Post Office savings Account Last Used In 1966

victoriajj

Hi, I don't know if this is the right forum to post my question on but hopefully the forum moderators will move it if not.

My Mother-In-Law died last year at the age of 93. Among her papers was a Post Office Savings Book, Opened in 1937 & last used in 1966. There was a balance of 49 pounds 4 shillings & 11 pence. My husband sent the book to NS&I & they have sent a cheque for £154.09.

My husband phoned NS&I to ask how they had arrived at this amount, which we think is low & was told they could not tell him & he would have to write in.

My question is, does anyone know how to find or work out what the amount should be using the historical interest rates.

Thank you in advance

bowlhead99

victoriajj wrote: »

Hi, I don't know if this is the right forum to post my question on but hopefully the forum moderators will move it if not.

My Mother-In-Law died last year at the age of 93. Among her papers was a Post Office Savings Book, Opened in 1937 & last used in 1966. There was a balance of 49 pounds 4 shillings & 11 pence. My husband sent the book to NS&I & they have sent a cheque for £154.09.

My husband phoned NS&I to ask how they had arrived at this amount, which we think is low & was told they could not tell him & he would have to write in.

Well, if you think it is low, how much do you think you would like to have? And what evidence have you got for what the lowest-paying post office account has been paying for the last 50 years? Obviously, if there is more than one account available from the post office or their succesor, she would be on the lowest-paying account rather than the top-paying account because she has not made any attempt to keep track of, or sign up for, any good accounts or promotional deals.

If you do the maths, taking £49.25 and receiving 2.3% interest on it after a year, and then taking the resulting £50.38 at the start of year two and receiving 2.3% on it after another year, and then taking the resulting £51.54 at the start of year three and receiving 2.3% on it after another year, and then taking the resulting £52.72 and..... for fifty years in a row, you would get to £154. So the effective compound interest rate she has received over the half century is 2.3%.

At some points in history, the interest rates would have been 5% or more - even 10% was available. But probably not in a dormant post office account that didn't get touched. At the moment, national savings pays 0.1% a year on a "residual account", i.e. an account which was closed and accountholder couldn't be traced to return the money. Presumably your M-I-L did not have her account closed if she had stayed at the same address, but it would still have been in the least competitive account. As an example, Post Office Money's "Instant Saver" account pays 1.2% a year - but that includes a bonus of 1.1% for the first year for new accounts opened, so that after 12 months it falls back to the normal rate of 0.1%.

So, your MIL's account was probably not really earning 2.3% year in, year out... but more likely more than 2.3% at some times and then 0.1% for a long time.

But the effective compound rate over the period was 2.3%. Presumably, after tax deducted at source. Hopefully HMRC will not still need to chase her for taxes on the £100 of interest she earned over the period.

If you have any evidence whatsoever that the interest properly payable on the account should be higher than the amount you received - when the person whose account it was did not care about it, did not keep any records, and did not bother to tell you about it before popping their clogs - then you should perhaps pursue it. As you don't, I recommend you do not spend your time writing the letter or spending part of your £154 windfall on buying a stamp.

As a side note, according to RPI figures, £49.25 in 1966 would buy the same as £849 today. If your mother in law had wanted to preserve the buying power of her money, she should have invested it in something useful which would keep up with inflation. Bank accounts are designed for keeping money safe in the short term with zero risk, and do not have the objective of getting a return that keeps up with inflation in the long term. If you and your husband are the kind of people who expect that money in an account should magically keep up with inflation over very long periods, it might be worth taking a reality check and looking at how your own money is invested - to avoid nasty surprises when you are older and your own offspring are looking for a payout.

Keep_pedalling

The amount received seems about right, not worth spending any more time on really.

Sam_J12

The amount seems about right to me. Nobody here can say much more than that really - you will need to write in and ask.

If you do write, remember to come back here and post. I would be quite interested to see how they do this!

kidmugsy

The swine still owe me a couple of bob just because I can't be bothered to ask for it back. And we still have a few cents in an account in NZ. And Barclays; they still have several pence in an account of ours.

alanq

That account would have been with "Post Office Savings Bank" which became "National Savings" then "National Savings & Investments". Current "Post Office" accounts are rebranded accounts of Bank Of Ireland (UK). The current NS&I instant access account called "Investment Account" is paying 0.75%.

As I recall the first £x of interest on National Savings Ordinary(?) accounts was tax-free so that may apply to the account being discussed for at least some of its existence.

alanq

bowlhead99 wrote: »

If you do the maths, taking £49.25 and receiving 2.3% interest on it after a year, and then taking the resulting £50.38 at the start of year two and receiving 2.3% on it after another year, and then taking the resulting £51.54 at the start of year three and receiving 2.3% on it after another year, and then taking the resulting £52.72 and..... for fifty years in a row, you would get to £154. So the effective compound interest rate she has received over the half century is 2.3%.

[STRIKE]That assumes that the £154.09 cheque was just interest. and did not include the original £49.25.[/STRIKE]
It does nothing of the sort. My mistake.:o

bowlhead99

alanq wrote: »

That assumes that the £154.09 cheque was just interest. and did not include the original £49.25.

£49.25 * 1.023^50 is £153.53. So (roughly) £154 is what you get back as a cheque in total, including the £49.25 original deposit, if you invest £49.25 at 2.3% for fifty years compounded annually.

The £49.25 on its own would earn a bit more than a pound a year interest. But obviously after a few years you are earning money on the interest from all the previous years as well as on the original £49.25. As the pounds are added to the pot, you theoretically have about £150 going into the last year and at 2.3% you earn £3.45 for that year taking you up to nearly £154. So you've made more than £100 of interest even though you only started off getting a little over a pound a year and have only been going for 50 years. The power of compounding.

Obviously in reality she is not getting a uniform 2.3% a year and probably didn't get 2.3% in the last year earning £3.45. She probably got the 0.1% bare minimum attributable to holding an expired product, having earned most of her interest ages ago. But the total amount taken out of £154 is the same as if she had got a smooth 2.3% every year.

But you don't get £154 *and* the £49.25. The £49.25 is included - it's what grew into the £154.

Am I missing something?

alanq

bowlhead99 wrote: »

Am I missing something?

No but I was. Sorry Bowlhead. You were clear. I on the other hand must have been fatigued to have misunderstood.

bowlhead99

alanq wrote: »

I on the other hand must have been fatigued to have misunderstood.

Ah, a bit of the old "Saturday evening fatigue" setting in, I know that one

https://en.wikipedia.org/wiki/Tired_and_emotional
:beer: