Incomprehensible Cheshire ISA interest rates

G_M

Can anyone expain the rates for the historic account "ISA Saver (issue 1).

http://www.thecheshire.co.uk/uploadedFiles/Resources/Documents/Savings-rate-history.pdf

For each rate period from 14/12/12 to 1/5/14 the 'Tax free' rate for £1000+ is shown as 2.5%.

However the AER varies greatly for each period, from 1% to 2.5%.

How can this be?

Gromitt

Probably because the account has a varying bonus period, so depending on when you opened the account you would have a different AER.

Ie, 12 months @ 2.5% could be 2.5% AER
But 11 months @ 2.5% and 1 month @ 1% would be slightly less AER,
and so on, but if you opened your account mid-term, you would get the 2.5% rate for slightly longer due to the bonus period.

Seems completely logical to me?

G_M

I can see that my AER might vary depending on opening date and bonus, but they advertise the 'tax free rate' as 2.5 without reference to the bonus, so surely the corresponsing AER should be based on that ie... 2.5?

Gromitt

G_M wrote: »

I can see that my AER might vary depending on opening date and bonus, but they advertise the 'tax free rate' as 2.5 without reference to the bonus, so surely the corresponsing AER should be based on that ie... 2.5?

It states quite clearly "Includes a 2.00% fixed bonus until 31 July 2014". So the only way of getting an AER of 2.5% is if you got 2.5% for 12 months.