Interest Calculation

Archi_Bald

LittleVoice wrote: »

That was simply the first in a list of their savings account - Instant Access Saver. You will find, I expect, that it applies to all their accounts but do say if you find one which is different.

I had several FlexDirects and a cash ISA, and I have a Regular Saver and a FlexPlus. Admittedly the FlexDirects always had exactly £2,500 in them at the end of each day so I can't swear that they'd pay interest on the balance but all the other accounts paid/pay on the entire balance. There is nothing in the T&Cs for these accounts that suggests any different.

polymaff

LittleVoice wrote: »

Point 8 of http://www.nationwide.co.uk/~/media/MainSite/documents/products/savings/terms-and-conditions/P2766.pdf
"We will calculate interest on each whole pound in the account."

It's fascinating when someone counters all of our assumptions - and show us that those assumptions are false. Many thanks. I've checked back over some Nationwide accounts I've held. Of the few that had penny balances, the interest was a penny or two MORE than expected - so I'm baffled.

LittleVoice

Archi_Bald wrote: »

I had several FlexDirects and a cash ISA, and I have a Regular Saver and a FlexPlus. Admittedly the FlexDirects always had exactly £2,500 in them at the end of each day so I can't swear that they'd pay interest on the balance but all the other accounts paid/pay on the entire balance. There is nothing in the T&Cs for these accounts that suggests any different.

Not an exhaustive list but the "whole pounds" term is included for Flexone Regular Saver, Limited Access Saver, Loyalty Saver, Flexclusive ISA, Regular Saver ISA, Instant Access Saver, Instant ISA Saver, Easy Access (a savings account), Flexclusive Regular Saver, Fixed Term E-Bond Maturity, Monthly Saver, Direct Easy Access.


So far it is reported as not mentioned for FlexDirect or FlexPlus current accounts or the Regular Saver.

polymaff

buffman wrote: »

If I have £1000 in a fixed rate bond with AER 3% net paid quarterly over 2 years, what will my balance be at the end of the 2 years?

Is the calcuation simply (£1000 x 1.03) x 1.03 = £1060.90 or does the paid quartley alter the calculation?

Your "principal times factor-to-the-power-of-years" calculation will probably be within some tens of pence of the correct figure

and, maybe within some pounds of the likely final payout.

colsten

How are Nationwide establishing "whole pounds"?

polymaff

I've been looking at how accounts I have with other organisations than Nationwide which have balances including pennies have paid interest. So far, they all seem to pay on the whole balance.

Anyone who does face-to-face business with Nationwide cannot help but notice how saintly they see themselves to be - relative to the BSs who sold their souls to the devil and incorporated as companies. Members and all that.

How well does this image fit an organisation that applies - and, admittedly, documents - an unexpected approach to computation that impacts upon the headlined AERs?

A kiddy puts £9.50 in a "Smart Junior ISA" with a 3.25% AER. At the end of the year, said kiddy expects 3.25% of £9.50 - and, apparently, actually receives just under 3.08%?

Quote Nationwide:

"A great rate of 3.25% AER tax-free variable

Smart pays the same interest rate on every pound in your account, making saving simpler"


Live and learn!

PeacefulWaters

buffman wrote: »

If I have £1000 in a fixed rate bond with AER 3% net paid quarterly over 2 years, what will my balance be at the end of the 2 years?

Is the calcuation simply (£1000 x 1.03) x 1.03 = £1060.90 or does the paid quartley alter the calculation?

A 3% AER paid quarterly works out at 0.7417% per quarter gross. With a tax deduction of 20% this becomes 0.5934%.

£1,000 plus 8 quarterly compounding payments at this rate becomes £1,048.47.

Hopefully.

polymaff

PeacefulWaters wrote: »

A 3% AER paid quarterly works out at 0.7417% per quarter gross. With a tax deduction of 20% this becomes 0.5934%.

£1,000 plus 8 quarterly compounding payments at this rate becomes £1,048.47.

Hopefully.

I think that you have made the mistake I almost did. He's quoting a "net" rate. I earlier wrote - then deleted - a "wall of words" about this.

PeacefulWaters

polymaff wrote: »

I think that you have made the mistake I almost did. He's quoting a "net" rate. I earlier wrote - then deleted - a "wall of words" about this.

Well there's no such thing as a net AER.

A rate is either gross, net or AER.

I've made an assumption that it's an AER of 3%.

buffman wrote: »

If I have £1000 in a fixed rate bond with AER 3% net paid quarterly over 2 years, what will my balance be at the end of the 2 years?

What's the gross rate?

What's the net rate?

What's the AER?

There should be a value for all these.

polymaff

PeacefulWaters wrote: »

Well there's no such thing as a net AER.

A rate is either gross, net or AER.

I've made an assumption that it's an AER of 3%..

That is a good summary of the first paragraph of my "wall of words".

Then I followed on on the basis that he really meant what we all mean by 3% AER. We'll see.