Fixed Bond Paying at Maturity but NOT Compounded?

refluxer

claudebutler said:

Please can Moneysaving Expert indicate whether recommended accounts are compound interest or not? I have a Close Brothers fixed bond which I've just discovered does not pay compound interest. So although its headline rate over 5 years is 4.45%, that's equivalent to 4.09% with compound interest. You have to burrow into the terms to find this out, and to clock that when it says 'Interest is paid annually into your nominated bank account' that isn't an option, that is what it does, so by the end of the term, you have the same capital sum as when you started. This is very disappointing, and neither MSE or the Daily Telegraph piece that also recommended the bond pointed this out. 

As stated above, if the account pays 4.45% gross PA / AER then that's what you'll get each year. Had you been allowed to pay the interest into the same account, then 4.45% compounded over 5 years would have given you an overall return of around 4.86% but this isn't an option with the Close Brothers fixed rate bonds.

To be fair to Close Brothers, they do state that 'interest is payable annually and at maturity into your nominated bank account' and that the 'interest is not compounded' near the top of the main product page (it's not hidden away in the T&Cs as you said) but I do agree that it would be useful if MSE highlighted this in their top tables, as the majority of fixed rate bonds do not limit you to only having the option to have the interest paid away.

Bigwheels1111

From looking into a lot of fixed rate accounts I found it made very clear on how internet is paid, ie compounded or paid away.
A few like QIB worked out the interest each year and paid at maturity but interest was not compounded.
Paid Away each year suited me for tax purposes.