NS&I ISA: interest isn't monthly!

RowaN

Last month I opened an NS&I "Direct ISA" as recommended here:

www.moneysavingexpert.com/savings/best-cash-isa#best

I've had an ISA before with a different company, and it would get monthly interest. I thought the benefit of that is that every month you're getting interest on an ever growing sum (assuming you leave the aquired interest in there).

However, I e-mailed NS&I to ask on what day of the month interest would get added and they said none of the interest will get added until April 2008! Is this standard procedure? Surely its not good that each month interest is only being calculated from my initial deposit, rather than from what would be a growing sum of money.

Have I got the wrong end of the stick? Someone help me please.

debbie42

It's the overall AER that you should use to compare rates. Some accounts do offer monthly interest, but the gross rate is normally lower to take into account the compounding effect that yearly interest accounts do not have. So, as long as you are happy with the AER, don't worry, you aren't losing out.

Aegis

Interest is added monthly but calculated daily if I remember correctly. As such, you're not missing out at all.

RowaN

Wow thanks for the fast replies guys. I think I jumped the gun a bit because what NS&I actually said to me was:

While the interest on your National Savings and Investments Direct ISA is accruing on a daily basis, it is not physically added to your account until the close of business on the 5th April 2008.

..I want to ask them what happens to this virtual interest if I decide to take all my money out before 5th April 2008.. hopefully I get what I'm owed.. I wasnt aware that I was being tied into any specific period when I opened this account.. but then again you never know with all the miles of smallprint.

ManAtHome

You're not tied in - interest is quietly rolling up, but only credited each 5th of April. If you close your account, you'll get the interest due up to the date of closure. (should be the last savings account you close though... unless you've stopped paying tax).

debbie42

Just to second what ManAtHome has said: it's normally the same with any of these annually paying accounts. If you close them then they calculate and add the interest on closure.

It may vary sometimes with the different t&c, e.g. the YBS regular saver has a bonus that only gets added if you meet certain requirements for the year. If you closed this early then you'd get the lesser rate without the bonus. Cash ISAs are normally more straightforwards though.

Mikeyorks

RowaN wrote: »

Have I got the wrong end of the stick?

Yep .... definitely the end that's been in the cow pat.;)

Interest is calculated daily, so it's compounded, but it's only added to the account in April .... which basically is what they've told you?

Alternatively ... it is added at the time you close / transfer the ISA. And, as the previous post - you're not tied in. But ISA products are designed to be kept - not discarded after a couple of months