Regular Savings Calculator Issue?

EthicsGradient · 22 March at 12:41PM

We can start by saying the "you would have earned £142" from the £3600 if you didn't use the regular account is wrong - it should be £144 (4% * £3600 = £144). Similarly, it should be £288 for the £7200. This assumes the 4% is the AER. That they've said £142 and £283 shows both that they've rounded to the nearest pound (the latter should be exactly twice the former), and they are doing something slightly strange with AER and monthly figures.

By my calculations, if interest is added to each account monthly, at a rate that give the 4% and 7% as AER figures, the difference, in both the £3600 and £7200 cases, is £57.56:

£66.47 and £135.09 = £201.56

£210.47 and £135.09 = £345.56

(You can also tell the "£142" is wrong by putting in £3600 as the start figure, and moving the minimum £0.01 across each month. That tells you you'd get £144 in interest in the feeder account, but still claims it would be £142 if you didn't move anything across at all.)

kimwp · 22 March at 5:57PM

https://forums.moneysavingexpert.com/discussion/comment/81932883#Comment_81932883

Thanks Ethics, I did wonder if it was rounding. Changing between a lump sum of 12k to 80k with a 1k a month dripped changes the interest advantage of drip feeding by £50.

EthicsGradient · 22 March at 6:09PM

A further calculation shows that they are incorrectly deriving the lower "you would have earned, if you didn't use the regular saver" figure by assuming the interest from the feeder account is withdrawn every month - but if you do transfer something across to the regular saver, then they assume you leave the monthly interest in the feeder to compound. So they're not comparing apples with oranges. A bit sloppy, MSE.

kimwp · 22 March at 6:16PM

@MSE_James not sure if this is your area, but could you point it to the right team to have it looked at? It may not be worth the work, but at least a caveat or explanation of the assumptions should be added.

I think also the tax paid options might be a bit misleading - I think it is applying the personal allowances, which may not be applicable - they may have already been used up with other interest earned.