Nationwide Interest Calculation???

Andystriker

Hi All,

I opened a Nationwide Bond on 15th April with £25,000. I opted for Monthly Interest, the rate being 4.65% Gross 3.72% Net.

Today I was surprised to see a credit to my Flex Account for £45.02 with the narrative - Gross £56.27 Net £45.02 Credited 30 April 2010 (the credit went in on 23rd April).

I can't work out how they have calculated this. Before I contact them, does anyone else think this is right?

RHB

Ok, the gross interest on the whole balance over a year is going to be ~£1162. To get a rough idea of per month (obviously Feb is much shorter that only months and some months are 30/31) divide that by 12 so just under £97 a month in interest. You opened the account on the 15th April and interest is being paid for the 30th, so really its only been half a month, hence £56 interest, or roughly half of the £97. Very roughly.

Andystriker

RHB,

But £97 would be Gross?

And half of £97 is £48.50 Gross

I have received £56.27 Gross.

Am I missing something??

noh

Looking at the Nationwide site I'm guessing you took out the 5 year Bond?

The Gross rate for this is actually 4.75%.
http://www.nationwide.co.uk/savings/bonds/

So doing the calculation for 16 days interest (15th to 30th April inclusive assuming interest starts on the day of payment as stated in T+Cs section 16 http://www.nationwide.co.uk/savings/legal.htm?acc=bonds )

£25000 x 4.75/100 = £1187.50 Annual Interest
£1187.5/365 = £3.25 daily interest
£3.25 x 16 = £52.05 gross interest
£52.05 x 0.8 = £41.64 net interest

Consumerist

Something's still not quite right there, is it ?
I don't see them overpaying by £4 (gross) for no reason.

How did you pay the premium. Is it possible they received it before the 15th April and paid interest from the day of receipt rather than the day the bond was opened ?

noh

Consumerist wrote: »

Something's still not quite right there, is it ?
I don't see them overpaying by £4 (gross) for no reason.

How did you pay the premium. Is it possible they received it before the 15th April and paid interest from the day of receipt rather than the day the bond was opened ?

Yes still not quite right.
The gross interest paid of £56.27 equates to 17.31 days interest on £25000 at 4.75%

Andystriker

I sent them a message asking how they worked out the interest and got this response:-


Dear Andystriker,
Thank you for your message.

I have received a response from our Interest Team and have provided it below:

'The calculations we have used are as follows:

15 Apr 10 – 31 Dec 10
£25000.00 x 4.65% x 261 days (left in year) x 365 days = £831.27

Interest adjustment to 30 Apr 10
£25000.00 x 4.65% x 8 months (left in year) x 12 months = £775.00

£831.27 - £775.00 = £56.27

£56.27 x 0.8 (tax deducted at 20%) = £45.02

The interest is correct.'

Regards,

Customer Consultant
Nationwide

Consumerist

Their methods seems a little crazy.

They have calculated interest from 15 April to the end of the year in days and then deducted interest from the end of the year back to 30 April in whole months.

The 8-month period 1 May - 31 Dec is 245 days whereas the 8/12 (i.e. 2/3) of the year is 243.3 days. So they have credited you with an extra 1.7 day's interest.

This will all correct itself by the end of the year, of course, but what a way to run any financial calculation.