Newcastle Building Society ISA, IS IT 3% MONTHLY bonus?!?!?

le_loup

What do you think AER stands for?
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vpdanas

le_loup wrote: »

What do you think AER stands for?
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Have you seen the best cash isas section of Martin Lewis website????? http://www.moneysavingexpert.com/savings/best-cash-isa scroll down to the highlight Newcastle building society .... Money saver expert clearly states

'A substantially higher rate's on offer with Newcastle's Big Home Saver ISA. it pays 3% AER each month that you pay in £1-£500 and don't make a withdrawal. Yet take cash out, or miss a pay-in, and you only earn 2% AER for that month.'

Clearly states it pays 3% EACH MONTH (2.98%) !?!?!?

What am I not getting cuz I ain't a pro on savings etc etc

ManAtHome

vpdanas wrote: »

She said to me that 'I, like so many, have clearly misinterpreted the ISA and the bonus'?!?!

I think I'd have "misinterpreted" it as well... Seems fairly clear (to me) that they should pay the interest monthly at whichever rate you've qualified for. As it's open-ended, don't see (and they certainly don't state) how they could pick any future "anniversary" date to pay out bonuses.

Just a thought - they may credit the basic and bonus interest separately - was your interest credited on the last day of your first month, or the first day of the "next" month? (ie may be possible another credit turns up "manana")

[edit] as there were a few posts between this and post #9 - OP is not expecting 3% a month, but why interest was not paid at the "bonus" rate)

bowlhead99

OK OK we understand your question!

The 3% and 2% rates quoted are annual equivalent rate (AER). What they are saying is if you stick to the qualification conditions you will get some rate which, based on the timescale of them dripping in the money monthly and compounding it and giving you a bonus at some point, represents an annual equivalent rate of just giving you 3% once a year.

Sounds like the way they are achieving it is by giving you a rate, paid in chunks monthly, but skewed such that they back-load the payments with the bonus coming in at the end.

The rate they quote if you meet the conditions is 2.98 simple and 3% AER. If we look at the maths of this:

If they drip into your account 1.98% monthly and then 1% bonus after a year, you have indeed received 2.98% total on your money, because 1.98+1 = 2.98, which is what they promised for their monthly payment option. It doesn't have to be paid in exactly equal amounts. The very reason AER as a measure is quoted on all savings products is precisely because the amounts might not be paid evenly and you need to have a standardised industry measure as to what it works out to, compared to putting the money in on day one and getting paid back out after it being on deposit 365 nights with interest only paid at the end.

If you look at the Annual Equivalent Rate of this, you have £1,000 on day one, then after a month you have added interest at (1,000 x 0.0198/12) = £1.65. Then after the next month you have added interest at 1001.65 x 0.0198/12 = £1.653. These payments, including interest on interest, will keep going on until you end up after 12 months at a certain level, and they add on the 1% for each appropriate time period - so that you end up at £1030 at the end.

So, in this way they end up delivering 2.98%, dripped in monthly however they like not necessarily equally, and an equivalent of 3% by the end. The "equivalent by the end" is what they have to deliver, to two decimal places, and quoted as AER to be comparable with other products.

If they dripped in 2.98/12% monthly, and allowed it to compound, you would end up with 3.02% annual equivalent rate which is not what they're offering. It is more than what they are offering because they say AER of 3.00, not AER of 3.02.

Hope this helps. This is what you are not getting cuz you ain't a pro. But bottom line it means you don't really have a case to complain/argue/get them to change their mind.

Herbalus

The product is still available and hasn't changed, so you should get what they say you'll get. If you aren't, then I'm assuming you haven't met the conditions.

Do you know that you have to make a deposit and no withdrawals in your statement month, not a calendar month? That could cause an issue.

withnell

'The bonus on your Account will be paid as long as you make at least one Deposit and make no withdrawals in each Bonus Qualifying Period'

Bonus Qualifying Period is a calendar year - how long have you held the account for?

mf78

From their website:

http://www.newcastle.co.uk/savings/cash-isa.aspx

for every month in which you make an investment and don't make any withdrawals,
we'll pay you a bonus.

Monthly (Variable, Including Bonus)
2.98% Gross/3.00% AER*
Monthly (Variable, Excluding Bonus)
1.98% Gross/2.00% AER*

1. The bonus on your Account will be paid as long as you make at least one
   Deposit and make no withdrawals in each Bonus Qualifying Period
2. A Bonus Qualifying Period is classed as the time between each Monthly
   Anniversary (for example if your account was opened 27th January 2011, the first
   Bonus Qualifying Period would be 27th January 2011 to 26th February 2011, the
   second would be 27th February 2011 to 26th March 2011 etc). If your Monthly
   Anniversary does not exist in a particular month the Monthly Anniversary date
   will be the final day of the month. For example if you open your account on 31st
   January 2011, your first Bonus Qualifying Period will end on 28th February 2011

So from my understanding, if you pay in between the min and max, and make no withdrawals in a "month" then you should be getting the equivalent 2.98% rate of interest that month, not just at the end of a year.

mf78

I also opened up one of these and interpreted it to work like the OP did. I'll see soon, as my first month "anniversary" is coming up in the next few days. But to me, its as clear as day in their own terms on the website which I quoted above.

Edit: I just logged on and found that today was my the end of my first month and the initial interest has been added. Although it doesn't state it anywhere, 10 minutes with a calculator (I made several deposits within the month so had to work out interest per day for both 1.98% and 2.98%) has shown they have actually given me the 2.98% on this months interest, so have included the bonus rate. As I expected them to!

dzug1

vpdanas wrote: »

Clearly states it pays 3% EACH MONTH (2.98%) !?!?!?

What am I not getting cuz I ain't a pro on savings etc etc

What you are not getting is that the 3% (2.98) is not a monthly rate, but the annual rate that is split up into chunks and paid monthly

Herbalus

mf78 wrote: »

From their website:

So from my understanding, if you pay in between the min and max, and make no withdrawals in a "month" then you should be getting the 2.98% in interest that month, not at the end of a year.

It also says AER at the end, which means 3% is the Annual Equivalent Rate. Which means you get a total of 3% over the entire year. As there are 12 months in a year, you will get 2.98% divided by 12. (the reason it is 2.98% is because of compounding i.e. in February you get interest on the interest paid in January.

You will not get 3% or 2.98% on your whole balance in month 1. You will get that amount divided by 12.