Incorrect ISA interest.

rb10

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

For the second one, 15th April to 31st December is 260 days, so 3600*0.0615*260/366 = 157.2787, and add this to 31st December to 31st March, which is 90 days, so you get 3600*0.0615*90/365 = 54.5918. Adding these gives 211.8705.

Not sure about the first one, I make it £183.62.

Cardew

rb10 wrote: »

For the second one, 15th April to 31st December is 260 days, so 3600*0.0615*260/366 = 157.2787, and add this to 31st December to 31st March, which is 90 days, so you get 3600*0.0615*90/365 = 54.5918. Adding these gives 211.8705.

Not sure about the first one, I make it £183.62.

You have assumed that it is the interest paid to 31 March 2009.

Your explanation shows HOW Nationwide have calculated their interest figure, rather than how it should be calculated(IMO of course)

rb10

Cardew wrote: »

Your explanation shows HOW Nationwide have calculated their interest figure, rather than how it should be calculated(IMO of course)

Yes, I realise that I am tweaking the figures to fit what Nationwide have paid.

It's a very difficult one - whether their way is the way it 'should' be done. Obviously people like you are getting less interest back than the AER would suggest for a one year term. But on the other hand, as 2008 is a long year, every day is worth that little bit less, and other people are getting back more than you would expect for one year.

I cannot see you getting anywhere with the Ombudsman, because Nationwide will simply claim that interest is calculated daily (as per the T&Cs), and so if you have more days in the year, it slightly dilutes the daily rate, hence why this is happening.

dazeruk

Cardew wrote: »

You have assumed that it is the interest paid to 31 March 2009.

Your explanation shows HOW Nationwide have calculated their interest figure, rather than how it should be calculated(IMO of course)

How do you think it should be calculated? How should they deal with leap years?

If they advertise a rate of 6.15% AER then that is the rate for a years investment.

So if the money is earning interest during a leap year then the DAILY rate is slightly less than in a non-leap year. However over the WHOLE of 2008 you would get the correct and full 6.15%

sloughflint

Cardew wrote: »

Interesting.

My ISA balance on 31 Mar 08 was £28,287.00 now according to my calculator the interest on that sum at 6.15% is £1739.65. I have been credited with £1,736.06 - so a difference of £3.59 in NW's favour.

Your difference on a balance just over half my total is £1.88.

So again using my calculator it would appear that we have been 'short changed' in exactly the same way i.e. paid 6.137%

I calculate the same as you've been paid:
28287*0.0615* ( 275/366+90/365)= £1736.06

Trying_to_be_good wrote: »

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.

14958.55*0.0615* ( 275/366+90/365)= £895.93

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

I agree with the second one using 260 rather than 261 ( clearing time?):
3600*0.0615* (260/366+90/365)=£211.87
but can't get the first to tally whatever I do:
eg assuming funds earn interest from day 1 and you got one day's interest on 31/03/08
366.0615/366*3000*(275/366+89/365)*0.0615= £183.64.

If funds didn't start earning interest until 1/04/09, then £183.61.
Close but not quite. Sorry.

rb10

How do other banks deal with this? Can anyone post balances and dates of accounts elsewhere? (I don't have any on me at the moment).

Cardew

dazeruk wrote: »

How do you think it should be calculated? How should they deal with leap years?

If they advertise a rate of 6.15% AER then that is the rate for a years investment.

So if the money is earning interest during a leap year then the DAILY rate is slightly less than in a non-leap year. However over the WHOLE of 2008 you would get the correct and full 6.15%

Exactly correct!

As said above if you invested on 31/12/07 to 31/12/08 i.e. exactly one year, you would indeed get the full 6.15% - albeit NW had your money for an extra day.

However I invested for exactly one year on 31/03/08 to 31/03/09 and got less than 6.15%.

There is no dispute(I assume?) that if I invested on 31/03/09 to 31/03/10 I would get the full 6.15%.

So why should investing over a period that included a leap year entail getting a lower rate of interest?

Cardew

sloughflint wrote: »

I calculate the same as you've been paid:
28287*0.0615* ( 275/366+90/365)= £1736.06

Perhaps I am not making myself clear.

You have used the same calculation method as NW. I understand exactly the arithmetic both NW and you are using.

My point is the the method is flawed.

By using this method NW have had my money for exactly one year and paid less than 6.15%.

What possible logic is there in saying a leap year is longer than a 'normal' year, so we can use this as a reason to pay you a lower interest rate than a 'normal' year..

Cardew

sloughflint wrote: »

You did not get less that 6.15%.

I DID get less than 6.15%.

If I invest £28,287 today for 1 year at 6.15%. What do you calculate the interest will be on maturity?

I make it £1739.65 - do you agree?

sloughflint

Cardew wrote: »

I DID get less than 6.15%.

If I invest £28,287 today for 1 year at 6.15%. What do you calculate the interest will be on maturity?

I make it £1739.65 - do you agree?

Cardew, I can't seem to make you understand. The AER quoted is correct.
All that has happened is that you have invested for 365 days some of which land in a leap year and the others do not.

You will not get anywhere with your complaint.
Your money was still earning 1/366th of whatever annual rate between 1/01/08 and 30/03/08 wherever your funds were before.

The only time your net result would coincide with 6.15% is IF you'd invested between 01/01/08 and 31/12/08 or your 365 days fell outside of a leap year.
NW is not being unusual.