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SnowMan

Consumerist wrote: »

I make it closer to 2.0%.

On the back of an envelope -

3.05% for 1.5 years yields ~ 4.5%

180 days penalty (say, 0.5 years) will reduce the yeild by 3.05% / 2 or ~ 1.5%

So the yield is 4.5% - 1.5% = 3.0% over 1.5 years i.e. ~ 2.0% pa over the 18 months (1.5 years)

Hope that makes sense..

My back of the envelope calculation is

3.05% x ((1*0.75)+(1.5*0.25))/1.5 =2.3%pa

Based on an 18 month saving period. So 75% of the funds getting interest over roughly a year (net of the 180 day penalty) and the other 25% getting the full 1.5 year of interest

And then dividing back by 1.5 to get an annual interest figure

Consumerist

SnowMan wrote: »

. . .Based on an 18 month saving period. So 75% of the funds getting interest over roughly a year (net of the 180 day penalty) and the other 25% getting the full 1.5 year of interest. . .

I don't follow your reasoning.

SnowMan

Consumerist wrote: »

I don't follow your reasoning.

25% of the savings amount can be withdrawn without penalty.

So if the account is closed after 18 months then 25% has no penalty and the 75% balance is subject to an 180 day interest penalty

Withdrawals/transfers can be made of up to 25% of your capital investment without notice or loss of interest prior to maturity (31 March 2019). If you exceed this limit, the account will be subject to 180 days loss of interest or an equivalent amount on the amount withdrawn/transferred.

My only doubt is whether the 180 day penalty is applied to the whole amount if withdrawals exceed 25% of the amount saved or just to the balance over the 25% penalty free amount. The wording above is ambiguous and this needs clarifying/checking out.

Consumerist

SnowMan wrote: »

25% of the savings amount can be withdrawn without penalty.

So if the account is closed after 18 months then 25% has no penalty and the 75% balance is subject to an 180 day interest penalty

My only doubt is whether the 180 day penalty is applied to the whole amount if withdrawals exceed 25% of the amount saved or just to the balance over the 25% penalty free amount. The wording above is ambiguous and this needs clarifying/checking out.

Ok. I see what you mean. I was assuming the whole amount was transferred after 18 months and I disregarded the 25% penalty-free allowance.

Your last paragraph raises an interesting question.

Consumerist

Following on from the 25% penalty-free allowance, the penalty would be reduced to -

3.05% pa x 0.75 x 0.5 years = ~ 1.144% penalty (disregarding compounding over such a short period)

So the yield would be ~ 4.58% - 1.14% = 3.44% over 1.5 years

So that's ~ 2.29% pa over the 18 months.

If the 25% penalty-free allowance applies then I think we agree.

Consumerist

diy1950 wrote: »

. . . if you were to withdraw/transfer after 18 months, the interest rate would have been 2.3% (if I remember correctly). Maths is not my strong point and i would be interested to know how this was calculated. Any maths experts?!!!

So it depends on how Leeds BS will interpret its 25% penalty-free allowance when you transfer.

The yield will be ~2.0% pa if the penalty-free allowance is not applied but ~2.3% pa if the allowance is applied.

Hope the arithmetic made sense to you.

diy1950

Thanks for that. Yes the maths does make sense to me.

I agree the wording is somewhat ambiguous.

the_seer

I phoned the Leeds BS at the weekend to try to get some clarification on this, as I am looking for a new home for my NatWest ISA.
I was told that the 180 days penalty is on the amount transferred or withdrawn.
So my tactic would be to transfer/withdraw 25% penalty free first, and then transfer/withdraw the rest separately a few days/weeks later.
Seems like they're just creating more work for themselves really, but I'll play their game

Consumerist

the_seer wrote: »

I phoned the Leeds BS at the weekend to try to get some clarification on this, as I am looking for a new home for my NatWest ISA.
I was told that the 180 days penalty is on the amount transferred or withdrawn.
So my tactic would be to transfer/withdraw 25% penalty free first, and then transfer/withdraw the rest separately a few days/weeks later.
Seems like they're just creating more work for themselves really, but I'll play their game

The problem is, they might still charge the penalty based on the total amount transferred/withdrawn from the account before maturity, including the 25% you transferred/withdrew earlier.

I rather get the impression, from what you say, that their Customer Services doesn't know the answer.

the_seer

I did ask specifically if the penalty would be on the original sum invested or on the 75% remaining, and was told it would be on the actual amount withdrawn.
I was given the impression that they were just quoting from the T&Cs though.