/

https://www.halifax.co.uk/savings/help-guidance/saving-explained/whats-aer.html

Albermarle

Peterpan18 said:

I have some savings with my bank and with my Building Society, neither account has any penalties for taking out funds.

My bank pays 1.66% AER monthly and this amount had increased considerably in the past few months, so I assume the interest is variable. The interest is left in the account so I again assume this is compound interest..

My building society pays 3.75% Gross annually and again the interest is paid back into the account every 12 months, I can find nothing that says this is variable or not as the account is rather old.

I have now confused myself to the point of brain fade in trying to work out what account will give me the best return at the moment as I dont have a clue how to compare them, maths was never my strong point.

So my question is:- what account am I going to get the best return at the moment from? The bank savings ac @ 1.66% APR monthly or the building society ac @ 3.75% Gross yearly.
I do not pay tax on my interest.

If anyone can give me a simple answer I would appreciate it, thank you

The simple answer is that both rates are poor compared to what is available in the market ( especially 1.66% is abysmal) 
So move your money after reading this.
Best savings accounts: 5.2% easy access or 6% fixed rates (moneysavingexpert.com)

Cosmic_Life

If you have not made use of your ISA allowance this year, then consider moving upto £20k into an easy access ISA. If you want a high street name, Skipton will give you 5%, Salisbury 4.91% and no worry's about tax

https://forums.moneysavingexpert.com/discussion/401374/cash-isas-the-best-currently-available-list/p1

 If you dont need the money now there are many fixed rate accounts paying more, you might not pay tax now but worth considering building a tax free income for the future when you might be taxed.

Zanderman

Forget the 'monthly' and 'yearly' interest payment bit. That's merely when the interest gets paid.

The key figure is the interest rate. That's annual.  3.75 is clearly much better than 1.66 whether AER or APR.

The monthly v annual payment choice can give minor differences due to how it's calculated but basically the big difference in the two rates mean that one is massively better than the other.

And there are even better rates if you look elsewhere.

friolento

Peterpan18 said:

My bank pays 1.66% AER monthly 

You get the interest paid monthly but the rate is the annual rate. 1.66% is pretty bad when you can get 5% or more elsewhere

Bigwheels1111

MOVE THE MONEY ASAP. To a higher paying account.
Do you pay tax ?, 20% or 40%. Do you get more than 1k a year in interest at the moment.
How much are your savings in total.
Don’t tell us but work out the interest you could earn.
The best 1 year fixed is Bank of India, people on here have had issues with them
I would go with Al Rayan 5.96% for 1 year. Have accounts with them.
20k per day withdrawal limit.
I earn 4k a year but will get over 10k in interest this year.
So as the total from earnings & interest is under 18,570 I will not pay tax.
I will need to file a self assessment return as over 10k interest.
Keep an emergency fund just in case.

Peterpan18

Thank you everyone for all the information and advice. I now need to sit down and review my choices.
Thanks again