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  • FIRST POST
    • meunier
    • By meunier 25th Nov 16, 1:30 PM
    • 155Posts
    • 40Thanks
    meunier
    Question about Term Deposit Application ...
    • #1
    • 25th Nov 16, 1:30 PM
    Question about Term Deposit Application ... 25th Nov 16 at 1:30 PM
    I have (sadly) had a string of Term Deposits (all set up five years ago) come due. The last will come due in a few weeks.

    I am totally risk averse (blame Depression raised parents) and so have stayed with Term Deposits even though I am aware that it offers a bad return for my money. I am spreading these out so I have one at Two Years, one at three years, one at four years and one at five years. That way if rates do rise rapidly due to inflation or other influences (say the departure of the Governor of the Bank of England who seems to be a dedicated to QE) then at least I will be able to take advantage of a small portion of the increased returns. I should say that I am 61 and do have a small job - which I enjoy - and which can keep the wolf from the door.

    But my question is this ... I filled out an application yesterday for a Vanquis Bank's four year term deposit paying 1.84% when taking the monthly option. It went through fine and I sent my cheque and a recent bank statement which they required as proof of residence.

    The funds which are here covering the £75,000 cheque I enclosed are from a previous five year term deposit I had with Clydesdale Bank (although that was for £85,000 which was then the limit and I hear next year may well be again) ... Indeed I had another five year term deposit with Clydesdale for a same amount immediately previously.

    When asked about the 'source' of the money there was a drop down box with multiple answers to choose from. There was one option which said 'proceeds for a sale or maturing investment'. As the funds had only cleared into my account the day before that seemed most apt to me so I selected it. Certainly - if needed - and I have never had this experience - I could give them a copy of the original savings certificate and also a copy of my current bank statement showing that the money had indeed come into my bank account from the Clydesdale and evidenced on the certificate.

    There was a lot of verbiage as to the original source of the money. I have had much of this money for some time and it will have been garnered from a number of different areas - largely work in the 80's and 90's. I wouldn't know where to begin had I to try to define that.

    Do you think I am alright by having selected the option I did? As I say I have never had to do this before. I called Vanquis and the chap said that this is a new requirement and that all banks will have to follow it. He was very vague in his answers. He said that they aim to open all accounts within a month - 'although it could be earlier'. That seemed like a long time to me. Does anyone have experience in this regard? (Ooops; that's a second question.)

    Grateful - as ever - for your kind advice ... and bless you for your patience in reading this.
Page 1
    • soulsaver
    • By soulsaver 25th Nov 16, 2:56 PM
    • 1,377 Posts
    • 466 Thanks
    soulsaver
    • #2
    • 25th Nov 16, 2:56 PM
    • #2
    • 25th Nov 16, 2:56 PM
    Yes.. & Yes.
    There are 24 bottles of beer in a crate. There are 24 hours in a day. Coincidence? I think not....
    • Squash
    • By Squash 23rd Jun 17, 8:26 AM
    • 3 Posts
    • 0 Thanks
    Squash
    • #3
    • 23rd Jun 17, 8:26 AM
    • #3
    • 23rd Jun 17, 8:26 AM
    Meunier I note that you have had Term deposits with Clydesdale bank. I believe, based on my experience with them, that the bank may have paid you less than the advertised gross interest on your term deposit.
    The issue is quite complicated, involving illegally deducting tax at source and compounding interest on the net after tax interest rather than the gross.
    The simple test is to look back at the advertised gross interest at the time you invested in the term bond. Work out what you should have received using this interest rate, compounding the amount capitalised each year. The question is did this amount equal what you received ( after reducing the latter for any tax deducted at source)?

    Sorry if this question sounds odd- it is genuine and I am certain I am correct in what I say about Clydesdale's term deposits.

    I would be very interested in your response. I think there are a large number of investors who have been shortchanged.
    • eskbanker
    • By eskbanker 23rd Jun 17, 11:14 AM
    • 5,616 Posts
    • 5,455 Thanks
    eskbanker
    • #4
    • 23rd Jun 17, 11:14 AM
    • #4
    • 23rd Jun 17, 11:14 AM
    I would be very interested in your response.
    Originally posted by Squash
    Don't hold your breath, that poster hasn't been on here since last year!

    In terms of the issue you raise about compounding net rather than gross interest, on what basis do you contend that's illegal or even inappropriate?
    • PeacefulWaters
    • By PeacefulWaters 23rd Jun 17, 4:06 PM
    • 7,002 Posts
    • 8,608 Thanks
    PeacefulWaters
    • #5
    • 23rd Jun 17, 4:06 PM
    • #5
    • 23rd Jun 17, 4:06 PM
    From memory, Clydesdale don't capitalise term deposit interest annually.

    It makes for an unusual reading of gross rate and AER.
    • Squash
    • By Squash 6th Oct 17, 9:33 AM
    • 3 Posts
    • 0 Thanks
    Squash
    • #6
    • 6th Oct 17, 9:33 AM
    Clydesdale bank and capitalising term deposit annually
    • #6
    • 6th Oct 17, 9:33 AM
    Clydesdale bank definitely did capitalise interest annually on its term deposits. That was absolutely clear from their Terms and Conditions and also in how they provided the analysis of interest accrued and paid.
    The reading of AER and gross is also very clear. The advertised gross back in 2011 was 5.16% the AER was 4.7%. The actual amount paid was less because they deducted tax when interest was capitalised, not when it was paid as Income Tax Act 2007 requires.

    I am 100% positive about how the tax law operates, having spent over 30 years specialising in it. Also HMRC tax manuals agree entirely with my view.

    The key point is Cydesdale have advanced a vigorous completely incorrect argument defending their practice, this and other evidence indicates their practice was widespread. What is was hoping was to identify other depositors who had been effected.
    • PeacefulWaters
    • By PeacefulWaters 6th Oct 17, 9:59 AM
    • 7,002 Posts
    • 8,608 Thanks
    PeacefulWaters
    • #7
    • 6th Oct 17, 9:59 AM
    • #7
    • 6th Oct 17, 9:59 AM
    Clydesdale bank definitely did capitalise interest annually on its term deposits. That was absolutely clear from their Terms and Conditions and also in how they provided the analysis of interest accrued and paid.
    The reading of AER and gross is also very clear. The advertised gross back in 2011 was 5.16% the AER was 4.7%. The actual amount paid was less because they deducted tax when interest was capitalised, not when it was paid as Income Tax Act 2007 requires.

    I am 100% positive about how the tax law operates, having spent over 30 years specialising in it. Also HMRC tax manuals agree entirely with my view.

    The key point is Cydesdale have advanced a vigorous completely incorrect argument defending their practice, this and other evidence indicates their practice was widespread. What is was hoping was to identify other depositors who had been effected.
    Originally posted by Squash
    Their current rates offer the choice of interest on maturity or annually.

    Your example of a 4.7% AER, when compounded five times, works out at 25.8%. Divide by five to get the gross rate and they can claim a 5.16% gross rate.

    Today's numbers are 2.19% gross yet only 2.10% AER. Because they're not capitalising interest annually.

    http://www.cbonline.co.uk/personal/savings/fixed-term-and-notice-accounts/term-deposit/
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