Interesting - Nationwide Flex Regular Saver 8% AER

[Deleted User]

BoGoF said:

What do you think it should be?

There is an example on the product info page.

The link is here.  The total deposit is £2400 and according to Nationwide the interest earned is £104 making a total of £2504. Using simple interest the effective rate would be 104/2504 = 4.15%

Is this correct?

eskbanker

[Deleted User] said:

BoGoF said:

What do you think it should be?

There is an example on the product info page.

The link is here.  The total deposit is £2400 and according to Nationwide the interest earned is £104 making a total of £2504. Using simple interest the effective rate would be 104/2504 = 4.15%

Is this correct?

The amount of interest payable is correct but your derivation of a fake notional interest rate isn't!

When building up the balance from £200 to £2400 over the course of the year, the average balance will be about £1300, so £1300 * 8% = £104....

Exodi

[Deleted User] said:

BoGoF said:

What do you think it should be?

There is an example on the product info page.

The link is here.  The total deposit is £2400 and according to Nationwide the interest earned is £104 making a total of £2504. Using simple interest the effective rate would be 104/2504 = 4.15%

Is this correct?

Because you're making the age old mistake in thinking you should earn a years worth of interest at 8% on the whole £2,400 - despite only holding £2,400 in the account in the twelfth month.

Think of it like this, the first £200 you put in will earn interest for 12 months, the second £200 you put in will earn interest for 11 months, etc.

In reality, over the 12 months your average balance would be half that (well a bit higher since you are making payments at the start of the month).

It's not just you, this mistake of thinking '£2400 * 8% = £192, so why £104 Nationwide?' is relatively common among those new to regular savers, now please leave their poor call staff alone lol.

SonOfPearl

[Deleted User] said:

BoGoF said:

What do you think it should be?

There is an example on the product info page.

The link is here.  The total deposit is £2400 and according to Nationwide the interest earned is £104 making a total of £2504. Using simple interest the effective rate would be 104/2504 = 4.15%

Is this correct?

No. You are assuming the total deposit is all in the account from day 1. It's not. It's paid in monthly. You don't get interest on the final total deposit amount for the whole year because you haven't saved it all for a full year (e.g. the last payment would only be in the account for 1 month). It's a common misconception. 

Check out point 5 of this page for a worked example. https://www.moneysavingexpert.com/savings/best-regular-savings-accounts/

BoGoF

The only amount that earns a full years interest is Month 1 so month 1 is £200 at 8% = £16. Every subsequent deposit gets a pro rata amount, i.e. the second £200 earns 11/12ths of £16 and so on.

There is probably more 'techy' way to do it but normally works for me give or take.

[Deleted User]

BoGoF said:

[Deleted User] said:

BoGoF said:

What do you think it should be?

Give Nationwide a call

No need when the website says (estimate) £104.

Yes it does   However if websites Occam Investing, Nutmeg and the Calculator site are anything to go by the interest should be £323.19.

AI Captain...

Exodi

[Deleted User] said:

BoGoF said:

[Deleted User] said:

BoGoF said:

What do you think it should be?

Give Nationwide a call

No need when the website says (estimate) £104.

Yes it does   However if websites Occam Investing, Nutmeg and the Calculator site are anything to go by the interest should be £323.19.

AI Captain...

With respect, please just stop and read some of the comments above.

If you entered it properly on the calculator site, you would get the same as Nationwide:

BoGoF

[Deleted User] said:

BoGoF said:

[Deleted User] said:

BoGoF said:

What do you think it should be?

Give Nationwide a call

No need when the website says (estimate) £104.

Yes it does   However if websites Occam Investing, Nutmeg and the Calculator site are anything to go by the interest should be £323.19.

AI Captain...

Suggest you read the responses since and see why you are wrong and not comparing like for like

wiseonesomeofthetime

I have a feeling the whole thread is a wind up 🤔

Officer_Dibble

Exodi said:

Using FV in Excel =FV(0.08/12,12,-200,0,1) gives £106.59 interest, but you can expect that they've factored in the things like payments clearing. Nationwide states £104.00 on their website.

With respect, I know repeatedly calling them to ask insignificant questions is amusing to you, but I'm sure both you and them have more productive things to do with your time.

[Deleted User] said:

BoGoF said:

What do you think it should be?

Give Nationwide a call

Well if anything good's come of this discussion it's that I've learnt about the FV function. I've always just halved the interest rate on annual savers as my interest guesstimate and done it in my head, but it's obviously a slight underestimation - somewhere between £8 and £10.59 on this occasion.