Incorrect ISA interest.

rb10

Just to add to it ... I'm missing all of 6 pence from my Members' Reward Bond that I closed last December. I made a thread about it here.

As, so far, all replies have been that interest has been lower than received, I'd take this to indicate that they truncate an intermediate calculation to a certain number of decimal places.

BruceyBonus

Trying_to_be_good wrote: »

Looks like more Nationwide tricks - they've credited £65.87 gross, £52.70 net. Where's my other 13p gross, 10p net?! That's 364.72 days' interest, not 365.

I can find a way to get within a penny of your interest, with a bit of rounding.
£1000 * 6.6% = £66.00
£66.00 / 365 = £0.180821917808219 per day
Round that to £0.181 per day (i.e. three significant figures), multiply by 364 (i.e. not including the day of opening) and you get £65.88 - a penny out.

Using the same method (three significant figures and 364 days), I can get within 22p and 49p of the other two people's interest who put figures in their posts.

I've got absoluetly no idea what they do to calculate the interest as it should just be balance * AER on 1 year fixed rates. I'd be interested in hearing if anyone finds out anything from NW as my mum has been paid a few pounds less than expected too.

rb10

BruceyBonus wrote: »

I can find a way to get within a penny of your interest, with a bit of rounding.
£1000 * 6.6% = £66.00
£66.00 / 365 = £0.180821917808219 per day
Round that to £0.181 per day (i.e. three significant figures), multiply by 364 (i.e. not including the day of opening) and you get £65.88 - a penny out.

Using the same method (three significant figures and 364 days), I can get within 22p and 49p of the other two people's interest who put figures in their posts.

I've got absoluetly no idea what they do to calculate the interest as it should just be balance * AER on 1 year fixed rates. I'd be interested in hearing if anyone finds out anything from NW as my mum has been paid a few pounds less than expected too.

For each individual set of figures, there is often a way of calculating it to be fairly close to the real answer, but Nationwide must have a formula that they work to - so there must be a solution that works for all accounts (assuming they calculate interest on all different types of accounts identically!).

BruceyBonus

Using the Natiowide "Savings Illustrator", it seems they work out interest as simply being Rate * Balance.
http://www.nationwide.co.uk/nbsasp/illustrator/default.asp

I'd definitely query with them if you receive less.

Cardew

BruceyBonus wrote: »

Using the Natiowide "Savings Illustrator", it seems they work out interest as simply being Rate * Balance.
http://www.nationwide.co.uk/nbsasp/illustrator/default.asp

I'd definitely query with them if you receive less.

I have tried a few examples in the link you provided and all are within 1p of the expected return.

e.g. £1,000 for 1 year at 3% = £29.99 interest.

However my interest was £3.59 too little and 'trying to be good''s interest was £1.88 too little.

I have queried this on their secure network and will update this thread when I get an answer, if it is before Xmas.

Trying_to_be_good

Trying_to_be_good wrote: »

Looks like more Nationwide tricks - they've credited £65.87 gross, £52.70 net. Where's my other 13p gross, 10p net?! That's 364.72 days' interest, not 365.

Nationwide have provided an answer on the Bond interest (but not on the ISA yet):

25 Apr 08 to 31 Dec 08: 1000 x 6.6% x 251 / 366 = 45.26
2009: 1000 x 6.6% = +66.00

less Maturity - write back to 25 Apr 09
1000 x 6.6% x 251 / 365 = -45.39

So the gross interest is £45.26+£66.00-£45.39 = £65.87

I lose £0.13, because apparently I only earn 1/366 interest per day for 2008 as it's a leap year (despite the bond starting in April), and 1/365 per day for 2009. So that's 251/366 + 114/365, or 99.8% of a whole year's interest.

Sounds dodgy to me. I've asked them to reconsider.

rb10

That makes sense to me, it all works. I think that is a fair way to do it.

For your ISA,
31/3/08 to 31/12/08 is 275 days, £14598 * 0.0615 * 275 / 366 = 674.5592
31/12/08 to 31/3/09 is 90 days, £14598 * 0.0615 * 90 / 365 = 221.3697.

674.5592 + 221.3697 = 895.9289.

And you got £895.93 interest, so it fits!


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Cardew's on post number 12 is calculated similarly, replacing 14598 by 28287 gives 1307.114 and 428.9549, so a total of 1736.069. So I reckon you should have got a penny more than the £1736.06 they paid you



***


And it fits for my Members' Reward Bond, which I made to be 6p out, doing it this way gives the exact answer.



***


Thank you Trying to be Good for finding out and posting the answer here!

Cardew

Thanks for your calculations, which explain the 'shortfall'.

I am not sure I agree with you that it is 'the fair way to do it'!

'Your' explanation would indicate that someone who invested before 29th February 2008(as I did) *would receive slightly more than the declared interest rate on 31 March 2008.

The bottom line is that if I invested, say, £1,000 @10% for 2 years I should expect to have £1,210 on maturity.

* I invested £28,000 on 31 Jan 2008 for 2 years at 6.15%. On 31 March 2008 interest of £287 was added, and on 31 March 2009 a further £1,736.06 added.

Regardless of how NW work their figures, on 31 Jan 2010 I would expect(on maturity) the sum to be £31,549.90.

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Cardew wrote: »

Regardless of how NW work their figures, on 31 Jan 2010 I would expect(on maturity) the sum to be £31,549.90.

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Cardew

ffacoffipawb wrote: »

Only if you are a non taxpayer (or the account is an ISA, not clear from this thread). You won't earn interest in year 2 on the tax you paid in year 1 otherwise.

YEAR 1: £28,000.00 * (1 + 6.15% * 0.8) = £29,377.60

YEAR 2: £29,377.60 * (1 + 6.15% * 0.8) = £30,822.98

Not clear????

1. This section of MSE is headed 'ISAs and Tax-free savings'

2. The title of the thread is 'Incorrect ISA interest.'

3. My opening line was

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