Can some explain this.

Printer

Hi i've got a Lloyds online regular saver at 8% running for two years. After one year i had £3500 in the account and the interest was added which came to £132. I'm sure its to do with taxes and also the fact is gross % or what ever but this works out at 3.8%. Why is it so low.?

Thanks

Toastie

Printer wrote: »

Hi i've got a Lloyds online regular saver at 8% running for two years. After one year i had £3500 in the account and the interest was added which came to £132. I'm sure its to do with taxes and also the fact is gross % or what ever but this works out at 3.8%. Why is it so low.?

Thanks

It would depend on how much you put in the account, If you put around £300 per month away then that interest is right at the basic tax rate.

http://www.moneysavingexpert.com/savings/savings-accounts-best-interest#savingscalc

stokesy01

yeah, it's cumulative so they don't go, at 12 months, oh this guy has £3500, so 8% of that is ? whatever it would be. They say, month 1 he had £300, so 8% of that is ?. Then month 2 there was £600 so 8% of that is ?.

I think that's how it's worked. I sometimes do accounts that pay monthly interest because although they saometimes offer slightly lower rate, you are getting the interest quicker and then you get interest on the interest if you see what i mean.

i am no expert and i may have this wrong but think this is right??

Lokolo

Yep, but usually its daily, so day 1 etc. day 2 etc.

RayWolfe

Were you expecting 8% on the full amount? If so, you don't understand how monthly savers work. If that's true do a scan here, it has been discussed ad nauseum.

Toastie

stokesy01 wrote: »

yeah, it's cumulative so they don't go, at 12 months, oh this guy has £3500, so 8% of that is ? whatever it would be. They say, month 1 he had £300, so 8% of that is ?. Then month 2 there was £600 so 8% of that is ?.

I think that's how it's worked. I sometimes do accounts that pay monthly interest because although they saometimes offer slightly lower rate, you are getting the interest quicker and then you get interest on the interest if you see what i mean.

i am no expert and i may have this wrong but think this is right??

As far as i understand it, which hasn't failed me yet.

The 1st £300 is in the account on day one. That will get 8% interest.
The 2nd £300 gets 7.4% interest (1months of 8% is 0.666 reccuring)
The 3rd £300 gets 6.7% interest (2months of 8% is 1.3 reccuring)
So on and so Forth, i've made it complicated but basically only the money from day one gets the full 8%, as a month goes by less interest can be gathered on it.

Also tax comes out. Basic tax payers would get only 6.4% interest on the final sum, and higher tax payers only get 4.8% of the interest.

Hope this expalains it.

knights

Printer wrote: »

Hi i've got a Lloyds online regular saver at 8% running for two years. After one year i had £3500 in the account and the interest was added which came to £132. I'm sure its to do with taxes and also the fact is gross % or what ever but this works out at 3.8%. Why is it so low.?

Thanks

As a rough guide its:-

6.5 x £3000 x 8% = £ 130.00
12

plus 8% on your first deposit of £500 = £ 40.00

£ 170.00
less 20% tax £ 34.00
£ 136.00

exel1966

Printer wrote: »

Hi i've got a Lloyds online regular saver at 8% running for two years. After one year i had £3500 in the account and the interest was added which came to £132. I'm sure its to do with taxes and also the fact is gross % or what ever but this works out at 3.8%. Why is it so low.?

Thanks

Sounds like a basic misunderstanding of how regular savers work. You have been paid 8% gross on everything you have in the account which is accrued on a daily basis. As has been explained above your interest sounds pretty accurate, but if you'd paid into the account as early as possible each month it would be nearer £150 net, therefore and if possible always deposit/transfer your £250 on the 1st banking day of the month.

exel1966

Toastie wrote: »

It would depend on how much you put in the account, If you put around £300 per month away then that interest is right at the basic tax rate.

http://www.moneysavingexpert.com/savings/savings-accounts-best-interest#savingscalc

Just for info the max payment per month with this account is £250. Initial £750 payment excluded.

Toastie

knights wrote: »

As a rough guide its:-

6.5 x £3000 x 8% = £ 130.00
12

plus 8% on your first deposit of £500 = £ 40.00

£ 170.00
less 20% tax £ 34.00
£ 136.00

Much clearer than my explanation , thank you:beer:

Printer

Thats how i thought it worked. Interest worked out on a monthly basis. But it was added at the end of the year...i would expect it to have been added monthly if this was how it was calculated.

Thats fine. I'm happy now..