HSBC Regular Save 8% AER

byrnedj

Hi all,

The HSBC is still offering 8%AER on thir regular save account. Main conditions are that you have to have a current acount into which regular income is paid in and you have to leave the money for a year. But if you are planning a wedding like we are you can pay in the maximum of £250 a month for a year beforehand to earn a nice £240 interest before tax for the year.

Hope its of use,

David

MrChips

Hi David,

I'm afraid you haven't done your sums properly :-(

You would only get £240 interest if you had £3000 in there at the beginning of the year for the whole year. As your money is drip fed in over the year, it is only in there (on average) for half a year meaning that the interest you get is more like half that i.e £120 before tax. Still not bad.

Personally I don't like the fact that you have to have an HSBC account to use it. I prefer to have an A&L current account paying 5.5% pa and use the less restrictive Halifax regular saver (amongst others) which pays 7%. At the end of the year, the interest will be about £15 less, but I will have made a bigger profit on the current account to more than offset this.

Martin discusses this in his regular savings article if you care to have a look :-).

http://www.moneysavingexpert.com/cgi-bin/viewnews.cgi?newsid1108401263,93536,

Milarky

byrnedj wrote:

Hi all,

The HSBC is still offering 8%AER on thir regular save account. ..earn a nice £240 interest before tax for the year.

Hope its of use,

David

It will be between 11/24ths and 13/24ths [depending when in the month they receive each payment.] That's between £110 and £130.

lipidicman

Then you take the tax off.....

I've gone for all the regular savers, except this one. The requirement to pay your income into HSBC is the real catch, even Abbey didn't insist on this and they let you save £500 a month at 7%

If you have an HSBC current account your first step should be to get something better.

Milarky, nice approximation, and it is good to point out that the time of month that you make deposits is crucial. However, grumbler will be here soon with his series expansion (I think it was grumbler) to give us an even better estimate which includes compounding. I do it iteratively in excel but his method is much neater!

lipidicman

Grumbler's method can be found here:
http://forums.moneysavingexpert.com/showthread.html?t=45428&page=1&pp=10&highlight=expansion

uses this rearrangement:



Simple eh? People in my maths GCSE group complained that it wasn't any practical use! Pah, what do teenagers know?

with the HSBC account can you deposit £250 on the last day of the month, then add the first SO on the first day of the next (this maximises interest in the others as you have £500 almost straight away). Let me know and I will do the calculation in excel for you

Milarky

lipidicman wrote:

People in my maths GCSE group complained that it wasn't any practical use! Pah, what do teenagers know?

'GCSE' don't you mean 'A level'? grumbler's link is to:

http://www.mathsyear2000.org/alevel/pure/purtutsergeo.htm

Just to point out that these 'savings' formula series can be rearranged in order to give equivalent 'loan' formulas for:

Loan value [L] to repayment ratio [R] borrowed over [n] interest-periods

R = L x (r-1) x r^n / (r^n - 1)

where r means the same as above - the interest rate expressed as a 'real' decimal - so '5%' becomes an r of '1.05'

Less used, would be a formula for a geometrically increasing payments at regular intervals [say by 5% a year]: eg £100 in year 1, £105 in year 2, £110.25 in year 3... Not realistic, but used to give an idea of what could happen on longish periods of time:

R = L x (1 - r^n) / (1-r) is grumbler's 'standard' formula [i.e 'flat' payments]

Now substitute the geometric factor 'g' for '1' [the 'flat' factor] and you get

R = L x (g^n - r^n) / (g-r)

eg £100 at a 5% growth factor, invested at fixed 7% return [interest rate] for 5 years:

R = £100 x ( (1.05)^5 - (1.07)^5 ) / (1.05 - 1.07) = £631.35

[What you do when the factor and the interest are the same - division by zero - I'm not sure!]

lipidicman

Milarky wrote:

'GCSE' don't you mean 'A level'?

Well I was in the top set and it was a long time ago. Understanding the series might be A-level but a GCSE student should cope with the manipulation!

Great addition, should we think about a 'sticky' with useful formulas for calculating these things - ie compounding, daily rates, regular savings.....

Walletwatch

On an unrelated note, my wife has her salary account with them (a joint account with me), which has enabled both of us to have regular savers with them. She's now going to be off on maternity leave, so her earnings are going to reduce or stop altogether. Wonder what their policy is in such cases! Hope they don't prematurely close both our RS's :-(

cjn_2

If you put in the £250pm on the first day of each month, the average balance would be £1650 and interest £132 (gross). Halifax RS would give £115.50 (gross) on the same balances. Personally, I hold both accounts.

I'm not sure the requirement to hold an HSBC current a/c is too much of a burden, because you can set up a standing order to immediately transfer the money to an A&L Premier Pluc current a/c, losing only in terms of the time in transit. You can then use the A&L as your day to day current account for cash withdrawals and suchlike.

I spend all my day working out formulae so not for now (though they look very impressive!), although I'd have though the £16.50pa (less tax) would more than compensate for the loss of interest from money in transit.

lipidicman

cjn wrote:

If you put in the £250pm on the first day of each month, the average balance would be £1650 and interest £132 (gross)

The average will be higher if you open on the last day of the month, then pay in your first SO on the first day of the month (you can do this at halifax and at HSBC I believe, though I dont know for sure)

Even so you cannot do compound interest calculations on 'average balances'

multiplying by 1.08^(1/12) (a notional monthly or (365/12 days!) interest rate) and adding £250 (each month) I get

£3146.86 (£146.83 interest)

after 12 months, so thats a little better!

If you cant do the first two deposits so close together then this is just one more reason to sidestep this account and stick to the halifax one, which would then be even closer (and minus the HSBC current account and transferring your salary around and losing interest!)

cjn_2

Lots of questions lipidicman (sorry!), I'm just getting a bit confused by it all.

---

Is a 'month' defined as a calendar month or a month from opening?

I opened my Hx RSA (i.e. paid in the first installment) on 24th July. I had always assumed that each 'month' lasted from 24th-23rd, and that it was during this period that it was neccesarry to put in the £25-£250. However if a month starts on the 1st regardless, then I could presumably have paid £250 on 24th July, another £250 on 1st August and thereafter to 1st July 2006 (i.e. a total input of £3250), as though there were 13 months in the year!

---

How did you arrive at the £146.83 figure? I've rerun the calculation on Excel and now my annual interest seems to only be £128.47. There may well be an error in my logic, although I got there thus:

Day 1 month 1: I input £250. At the end the mth I have 250*1.08^(1/12) = 251.61.
Day 1 month 2: I input another £250, giving £501.61. Now 501.61*1.08^(1/12) = £504.84 at the end of month 2.
Day 1 month 3: Add another £250 to give £754.84...

AND SO FORTH.

At the end of month 12, I have £3128.47, of which £128.47 is interest.

---

One final question: At what point is the tax withdrawn from the account? Is the interest calculated daily with 20% taken by the taxman there and then, or is it deducted in one fell swoop when the account closes such that I am only entitled to 80% of my earnings.




TAX before or after