Incorrect ISA interest.

sloughflint

masonic wrote: »

Not really, because if interest is paid on any date other than the anniversary more interest results, never less.

I don't understand your answer.

The point I was making was that you seem to disagree on NM quoting an AER of 6.15%.

Wouldn't you then apply that same argument to their product in general since investing on a different date will always result in a different amount of interest paid due to the fact that they are forcing a interim interest payment ( not a bad thing IMO)?

sloughflint

rb10 wrote: »

so the total by my calculation is £2815.83, not sure why you got the extra 2p.

42000*0.067*(88/365+278/366)= £2815.85

vincit_veritas

Thank you and well done, rb10 and sloughflint, for kindly, swiftly and succinctly supplying the explanation that Nationwide refused to give me.

masonic

sloughflint wrote: »

I don't understand your answer.

The point I was making was that you seem to disagree on NM quoting an AER of 6.15%.

Wouldn't you then apply that same argument to their product in general since investing on a different date will always result in a different amount of interest paid due to the fact that they are forcing a interim interest payment ( not a bad thing IMO)?

The point I am trying to make, not very well it would seem, is that the AER often doesn't perfectly fit in with the way interest is calculated in individual circumstances, but it must at least be possible theoretically to attain the AER at the time you open the account. The quoted AER should be attainable during the month it is advertised. This isn't the case when NW are calculating interest on the basis of a 366 day year and the account year is only 365 days long, so NW should revise their AER after 29th Feb 2008 to reflect that (and again each subsequent month in 2008). Obviously, the ideal solution is they amend their methods of calculating interest, but that would just be asking too much...

Cash43

I am currently in dispute with Nationwide over their method of interest calculation on fixed rate bonds, which in my wife's case would not have produced interest to the APR advertised. Had Nationwide not committed a series of appalling blunders ( for which they have admitted and apologised with recompense ) we would not have discovered that they did not originally meet the APR. After exhaustively educating them we eventually received interest which matched the APR. I am awaiting their further explanations before taking this matter to the FSA. Every Nationwide depositor should/must check their interest against the advertised APR - do not simply accept Nationwides calculation.

Cash43

I am currently in dispute with Nationwide over their method of interest calculation on fixed rate bonds, which in my wife's case would not have produced interest to the APR advertised. Had Nationwide not committed a series of appalling blunders ( for which they have admitted and apologised with recompense ) we would not have discovered that they did not originally meet the APR. After exhaustively educating them we eventually received interest which matched the APR. I am awaiting their further explanations before taking this matter to the FSA. Every Nationwide depositor should/must check their interest against the advertised APR - do not simply accept Nationwides calculation.

sloughflint

Cash43 wrote: »

I am currently in dispute with Nationwide over their method of interest calculation on fixed rate bonds, which in my wife's case would not have produced interest to the APR advertised. Had Nationwide not committed a series of appalling blunders ( for which they have admitted and apologised with recompense ) we would not have discovered that they did not originally meet the APR. After exhaustively educating them we eventually received interest which matched the APR. I am awaiting their further explanations before taking this matter to the FSA. Every Nationwide depositor should/must check their interest against the advertised APR - do not simply accept Nationwides calculation.

I take it you must have been one of the unlucky people to have opened it beween April 1st and 14th 2008 then.
Any other date and you'd have been better off keeping quiet.

Trying_to_be_good

sloughflint wrote: »

I take it you must have been one of the unlucky people to have opened it beween April 1st and 14th 2008 then.
Any other date and you'd have been better off keeping quiet.

My understanding is that any account operating during 2008 but wasn't operating (and therefore earning interest) on 29 Feb 08 misses out, as the 'annual' interest for 08 was divided by 366, rather than 365 days. So any 2008 account closing on or before 28 Feb 08 or opened on or after 1 Mar 08 misses out.

Unless there are other shenanigans going on...

rb10

Trying_to_be_good wrote: »

My understanding is that any account operating during 2008 but wasn't operating (and therefore earning interest) on 29 Feb 08 misses out, as the 'annual' interest for 08 was divided by 366, rather than 365 days. So any 2008 account closing on or before 28 Feb 08 or opened on or after 1 Mar 08 misses out.

Unless there are other shenanigans going on...

No ... there are other shenanigans...

Because Nationwide always compound their interest on 31st March, regardless of when the account was opened, accounts opened during March benefit from this compounding, so actually receive very slightly more than the AER. (The compounding effect is not taken into account for the AER.) Accounts opened after 14th April also benefit from the compounding, but this time at the end of their account year, in March 2009.

Hence, it is only those opened during the first two weeks of April 2008 that suffer.

sloughflint

Trying_to_be_good wrote: »

My understanding is that any account operating during 2008 but wasn't operating (and therefore earning interest) on 29 Feb 08 misses out, as the 'annual' interest for 08 was divided by 366, rather than 365 days. So any 2008 account closing on or before 28 Feb 08 or opened on or after 1 Mar 08 misses out.

Unless there are other shenanigans going on...

It was a combination of two factors that created this. The leap year aspect and the interim interest payment.
A quadratic equation provides the window where it is unfavourable to open an account.
Any other time, account holders receive more interest than the quoted AER. There is an optimum date to open but maybe they'll have changed their rules on this by 2012.