Incorrect ISA interest.

Cardew

I have a 2 year fixed rate ISA with Nationwide at 6.15% which I started in Jan 2008.

It was showing a balance on 31/3/2008 and shows the interest added on 31/3/2009.

If I calculate the interest on that balance at 6.15% it comes to a few pounds more than has been credited to my account.

e.g. If balance on 31/3/2008 was, say, £10,000 am I correct in assuming that I should be credited on 31/3/2009 with a simple £615?

Or have I missed something?

I would add that the interest is not correct even assuming that I would be paid for 364/365ths - i.e. 1 day short.

BruceyBonus

Same happened with my mum's 6.15% NW ISA - a few pounds lower than expected.

Nationwide have a funny way of calculating interest - there is a leaflet that they have available in branches that explains exactly how to work it out.

Milarky

BruceyBonus wrote: »

Nationwide have a funny way of calculating interest - there is a leaflet that they have available in branches that explains exactly how to work it out.

Agreed. They are 'outliers' where interest calculations are concerned, in my experience. Their interest is about + or - half a percent compared to perhaps a tenth of this margin for everybody else.

The point about NW's fixed rate products (particularly 12 months) is they will fix the date of interest payment to one date during the first 12 months and then pay out a bit extra on the anniversary to cover the remaining period. It may suit them to block you into fixed dates like this but what is the value, exactly, of paying interest twice for an 'annual' interest rate on a 12 month product or (as per the original post) three times on a 2 year one?

martinman3

Milarky wrote: »

Agreed. They are 'outliers' where interest calculations are concerned, in my experience. Their interest is about + or - half a percent compared to perhaps a tenth of this margin for everybody else.

Reminds me of the film 'Superman 3' with Richard Pryor programming a computer to give all the fractions of a cent left over in payroll calculations to himself. Perhaps someone in Swindon is driving around in a red Ferarri.;)

Cardew

Not heard of the term 'outliers' in this context.

The bottom line is that if I, say, invested £10,000 for 2 years at 10%(to make the arithmetic easy), at the end of year 1 I should have £11,000, and at the end of year 2 I should have £12,100.

Given N/W's convoluted methods, should I be confident that this sum will be paid even if my statement shows less than £11,000 at the end of year 1?

BruceyBonus

Out of interest, what was the exact amount you paid into the account and the amount of interest you received? I think NW might do something with the pennies on the balance.

Milarky

It's not directly relevant but Nationwide does round the pounds in your balance before working out interest (the only ones I am aware of doing so)

eg '£127.49' is only '£127' to Nationwide

The difference this makes is miniscule, but then someone thought that wheeze up years ago and quietly slipped that into the T&Cs. 15 million customers, say 25 million savings accounts beween them = £12.5million interest-free cash....

[Think 'BT' without the brains...]

BruceyBonus

Milarky wrote: »

It's not directly relevant but Nationwide does round the pounds in your balance before working out interest (the only ones I am aware of doing so)

eg '£127.49' is only '£127' to Nationwide

Ah yes, that is what I was thinking of in the post above yours, just couldn't remember the exact details. So I assume that £127.99 would be rounded down to £127?

rb10

BruceyBonus wrote: »

Nationwide have a funny way of calculating interest - there is a leaflet that they have available in branches that explains exactly how to work it out.

Is the leaflet online, does anyone know? I'd be interested to see it.

Trying_to_be_good

I have sent a secure message to Nationwide about exactly this - I have a 2-year fixed term ISA paying 6.15% (yay!), started in Dec 07. It pays interest on 31 March, annually, and on the maturity date.

So, original deposit £14,338.23
Interest to 31 Mar 08 £260.32 (didn't bother to check this - new balance £14,598.55)
Interest to 31 Mar 09 £895.93 - should be £897.81 by my calculator

Only pennies different, but MY pennies. I was advised ISA replies were taking approximately 14 working days, on 1 April. I make it 15 working days since then, so will let you know when they reply.

BruceyBonus

Trying_to_be_good wrote: »

Interest to 31 Mar 09 £895.93 - should be £897.81 by my calculator

I calculated the same. Even if you work it out for 364 days, round down the balance etc, you still get a different figure to NW.

I've never been able to work out the interest on NW accounts exactly, so it would be interesting to know exactly how they do it.