natwest isa 7.32%

brookerbabyisababy

Could someone tell me which of the following two providers is offering a better rate and what is the difference between the two - I am really confused!

Natwest
Balance AER (variable) Gross Rate
£1 - £8,999 6.67% 6.51%

First Direct
AER(1) Tax free(4)
5.85% 6.125%

jimbow25

Natwest will pay 6.51% interest, presumably monthly, which is AER 6.67%.

In other words 6.51% interest earnt monthly is the same as getting 6.67% interest paid once a year.

The First Direct rate is confusing (see here), I don't follow why the tax free rate is higher than the AER. Maybe someone else can make sense of that.

YorkshireBoy

jimbow25 wrote: »

I don't follow why the tax free rate is higher than the AER. Maybe someone else can make sense of that.

Because the 6.125% gross p.a. rate is not fixed for a full year. It's only fixed until June 2009, when it falls to 4.41% gross p.a.

With each month that passes (between now and next June, and if the account remains available) the AER will reduce from it's current 5.85% AER.

Baldur

jimbow25 wrote: »

The First Direct rate is confusing (see here), I don't follow why the tax free rate is higher than the AER. Maybe someone else can make sense of that.

From their website "cash e-ISA - 5.85% AER (6.125% tax free fixed until 15 June 2009)"

As the finishing date of the product is fixed, it is impossible for anyone paying into it now to attain the gross rate of 6.125% (which would require a full year's savings from 15/06/2008), therefore the attainable AER reduces each month after June 2008.

<Edit>: Apologies to Yorkshire Boy for virtually repeating his post - should have refreshed the page before hitting the post button.

runciblespoon

Milarky wrote: »

This is a minor aggravation - it is merely saying that the account is at a bonus a rate for a 'fixed' period - and the period starts when you apply for it. Were the transfer to take longer than 30 days then the FOS may be mentioned by the customer

Let's assume they take the maximum 30 days permitted and do some quick sums:

You have £27000 to transfer, compared with a 6.25% ISA
The extra interest you'd gain over 11 months would be 27000*((7.32-6.25)/100)*(11/12) = £264.83

If you lose one month's worth of interest on your old account due to the transfer you'd lose:
27000*(6.25/100)*(1/12)=£140.63

So you're still quids in to the sum of £264.83-£140.63 = £124.21

Now let's say you have £3600 to transfer and so are on the 6.67% tier:
11 months extra interest = £13.86
Lost month interest at 6.25% = £18.75

So you've gained £13.86-£18.75 = £-4.89 - in other words you'd lose a fiver.

I haven't calculated for what might happen at the other end, when every man and his dog wants to transfer out their money in a year's time.


I suppose the question for this ISA is: what's the likelihood that in a few months the 'variable' rate will be quickly wound down? The bonus rate is based on the 'whole balance in the account for 12 months from receipt of the Cash ISA transfer request', which I take to mean that it's only on the balance that stays in the account for the whole year - ie the minimum balance over that time. Does that mean the first 30 days when the transfer hasn't come through has a balance of zero, which would prejudice your bonus?

Doesn't it also mean your money is effectively locked in unless you're willing to forfeit a significant chunk of the bonus? The ISA seems to be NatWest's main cash ISA, so it's unlikely to suffer from the 'issue N effect' (where the account is withdrawn and quietly the rate wound down in the hope customers won't notice). But NatWest aren't known particularly for their competitive rates, so winding down the non-bonus part wouldn't surprise me.

YorkshireBoy

runciblespoon wrote: »

I haven't calculated for what might happen at the other end, when every man and his dog wants to transfer out their money in a year's time.

Probably best (especially with £27K+) to initiate the transfer 'early' so as to avoid (or even take advantage of) the rush?

Sillychuckie

What if you want to transfer from 2 different ISA's into the new NatWest one?
If you have 2, say, with 15k in each... then its obviously worth doing both so you can hit the 27k required to get the highest rate.
But, if they only pay the bonus on the initial transfer amount, does that mean u'd only get the bonus rate on the first 15k?
Might pop into a branch on Monday... need to wait a few weeks anyway for my other ISAs fixed rate (with penalty to withdraw) to end.

YorkshireBoy

Sillychuckie wrote: »

What if...

For anything not explicitly covered in the account T&C's I'd be getting an answer in writing...

http://www.natwest.com/global/contact-us.ashx?channel=personal
(click "Personal and Private Banking customers", then "Online feedback form")

runciblespoon

runciblespoon wrote: »

Doesn't it also mean your money is effectively locked in unless you're willing to forfeit a significant chunk of the bonus? The ISA seems to be NatWest's main cash ISA, so it's unlikely to suffer from the 'issue N effect' (where the account is withdrawn and quietly the rate wound down in the hope customers won't notice). But NatWest aren't known particularly for their competitive rates, so winding down the non-bonus part wouldn't surprise me.

Actually, I now realise since it's monthly interest including the bonus the opportunity for funny business is much reduced. If you think you're doing anything which might prejudice your bonus you can just transfer the whole lot out just after interest payday with no loss. If they wind down the rates you won't compromise your bonus by moving part way through the year. Unless there's a clause by with NatWest can claim back some of the interest previously paid.

This is unlike RBS' offering where the interest is annual and paid in two lumps, one past the end of the bonus year. So if you don't keep it in for the whole year then there's a chance you might lose some bonus.

I'm tempted to give them a ring and record the call (and tell the operator I'm doing so)...

Stompa

I must say I find it decidedly odd (and inconvenient) that for transferring an existing ISA you are required to complete the transfer form and physically take it to a local branch. Why can't they do it online (as appears to be the case for a new ISA) or by post?