West Brom Webssave ISA pays interest on Dec 1st. What balance will it pay on?

Cycler

Hi all,

I currently have an ISA with Natwest (2% rate - not great I know but it pays interest monthly).

I've just noticed the West Brom BS web save ISA in the MSE email. Sorry, I can't post links yet but its at www westbrom co uk / websaveisa3 (Copy and paste the text into a browser and replce spaces for full stops to view it).

The details are:
3.07% AER (1.07% is a bonus rate up to 30/11/12) paid annually.
It says Interest is calculated up to 30th November and paid on 1st December (no year mentioned).

If I open a West Brom ISA and transfer my Natwest ISA cash into it now will it calculate the full 3.07% interest on 30/11/2011 or will it pro-rate it given the cash will have only been in there for about a month and a half? Or is it saying that the interest won't be calculated until 30/11/2012.

TIA

Cycler

Cycler

Here's the text from the T&Cs. Looks like the 2% bonus is not paid until 01/12/2012.

"The interest rate is variable and includes a fixed 1.07% gross p.a. unconditional bonus until 30 November 2012, which is included in the interest payment made on the 1st December 2012. Interest will be calculated to accrue up to and including the 30 November in each year. Any interest payments will be paid annually on 1st December. In the case of a withdrawal, or if you close the account, interest is calculated up to and including the day of the transaction. If any amount is to be transferred to an alternative WeBSave Account/Bond, interest will be calculated up to the day prior to transfer. Interest on the new WeBSave Account/Bond will then accrue from the day of the transfer. In the case of ISA Transfers received from another ISA provider, interest will be earned from the date stated on the cheque effecting the Transfer.
Visit: to view the interest rate for this and other accounts with the West Bromwich Building Society."

System

I would imagine that this account will work like most savings accounts where an AER is quoted.
i.e.
Interest will be calculated daily on the balance and the interest earned will be added to the account, in this case on the 1 December each year.

So, on 1-DEC-2011 you will receive interest for the number of days from the day the account was funded up to and including 30-NOV-2011

The bonus ends on 30-NOV-2012 and then the interest drops to 2% AER, there are better ISA rates available

The basic formula to use to calculate the daily interest is :
=Balance*((InterestRate ^ (1 / 365))-1)*(NoOfDays)

Where :
InterestRate of 3.07% is entered as 1.0307
NoOfDays = 1 for daily interest, or 365/12 for monthly, etc...

pqrdef

BAA1 wrote: »

(InterestRate ^ (1 / 365)

Not unless the quoted rate is based on daily compounding.

System

pqrdef wrote: »

Not unless the quoted rate is based on daily compounding.

So if the quoted rate is AER how else would it be calculated ?

weenemo

I'm a little confused by tis too. I presume interest is paid on the total cash in the ISA. I'm planning to transfer in and top up with maximum. However when following the link it states only 3.07 AER on £1 - £5340. DOes this mean that interest is only paid on the max put in for tax year rather than total in the ISA

System

weenemo wrote: »

I'm a little confused by tis too. I presume interest is paid on the total cash in the ISA. I'm planning to transfer in and top up with maximum. However when following the link it states only 3.07 AER on £1 - £5340. DOes this mean that interest is only paid on the max put in for tax year rather than total in the ISA

The info on their webpage : http://www.westbrom.co.uk/websaveisa3/ is not the clearest or best worded that I have come across, but under the table showing the interest rate tier - £1 - £5,340 it also says :

Variable Rate - ISA Transfers in will attract the same interest rate

I assume this is the 1st year that this particular account ( websaveisa3 ) has been available, hence the maximum new money that could have been paid in is £5,340, any additional balance in the account must have been via a Transfer In, so the interest will be as stated.