Could regular saving earn you more interest?
Are you an ‘all at once’ saver or a regular monthly deposit-maker? If you’re an ‘all at once’ saver and were disappointed by your level of interest paid last tax year, read on.
Did you know that if you deposit regularly throughout the year, you’ll be paid more interest at the end of it, as opposed to one lump sum just before the tax-year deadline? Although your interest here at The Nottingham is paid annually, it is calculated daily. Compound interest is applied and can really be handy in accumulating a few more pennies and pounds across your savings.
What is compound interest?
Compound interest is the addition of interest to the principal sum of a loan or deposit, or in other words, interest on interest. It’s the result of reinvesting interest, rather than withdrawing it, so that interest in the next period is then earned on the principal sum plus your previously earned interest.
We’re encouraging our savers to make full use of their tax-free allowance all year round. Government data(1) shows average annual cash ISA contributions are just £5,187 compared with the full annual allowance of £20,000 while average Junior ISA contributions are only £830 compared with the full allowance of £9,000.
With Lifetime ISAs it is a better story with average annual contributions sitting at £2,709 compared with the total allowance of £4,000 and those contributing the average amount would still benefit from a £677.25 annual bonus.
Our data shows nearly a quarter (24%) of deposits into our members’ accounts excluding transfers to its ISAs were made in March this year and the first five days of April as customers rushed to beat the end of tax year deadline.
Jenna McKenzie-Day, Senior Savings Manager at The Nottingham said: “The start of the new tax year is the ideal time to open an ISA and start as you mean to go with a regular, monthly savings habit. Interest is calculated throughout the year in many cases so you could earn a few extra pounds in the process.
“We’ve seen some people saving more during the COVID-19 pandemic and although our data shows unfortunately, most people are not taking advantage of their full tax-free allowance, starting early is a great way to do that and as the pandemic has shown, the importance of forming savings habits and sticking to them has never been more prevalent.”
Our research(2) also shows the COVID-19 pandemic has driven more interest in what building societies offer with 15% of adults saying they are now more likely to take out products from a building society or other mutual.
Visit our range of savings products, open a Lifetime ISA online or find your nearest branch for more information on the accounts we currently have on offer.
(1) GOV.uk ISA Statistics
(2) Nottingham Building Society commissioned the consumer research company Consumer Intelligence to interview 1,051 people, who represented the demographic profile of the UK. They were interviewed online between 12th and 15th March 2021.
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