The Top Easy Access Savings Discussion Area

TiVo_Lad

BooJewels said:

Not sure why Income Bonds display the AER as 2.89%, when the very nature of the product is that the interest gets paid out monthly, so AER doesn't apply (hence I noticed 2.63% yesterday when it was really 2.6%, it hadn't actually changed).  Is this one of those regulations where they have to display a theoretical AER in order that customers can compare products?

AER stands for annual equivalent rate and represents how much you would earn if you put your money in a savings account and didn't touch it for a year.

BooJewels

Thanks @TiVo_Lad - I do actually know how to work out interest of different sorts, what I was asking was why NS&I only display the AER on Income Bonds, a product that only pays out to a separate account interest monthly, where AER doesn't apply in the compounding sense - for that sort of account.

General_Grant

BooJewels said:

Thanks @TiVo_Lad - I do actually know how to work out interest of different sorts, what I was asking was why NS&I only display the AER on Income Bonds, a product that only pays out to a separate account interest monthly, where AER doesn't apply in the compounding sense - for that sort of account.

For the instance you mention, I would expect that the AER is the rate if it were possible to add the interest back into the bond each month when it is paid out.  Absolutely just a guess!!

jak22

I'd imagine they're obliged to show AER for any savings product so it's more of an oversight to have omitted the gross rate on monthly - but that figure seems to be optional anyway as many apps etc only show an AER even when interest is paid monthly.

On https://nsandi-corporate.com/news-research/news/nsi-gives-valentines-day-boost-savers a gross rate is quoted for Income Bonds.

That link also has the prize breakdown for Premium Bonds - and the new rate makes all those EA accounts still paying well under 3% look even meaner. 

poppystar

BooJewels said:

Thanks @TiVo_Lad - I do actually know how to work out interest of different sorts, what I was asking was why NS&I only display the AER on Income Bonds, a product that only pays out to a separate account interest monthly, where AER doesn't apply in the compounding sense - for that sort of account.

I think they only have to show it where AER and gross interest differ. With the Direct Saving account they will be the same. In other words you’d get more interest if you did reinvest the Income Bond interest back (not possible unless getting £500 a month🙄) or elsewhere over what you would get in the Direct Saver account during the year. In your case that extra 0.04% is what your hols money could earn😉🍦

RG2015

There is a formula to convert AER to gross (and vice versa) which I am sure applies to all savings accounts.

Many banks, and NS&I here, are lax in publishing both rates and sometimes stating AER when they mean gross (and vice versa).

For easy access accounts I mostly prefer monthly interest so I prefer gross as it equates to what I actually get. Clearly though an annual account will actually get AER so in that I case I use AER.

A year or so back with rates so low it made virtually no difference. Now there is a much larger difference.

Yes, the AER does allow direct comparison, but it does in some cases give misleading information. As ever you need to do your own research. 

Band7

poppystar said:

BooJewels said:

Thanks @TiVo_Lad - I do actually know how to work out interest of different sorts, what I was asking was why NS&I only display the AER on Income Bonds, a product that only pays out to a separate account interest monthly, where AER doesn't apply in the compounding sense - for that sort of account.

I think they only have to show it where AER and gross interest differ. With the Direct Saving account they will be the same. In other words you’d get more interest if you did reinvest the Income Bond interest back (not possible unless getting £500 a month🙄) 

You could reinvest the monthly interest by topping it up to £500 and then deposit the £500. Though you would probably not use the Income Bonds if you intended to re-deposit the interest - - - - and you might then even choose a different account(s) altogether because 2.89% isn't exactly stellar.

poppystar

Band7 said:

poppystar said:

BooJewels said:

Thanks @TiVo_Lad - I do actually know how to work out interest of different sorts, what I was asking was why NS&I only display the AER on Income Bonds, a product that only pays out to a separate account interest monthly, where AER doesn't apply in the compounding sense - for that sort of account.

I think they only have to show it where AER and gross interest differ. With the Direct Saving account they will be the same. In other words you’d get more interest if you did reinvest the Income Bond interest back (not possible unless getting £500 a month🙄) 

You could reinvest the monthly interest by topping it up to £500 and then deposit the £500. Though you would probably not use the Income Bonds if you intended to re-deposit the interest - - - - and you might then even choose a different account(s) altogether because 2.89% isn't exactly stellar.

…and assuming you have enough easy access cash to do the top up!

BooJewels

I promise you that I do understand the difference between gross and AER etc., I was only querying why a product that only pays gross monthly interest only displays the interest as the AER - I just wondered if it was some regulatory requirement.  I'm also not sure that it always has either - the 2.63% yesterday caught my eye - when I knew I was getting 2.6%.  Most monthly interest paying accounts display either the gross, or both, i.e. Interest 2.85% (2.89% AER).  

I just put my interest into a higher paying EA account, so that the principle remains and indeed @poppystar it is reinvested for my ice cream funds - or as I'm going to Switzerland this year; beer, rösti and apfelkuchen.  For what it's worth, me, beer and getting into moving cable cars don't mix well.

Nova1307

Based on previous BoE rate adjustments do we expect Al Rayan to increase their rate from 2.81% or is it unpredicatable?