monthly interest leaves tax-payers out of pocket

Nice one. I had never thought of that before, but it makes perfect sense when you think about it. In (relatively) layman's terms, the AER is calculated by assuming interest is received on the interest already paid, but if tax is taken off at each step then this interest-on-interest component of the total interest is reduced.

So, in order to meet their advertised AERs, monthly interest accounts should pay interest gross and then deduct the tax at the end of the year.

Excellent post - although I must admit that I'm not really in the mood to check out the maths! It's a small enough difference to be irrelevant for small savings but if people have a large amount of money in their savings account it's worth considering.


Thankfully my wife isn't a tax payer at the moment so she has all of our money and we don't have to worry about tax (although I do have to worry about her leaving the country :rolleyes: )

Well, I might be losing some money here but I've more than made up for it with "Free" Rump Steaks and Organic Lamb Chops from Tesco in the last 5 days....:j

Dagobert wrote:

I wasn't seriously advocating against monthly interest accounts on the basis of such a small difference.

You obviously hadn't realised how mean I am

realaledrinker wrote:

Joking aside, that's not really a good idea if you happen to walk in front of a bus, say....

Can't speak for YB but I keep a record of all accounts that we have so that OH would know the details if that damn bus ever got me. My parents hold this so if anything happened to us both somebody knows where it is too! It doesn't have usernames and passwords but, as the account holder, OH would be able to contact the bank to get these re-issued if needed.