Incorrect ISA interest.

Cardew

More on this!

I have had a reply back from NW stating that my reduced interest is indeed because 2008 was a leap year with 366 days.

I have spoken to a supervisor who confirms that this is the reason.

So we have the extraordinary situation where NW have your money on deposit for an extra day in a leap year and contrive to pay you less interest than in a normal 365 day year.

I have also checked on some fixed bonds that have just matured and indeed they also show a shortfall.

So it would appear that all accounts in Nationwide will suffer the same penalty.

rb10

Cardew wrote: »

So we have the extraordinary situation where NW have your money on deposit for an extra day in a leap year and contrive to pay you less interest than in a normal 365 day year.

No, but if the deposit spans Feb 29th, then it evens out.

So say I opened a one year account on Jan 1st 2008, it would close on Jan 1st 2009, I would have had it for 366 days, with each day being counted as 1/366th of the gross rate. This would come back up to the gross rate. So provided your dates span Feb 29th, you'll be fine.

Cardew

rb10 wrote: »

No, but if the deposit spans Feb 29th, then it evens out.

So say I opened a one year account on Jan 1st 2008, it would close on Jan 1st 2009, I would have had it for 366 days, with each day being counted as 1/366th of the gross rate. This would come back up to the gross rate. So provided your dates span Feb 29th, you'll be fine.

If you open a one year account only on 01 Jan 2008 then I agree with you that you will get a full year's interest. - that is the only case.

Open a 1 year account on 30 June 2008 and you get 6 months in a 366 day year and 6 months in a 365 day year.

In my case(a 2 year bond), in the period from 31/03/08 to 31/03/09 I get paid less than the annual rate. This is beacause, in effect, the period 01/03/08 to 31/12/08 pays a lower rate. So that savings bond spans 29 Feb 2008 and I am still 'shortchanged.

rb10

Say you put £1000 into a one year fixed rate account paying 5% on 30th June 2007. You would expect to get 1000*0.05 = £50 at the end of the year.

Nationwide would calculate the interest as follows:
30th June 2007 to 31st December 2007 (184 days) - 1000 * 0.05 * 184 / 365 = 25.2055
PLUS
1st Jan 2008 to 30th June 2008 (182 days) - 1000 * 0.05 * 182 / 366 = 24.8634

So the total is £50.07 - you gain a tiny amount because of the 29th Feb.

Cardew wrote: »

In my case(a 2 year bond), in the period from 31/03/08 to 31/03/09 I get paid less than the annual rate. This is beacuse, in effect, the period 01/03/08 to 31/12/08 pays a lower rate. So that savings bond spans 29 Feb 2009 and I am still 'shortchanged.

But although the account spans 29th Feb 2008 (which is what I assume you meant - there was no 29th Feb 2009), that interest calculation period does not; it starts a month later.

(I'm not sure how you got £287 interest over the period that did cover 29th Feb '08 though. 31/1/08 to 31/3/08 is 60 days, so 28000*0.0615*60/366 = £282.30, yet you got £287, so you seem to have got significantly over the odds for this bit.)

michaels

Anyone know how the interest is supposed to be calculated on the LTSB Fixed Rate ISA? I made my first deposit on 11 APR 08 and have a statement dated 24th Apr which shows interest being added on 14th APR. Not sure when this interest is up to but even assuming it is for the 1 year anniversary 10 Apr it still seems to be about a tenner short?

Cardew

what is LTSB ????

rb10

Cardew wrote: »

what is LTSB ????

Lloyds TSB.

Cardew

rb10 wrote: »

Say you put £1000 into a one year fixed rate account paying 5% on 30th June 2007. You would expect to get 1000*0.05 = £50 at the end of the year.

Nationwide would calculate the interest as follows:
30th June 2007 to 31st December 2007 (184 days) - 1000 * 0.05 * 184 / 365 = 25.2055
PLUS
1st Jan 2008 to 30th June 2008 (182 days) - 1000 * 0.05 * 182 / 366 = 24.8634

So the total is £50.07 - you gain a tiny amount because of the 29th Feb.



But although the account spans 29th Feb 2008 (which is what I assume you meant - there was no 29th Feb 2009), that interest calculation period does not; it starts a month later.

(I'm not sure how you got £287 interest over the period that did cover 29th Feb '08 though. 31/1/08 to 31/3/08 is 60 days, so 28000*0.0615*60/366 = £282.30, yet you got £287, so you seem to have got significantly over the odds for this bit.)

Thanks.

Firstly – yes you are correct about the date of the leap year and I have corrected it.

Secondly the £287 is because they have obviously given me interest for 31 Jan and so to 31 March is 61 days not the 60 you have used.

I understand the point you are making and agree with the figures in your example.

However in the case of the £1000 at 5% it would be if that was invested for the rest of 2008 at 5% after it matured on 30 June 2008 where the shortfall would occur. It will earn daily interest at a rate calculated at 1/366 for the rest of that year

We have already agreed that the interest paid myself and the others from 31/03/08 to 31/03/09 is incorrect. By any calculation that is a period of 1 year and we haven't got the declared interest rate.

Anyone investing after 01 March 2008, or indeed having funds with Nationwide after 01 March 2008 will have lost interest for the rest of that year.

BigJonnyB

I'm a little confused - can anyone tell me whether my interest payment is correct, as I calculated to be slightly higher? I have two fixed ISAs with them as follows:

£3000 funded on 31March 2008, interest earned = £183.55
£3600 funded on 14th April 2008, interest earned = £211.87

Both are the 6.15% fixed rate ISA bonds.

Thanks,

JB

Cardew

BigJonnyB wrote: »

I'm a little confused - can anyone tell me whether my interest payment is correct, as I calculated to be slightly higher? I have two fixed ISAs with them as follows:

£3000 funded on 31March 2008, interest earned = £183.55
£3600 funded on 14th April 2008, interest earned = £211.87

Both are the 6.15% fixed rate ISA bonds.

Thanks,

JB

Both for 1 year? and that was the interest on maturity?

If so the £3000 ISA should have earned £184.50 and the £3600 ISA £221.40.