How does Nationwide calculate interest?

rb10

Hello,

I've been wondering how Nationwide calculates interest, as my calculation for what I expected is a little different from theirs (only by 6 pence, so I'm not saying I'm going to run in there and demand my 6p back, I'm just interested as to why I am wrong!)

These are the details of the account I have:

Interest last paid on 30th June 2008. Balance with the interest payment was £292.35. This has not changed since then.

The interest rates are as follows (interest paid annually so these are gross/AER rates; I do not pay tax)
From 30th June: 5.3%
From 1st November: 4.8%
From 1st December: 3.3%

Account closed in branch on 5th December, interest paid was £6.46.

This is how I have worked out the interest:

(1) 30th June to 31st October - 124 days. Interest earnt = 292.35 * 0.053 /365 * 124 = £5.2639.
(2) 1st November to 30th November - 30 days. Interest earnt = 292.35 * 0.048 / 365 * 30 = £1.1534.
(3) 1st December to 4th December - 4 days. Interest earnt = 292.35 * 0.033 / 365 * 4 = £0.1057.

So total of (1), (2) and (3) gives £6.52, whilst I was only paid £6.46.

Can anyone tell me what is wrong with my calculations above to get this?

Hungerdunger

I must say I can't really get excited about a 6p discrepancy, but is there a chance that they are using 366 as the divisor as this is a leap year?

rb10

No, using 366 days would give £6.51 according to my calculation. Thanks for the idea anyway.

Lansdowne

The first line of your calculation is actually 5.3% not 5.8%.

I'm not sure you should include 30th June. That date would have been included in the interest added to the account. I think that reduces it by 5p, plus round down the fractions of pence.

rb10

Lansdowne wrote: »

The first line of your calculation is actually 5.3% not 5.8%.

... sorry for confusion, I meant to type 5.3%, that's what the rate actually was. I have edited it now in my original post.

I'm not sure you should include 30th June. That date would have been included in the interest added to the account. I think that reduces it by 5p, plus round down the fractions of pence.

If I start at 1st July, I make that £6.48 ... getting closer! I have tried various roundings of the pence, and haven't got £6.46 yet... ! Thank you.

rb10

Oh, I may have found it. I'm guessing that Nationwide round the daily interest accrued to four decimal places (when counting in £s) - this works, with a start date of 1st July.

Hungerdunger

This is a lot of work for 6p!!

Lansdowne

But it helps to demonstrate that they are not fiddling their customers.

twokcc

I've writtten to them to ask how interest is calculated. A one year fixed rate bond @6.6% closed on maturity. Very simple calculation as far as I was concerned paid about £6 short. Got my capital refunded by cheque(had asked them to BACS it so further loss of interest ) but no response to request to advise how interest had been calculated.
Just don't have the time at the moment to follow this up. Had same problem with a B & B account kept chasing then but never got an answer, shouldn't it be a legal requirement that if requested by the saver the provider gives a written calculation

rb10

Hungerdunger wrote: »

This is a lot of work for 6p!!

Sure is, I just like to know exactly how they arrived at it!