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MetroBank 18-Month Fixed Rate Account

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alanq
alanq Posts: 4,216 Forumite
1,000 Posts Combo Breaker
edited 21 September 2013 at 10:48AM in Savings & investments
In September 2012 I opened a MetroBank 3.15% 18-Month Fixed Rate Account. I was offered interest paid "monthly" or "annually" and opted for "annually". Over 12 months later no interest has been paid away to my Instant Access Account (as it should have been) nor has any been added to the balance of the account. On enquiring I have been informed that for this account "annually" and "yearly" in fact mean "on maturity". I am complaining because nowhere in the documentation that I have seen is interest "on maturity" mentioned.

Has anyone else here ever seen such documentation or experienced this issue?

Online banking shows, for information, an amount of interest that the account will earn in total. This amount is equivalent to daily interest due * days between the account being opened and date of maturity. So it seems that not only has interest not been paid away but also no compounding will occur.

Apart from delayed access to ones interest the difference between "annually" and "on maturity" could affect someone's tax planning by paying all of the interest in one tax year when they were expecting to get two payments in different tax years. (Tax planning was not an issue for me as I was expecting payments in September 2013 and March 2014 which are in the same tax year.)

ETA Link to details of current fixed term/fixed rate accounts. Still no mention of interest paid "on maturity" that I can find.
https://www.metrobankonline.co.uk/Personal/Savings/Fixed-Term-Savings12/

Comments

  • ColdIron
    ColdIron Posts: 9,851 Forumite
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    I'm not sure this helps much but I took out an 18 month fix with MB and was offered monthly or annual interest. I asked if I could have it paid on maturity, he said yes and I inferred that there were 3 options though he did not expressly offer 3

    I can see nothing in the documentation relating to this although 'Fixed rates of interest Interest paid monthly or annually' leaves little scope for interpretation

    I don't think compounding is an issue as all fixes I have ever taken out pay money into your nominated account rather than increase the original amount. Although as you say this could have implications for tax planning in some circumstances
  • G_M
    G_M Posts: 51,977 Forumite
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    ColdIron wrote: »
    ...

    I don't think compounding is an issue as all fixes I have ever taken out pay money into your nominated account rather than increase the original amount. Although as you say this could have implications for tax planning in some circumstances
    Of course compounding is an issue. Just because the interest is not compounded within the account itself does not mean you cannot compound it elsewhere...

    If the interest is received by you earlier, you can re-invest it and.... compound.
  • opinions4u
    opinions4u Posts: 19,411 Forumite
    edited 21 September 2013 at 12:58PM
    Just because interest isn't added annually doesn't mean that there isn't a compounding effect calculated in on maturity.

    Before you go off on one, establish what they will pay you at the end of the term.

    Reading the documentation you've linked, I agree with your expectation to see an interest credit to the account this month.
  • alanq
    alanq Posts: 4,216 Forumite
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    edited 21 September 2013 at 2:42PM
    opinions4u wrote: »
    Just because interest isn't added annually doesn't mean that there isn't a compounding effect calculated in on maturity.
    As initially stated I have performed my own calculation and the projected interest payment appears not to include any compounding.
    opinions4u wrote: »
    Before you go off on one, establish what they will pay you at the end of the term.
    Have I given any reason to suspect that I am about to "go off on one". Did you read G_M's post as from me?
    opinions4u wrote: »
    Reading the documentation you've linked, I agree with your expectation to see an interest credit to the account this month.

    As initially stated my expectation was that as per Ts&Cs interest would be paid FROM the account into the linked Instant Access account on the anniversary of the account being opened and therefore compounding would not be an issue. Only because this did not happen am I questioning how the projected interest payment would be calculated as things stand.
  • alanq
    alanq Posts: 4,216 Forumite
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    ColdIron wrote: »
    I don't think compounding is an issue as all fixes I have ever taken out pay money into your nominated account rather than increase the original amount.

    In my experience with many providers it is not uncommon to at least have the option of leaving interest interest to compound in fixed rate accounts.

    Other providers including MetroBank insist that interest is paid away. I agree that when this happens the question of compounding does not arise. The issue arises when this does not happen in practice.
  • alanq
    alanq Posts: 4,216 Forumite
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    Having been told that "annual" interest on an 18-month account is only paid on maturity it was then suggested by someone at MetroBank that perhaps annually meant end of year (in which case why no interest at the end of 2012? I accept that annual interest can mean yearly on a given date IF that is specified in the Ts&Cs).

    Finally MetroBank has acknowledged that interest should have been paid on the anniversary of opening and it is working on its computer systems to correct the issue. I cannot believe that I am the only one who has opened an 18-month account without taking monthly interest so am at a loss to understand why it seems I am the first to bring this issue to the Bank's attention.
  • ColdIron
    ColdIron Posts: 9,851 Forumite
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    alanq
    As I mentioned I also have an 18 month fix although I requested interest on maturity. I took this issue up with MB on Saturday anyway just to be clear about the situation and the person I spoke to didn't really know anything and said I should speak to the fixed interest dept who don't work weekends. I got a phone call from them today and the chap I spoke to confirmed that there is no annual (or yearly or upon anniversary etc) interest despite this being clearly stated in the T&Cs. He apologised on behalf of MB and is looking into the interest compounding issue. He said he would phone back before 18:30 tonight, he has 20 minutes left

    I'll post a follow-up once I hear from them
  • alanq
    alanq Posts: 4,216 Forumite
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    I've just had a phone call informing me that my interest has been belatedly credited to my account + £20 which was the amount I had in mind to demand for a brief delay had no offer been made.

    Credit to MetroBank in fixing the issue quickly once it accepted that there was one but it took a too long and a lot of speculation and misinformation before it got to that stage. As to how the situation could have been allowed to arise in the first place...!

    I have been informed that new 18-month accounts with "annual" interest will in future get interest credited on the first anniversary of the account being opened. I suggest that anyone who has already had such an account checks their interest calculation.
  • alanq
    alanq Posts: 4,216 Forumite
    1,000 Posts Combo Breaker
    So much for assurances! I have just discovered that the bond that I opened in January 2014, four months after the above incident, had the same problem.

    I have once again been informed that the problem is fixed and more recent 18-month bonds do not suffer from this problem. The problem I was told was that the bond was set up in error for interest on maturity. Given that the only options offered to the customer are monthly and annual interest it seems a software error rather than an error by a member of staff opening the account.

    I was told that the bank had been dealing with a number of people with the same issue. Given that, why did it not trawl through all the 18-month accounts and take action for any set for interest only on maturity? It should not be left to the customer to complain. The projected interest on my account due at maturity equated to the amount for simple interest.
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