Santander Interest calculation - wrong?

nearlyretired2004

I have a Santander esaver and the account balance flutuates, but over the past month it has never fallen below £15,950 and for at least 27 out of 30 days has been between £16,400 and £16,800

at 3.2% I think the MINIMUM I should get, (after tax,) not taking account of any compounding, is shown by the formula 15950*((3.2/365)*30)*0.8

(as an aside, this formula gives me exactly, to the penny, what I receive on my two First Direct accounts each month with fixed amounts in them, so they obviously dont compound!!)

The amount should actually be more as the account balance is always higher than £15950 and I haven't taken any account of compounding - I make that a minimum of £33.46 and probably should be more like £34.50 ish ..... They've paid £32.21

I fully realise its only a small amount - but added up over thousands of accounts that people hold with them .....?????

Can somebody check that I'm not being stupid - and has anybody ever challenged a bank's interest calculations?

Thanks ......

psychic_teabag

Sounds like you are receiving interest monthly. Is 3.2% the AER rate ? If so, the gross rate for monthly interest is likely to be slightly lower. 3.15% perhaps. Which would give £33.04 I think. (Your formula is a factor of 100 out, but I'm sure you've spotted that.)

Inverting the calculation, £32.21 would correspond to a gross rate of 3.07%.

Milarky

Just did a rough estimate of 34.75 but that's for 30.5 days. There were 30 days June to July period (if it is a full period while the account was open) Knock off 1/60th (55p) £34.20....

Mounthly the rate is 3.15% or 0.2625% gross/0.21% net for BR tax.

nearlyretired2004

psychic - yes sorry typing, not thinking! 3.2% = 0.032

And yes 3.2 is the AER - so monthly will of course be a little lower, but any which way surely they've still paid too little!!

psychic_teabag

What is the period for this interest payment ? Looks like the rate went up from 3.0 to 3.2 on 9th June, so if period spans that date, it would obviously be slightly lower. I assume it's all after that, but ...

Is it definitely an esaver issue 5 ? issue 4 looks like it's 3.10% (or 3.06% monthly) which would be pretty close.

nearlyretired2004

Its an issue 5 - converted from Issue 4 on 19th June to get the better rate so first full months interest paid today and all should be at the higher rate ....

hmmm just looked though and youre right about 3.06% being close to wwhat was paid .....

Are we all in agreement that based on it being issue 5 I've been underpaid?

psychic_teabag

Yes, it does appear that way.

3.07% would be an upper estimate for the rate based on the £32.21 you received - the average balance was slightly higher so the actual rate you received was lower.

10_66

nearlyretired2004 wrote: »

I have a Santander esaver and the account balance flutuates, but over the past month it has never fallen below £15,950 and for at least 27 out of 30 days has been between £16,400 and £16,800

at 3.2% I think the MINIMUM I should get, (after tax,) not taking account of any compounding, is shown by the formula 15950*((3.2/365)*30)*0.8

(as an aside, this formula gives me exactly, to the penny, what I receive on my two First Direct accounts each month with fixed amounts in them, so they obviously dont compound!!)

The amount should actually be more as the account balance is always higher than £15950 and I haven't taken any account of compounding - I make that a minimum of £33.46 and probably should be more like £34.50 ish ..... They've paid £32.21...

I posted on another thread that I thought my interest payment on my new esaver 5 was calculated for an incorrect number of days (I only opened my account with £1 and didn't transfer funds in on which interest would've been earned until a few days before the anniversary of the opening month date). I made it 5 days, they paid interest for 4 days. I sent a secure message to Santander asking how they worked out the number of days for that period, but they wanted to charge me £10 for an interest calculation breakdown - I declined of course. Milarky said he'd kept a check on his interest payments for a while and they worked out correctly (and I've not known him to be wrong).

pqrdef

The other possibility is that they've paid 29 days rather than 30. That should have pretty much the same effect as knocking 0.1% off the gross interest rate.

Since they paid the interest overnight, your money hadn't actually been in for a full 30 x 24 hours at that point.

pqrdef

Looking at this another way, some banks that pay interest on anniversaries don't credit the money until the following night, so you don't see the money until the morning after the anniversary.

With that method of calculation, you'd have got 30 days, but you'd have got it this morning instead of yesterday morning.

Consumerist

To be honest, the Santander website is ambiguous :-

Choose to receive a monthly interest rate of 3.15% gross/AER (variable). This rate includes a variable rate bonus of 2.65% gross/AER (variable) for the first 12 months from account opening

When interest is paid monthly, the gross interest and AER are not the same (as they are when paid yearly). i.e. 3.15% gross paid monthly gives an AER of 3.20% but 3.15% AER paid monthly is equivalent to 3.11% gross.

It's a technicality but it could make the difference of a few pence per month.

I have successfully challenged an interest payment from Halifax who refunded the shortfall, without even an argument, and paid an additional compensation (Customer Care) payment.