NS&I - Direct Savings vs Income bonds

AmityNeon

Eco_Miser said:

AmityNeon said:

Eco_Miser said:

AmityNeon said:

ColdIron said:

AmityNeon said:

2.63% AER for the Income Bonds is possible because despite interest being paid away, you can just transfer it back into the account.

Not easily

All deposits must be at least £500, from a UK bank account in your own name.

https://www.nsandi.com/products/income-bonds

Not easily, but it's still possible, and probably why they advertise the higher AER.

They probably advertise the higher AER because it's a legal requirement, even if the AER isn't possible in practice, cf. accounts where interest is paid only on the first £x, so interest on the full amount won't compound.

It is actually a legal requirement? Some banks do not quote AER figures, such as Union Bank of India, which is preferable if the AER cannot be achieved, otherwise it's a misleading comparison and defeats its purpose as a standardised metric.

I don't actually know, which is why I say 'probably', but in the example I gave, while the AER can't be achieved on the full allowable amount, it can be achieved on smaller amounts, so it is serving its purpose as a standardised metric.

Your 'probably' was in relation to NS&I's advertising of AER, not AER being a legal requirement. The purpose of my example, re. Union Bank of India not advertising AER on its fixed-term bonds, was to demonstrate a regulated institution being legally compelled to advertise an AER that would be misleading and not fit for purpose, potentially breaking the law whilst endeavouring to remain accurate in its advertising.