To use regular savers or not

clairec666

UKX69 said:

clairec666 said:

sausage_time said:

RunsFromRobots said:

My regular saver with Virgin matured recently which was 10% on £250 per month. This yielded just over 5% on £3,000 over 12 months.

If you have capital already I don't see them as a great return but are good for those looking to start saving from scratch. 

If a feeder account was earning 5%, the overall return would be around 7.5%.   Worth the effort in my opinion.

I'd make the effort too. Unlikely to find another 10% account any time soon, so the boost won't be quite as good. Probably 6%. And to get that average on the full £30k would need multiple regular savers.

A lot depends on whether the OP wants the hassle of managing multiple accounts. Unlikely to find an easy access account that pays 5% interest AND pays out standing orders, so human intervention will be needed to move the money around each month.

No harm in sticking it all in the best easy access account for now, decide whether you favour "best interest return" or "simplicity", and ask for help here if want to go the whole hog on playing the regular saver game.

Moving the money around each month and updating spreadsheets is part of the pleasure I find. A great hobby.

Me too! Keeps me occupied on my commute. I'm sure there are better ways I could spend my time..... hang on, no there aren't

Middle_of_the_Road

@topyam if you've read all the replies and still don't understand regular savers, all you need to know is....

The more regular savers you have, and the more you put into them, the more interest you will receive 

jimjames

DrSyn said:

eskbanker said:

OP, while learning, would be well advised to ignore the old 'only getting half the advertised rate' trope that features so frequently in any discussions about regular savers!

Please explain to me why it should be ignored. What is wrong with it?

It's wrong because you get EXACTLY the advertised rate on everything in the account. Hence saying you get anything else is untrue.

Hattie627

The rule is simple:- If the RS offers a higher rate of interest than your easy access account (EA), you will always gain in interest by opening the RS and drip-feeding funds monthly into it from your EA, as against leaving all your money in the EA. The greater the difference in rates, the bigger your differential gain. Also, the monthly amount of the differential gain increases as you go from month 1 to month 12 of the RS.

The more RS's you have on the go, assuming the rate on each RS is higher than on your EA, the higher your gain will be (against leaving the full sum in EA).

If a Regular Saver has a variable rate of interest and it becomes lower than what you can get on EA (unlikely scenario, but possible) you will usually be able to close the RS within the term (with interest fully paid to the date of closure, in other words without losing interest) and move the total amount back to EA. Even if the specific terms of the RS don't allow early closure (unusual) on a variable rate RS, the general savings terms of the bank/building society will normally allow you to close an account (including an RS) within a specified number of days of a drop in the interest rate applying, again with interest paid to the date of closure. Always check the closure terms before opening an RS.

friolento

RunsFromRobots said:

My regular saver with Virgin matured recently which was 10% on £250 per month. This yielded just over 5% on £3,000 over 12 months.
 . 

It didn’t yield 5% on £3,000 as the interest rate was never 5%, and you only had £3,000 in the account for a maximum of 1 month before maturity.

This old misunderstanding that Regular Savers don’t pay the advertised rate should not be promoted on this forum.

friolento

sausage_time said:

My simple way of viewing it is that the effective rate is about half way between the feeder account rate and the regular saver rate.

No it isn’t. The effective rate is 100% as advertised.

friolento

saajan_12 said:

The "half the RS interest rate" approximation only makes sense if you have the full amount sitting in a 0% account and are transferring bits in gradually. 
If you had the full amount then the more accurate calc is AVERAGE ( RS rate , Orig Account rate), which is the same as half if the original account rate is 0%. But if you started with the full money in a simple easy access account at say 4% that average gets a lot higher. 
If you didn't have the full amount upfront then whether you drip it into a regular saver or an easy access makes no difference, you don't get interest on money you don't have!

It never makes sense because it is always wrong.

The rate is the rate, it doesn’t get halved 

sausage_time

friolento said:

sausage_time said:

My simple way of viewing it is that the effective rate is about half way between the feeder account rate and the regular saver rate.

No it isn’t. The effective rate is 100% as advertised.

There is no advertised rate - I'm taking about the effective combined rate of the feeder account and the regular saver it feeds.

friolento

sausage_time said:

friolento said:

sausage_time said:

My simple way of viewing it is that the effective rate is about half way between the feeder account rate and the regular saver rate.

No it isn’t. The effective rate is 100% as advertised.

There is no advertised rate - I'm taking about the effective combined rate of the feeder account and the regular saver it feeds.

I consider the rates published by the providers as the advertised rates. Neither the rates applicable to the feeder accounts nor the rate of the targets accounts get in any way combined to something called the effective rate, or other terminology chosen by people who confuse interest rates with yields. 

poolboy

Reg savers are my hobby too, the virgin 10% was a complete winner for no risk.  As mine mature I try and open another to keep my monthly contributions level.  

Only downside is self assessment and tallying up interest payments on 30+ accounts.