Interest paid on maturity

homerhotspur

I have had quite a few fixed rate term bonds over the years and always had interest paid annually with tax deducted as appropriate( if non-ISA). I was just checking the details of a Halifax 2 yr bond of mine and it appears that the interest is paid ' on maturity' ie all in one sum at the end of the term. I must admit I hadn't noticed this at the time. It is not a real problem to me, but I just wondered if this is unusual . I presume the interest is worked out on the deposit only ie- It does not take account of compound interest ?

opinions4u

The rate quoted is an AER which means that your return should compound interest paid at the end of each year.

e.g. a £1,000 in a 2 year account at 4% AER will return £1081.60 gross on maturity.

Some, like Halifax, do it this way. Others don't.

alanq

Yes it is confusing but I think all that it means is that the interest will be available to withdraw on maturity as opposed to being paid away monthly or annually.

I get annual statements on Halifax bonds telling me the interest that they have earned in the past year even when it will be paid out on maturity. If interest on a multi-year bond really was credited to the account on maturity then there could be tax consequences in having interest all paid at once at a later date.

homerhotspur

If interest on a multi-year bond really was credited to the account on maturity then there could be tax consequences in having interest all paid at once at a later date.

It was this point that first alerted me to what appears to be the difference from the norm. The certificate of investment states " Please note where interest is to be paid at maturity, this could affect your tax position( ie move you into a higher tax tier).