Alliance & Leicester Premium Regular Saver - Rip off?

nish

I joined this last year. The gross interest rate was 10%. The net being 9.2 (or 9.6) I cant remember specifically.

I put £250 a month aside and it matured yesterday. I only received £110.03 interest though.

That cant be right can it? :eek:

Aegis

(£250*12) * (6.5/12) * 0.1 * 0.8 = £130

You might be short, but not by a huge amount...

LittleVoice

Could be right amount of interest - depends when you put in the funds each month.

10% gross per annum = 8% nett (because 20% is taken off as tax)

What were you expecting to receive?

LittleVoice

Al_Mac wrote: »

They were expecting the full 10% of the final balance. Usual misconception of these products.

You are probably right - but I asked the OP as it might have been the misunderstanding about what the nett rate would be.

[Deleted User]

Aegis wrote: »

(£250*12) * (6.5/12) * 0.1 * 0.8 = £130

You might be short, but not by a huge amount...

Can you explain this please?

(£250*12) * (6.5/12) * 0.1 * 0.8 = £130

(monthly amount * number of months) * ?????

Also thanks to this board I know understand how to work out the monthly interest on a fixed rate ISA e.g.

Interest = ((Total * ('ISA %' / 100)) / 365 days a year) * Days of the month

Aegis

Deleted_User wrote: »

Can you explain this please?

Sure thing

(£250*12) * (6.5/12) * 0.1 * 0.8 = £130

(monthly amount * number of months) * ?????

(monthly amount * number of months) * (scaling factor for regular payments and monthly compounding) * interest rate in decimal form * left-over after tax deducted at source

Hope that's clear enough... It's much less eloquent like that, though, so in case it's not, here's the formula below:

I = C S R T

Where:

I = Total net interest
C = Total deposited capital (£3000 in this case)
S = Scaling factor (accounts for residence time and compounding, 6.5/12 is a good estimate)
T = Tax factor (80% deducted at source as standard)

Also thanks to this board I know understand how to work out the monthly interest on a fixed rate ISA e.g.

Interest = ((Total * ('ISA %' / 100)) / 365 days a year) * Days of the month

I usually just approximate it as Gross interest / 12. Less accurate, but a very good approximation.


Hope my maths makes more sense after that!

brightonman123

i think you only get the full interest on iitial deposit- thta the only amount that is invested for the full year? if saving monthly, the 2nd pymt would gert 11/12 of annual interest, 3rd pymt 10/12 etc..

so instead of say 12% p.a. on £1200 (12 x £100,for ease of calculations) = £144 EXPECTED, you would get 12% on the total of-
100 x 12 mnths
100 x 11 m
100 x 10m
.
.
.
.
etc down to 100 x 1 month.

kipwilliams

it might be easier to approximate it like i do:

you saved equal amounts for 12 months and ended up with £3k, so you can average your balance over the course of the year at £1500 constantly. that divided by 100 gets you £15 for 1%, multiplied by the 8% (10% -tax) is around £120ish. not very accurate, but shows the numbers aren't far out without resorting to more complex formulae

Aegis

kipwilliams wrote: »

it might be easier to approximate it like i do:

you saved equal amounts for 12 months and ended up with £3k, so you can average your balance over the course of the year at £1500 constantly. that divided by 100 gets you £15 for 1%, multiplied by the 8% (10% -tax) is around £120ish. not very accurate, but shows the numbers aren't far out without resorting to more complex formulae

It's pretty close that way, but it does ignore the effect of compounding. Effectively that's what my formula does, but it uses 6.5/12 instead of 1/2 as the factor for the full amount. I've used difference equations to check the workings with that, and it comes very close to the real value you'd expect.

Still not sure where the extra £20 has gone for the OP though.

Meltdown_2

Aegis wrote: »

Still not sure where the extra £20 has gone for the OP though.

Probably down to the date in each month when the money was added (as LittleVoice suggested).
If nish would like to say what the deposit pattern was (e.g. the same day each month by Standing Order), it should be possible to do a precise calculation.

YorkshireBoy

Aegis wrote: »

It's pretty close that way, but it does ignore the effect of compounding. Effectively that's what my formula does, but it uses 6.5/12 instead of 1/2 as the factor for the full amount. I've used difference equations to check the workings with that, and it comes very close to the real value you'd expect.

the 6.5 figure comes from the fact that your first payment earns interest for the full 12 months, your second for only 11 months, etc...

12/12 + 11/12 + 10/12 ......... + 2/12 + 1/12 = 78/12 = 6.5

...and can be used as a very close approximation wherever the regular savings account matures on the anniversary of the first deposit.

Still not sure where the extra £20 has gone for the OP though.

If past experience is anything to go by, A&L seem to pay the interest in two tranches...the first (larger amount) on the anniversary of the current account opening, and the second (smaller amount...in this case the missing £20) on the anniversary of the regular savings account first deposit.

It's been documented many times on this board, so a search will probably find a better explanation than I've provided here.