Charges for regular saver withdrawal.

housebuyer143

Can someone explain what this means:

"This account is designed for saving your money. After the 14 day ‘cooling-off period’, you can take out money or close your account if you need to, but there will be a charge equal to 30 calendar days’ interest on the amount withdrawn. Notice for withdrawal/closure cannot be given. The charge will be deducted from the balance of the account at the time of the withdrawal".

Does that mean I forfeit the interest I would have gained on the amount withdrawn or I don't get the interest and also get penalized?

AmityNeon

You pay only 30 days' interest on the amount withdrawn, which is a penalty, and that's it; you do not specifically forfeit interest earned beyond what you have to pay as a penalty.

E.g. £1,800 saved after six months of £300 deposits into a Regular Saver paying 5.00% gross/AER, and you withdraw £600:

• £600 × 0.05 = £30
• £30 x (30 ÷ 365) = £2.47

The penalty is £2.47 which is deducted from the account balance at the time of withdrawal, which will marginally reduce further interest earned.

eskbanker

housebuyer143 said:

Does that mean I forfeit the interest I would have gained on the amount withdrawn or I don't get the interest and also get penalized?

Neither - it's a penalty but not a forfeit and means that they deduct 30 days worth of interest from the withdrawn amount, but you would get the interest accrued up to that point, so if you withdrew the whole balance after 30 days you'd get back exactly what you paid in.  If you withdrew before 30 days you'd get back less than you paid in, or after more than 30 days then you'd be ahead....

Middle_of_the_Road

...there will be a charge equal to 30 calendar days’ interest on the amount withdrawn.

You will get all the interest on the remaining money in the account.
You will get 30 days less interest on any money you withdraw.

As to how these conditions affect you, it depends on how much is in the account, how long it's been there, and how much you need to withdraw.

MDMD

And also note that if the penalty is a charge rather than a reduction in the interest paid then if a non ISA account you may still have to pay tax on the full amount as there is no tax deduction for bank charges for individuals

Middle_of_the_Road

MDMD said:

And also note that if the penalty is a charge rather than a reduction in the interest paid then if a non ISA account you may still have to pay tax on the full amount as there is no tax deduction for bank charges for individuals

With this being the case, hopefully the provider will show full the interest as being paid, and also the associated charge for withdrawal.

badger09

Middle_of_the_Road said:

MDMD said:

And also note that if the penalty is a charge rather than a reduction in the interest paid then if a non ISA account you may still have to pay tax on the full amount as there is no tax deduction for bank charges for individuals

With this being the case, hopefully the provider will show full the interest as being paid, and also the associated charge for withdrawal.

Why ‘hopefully’? 

As MDMD said, if it is a charge, (rather than a reduction in interest) it would not be an allowable deduction to set against the full amount of interest. 

Middle_of_the_Road

badger09 said:

Middle_of_the_Road said:

MDMD said:

And also note that if the penalty is a charge rather than a reduction in the interest paid then if a non ISA account you may still have to pay tax on the full amount as there is no tax deduction for bank charges for individuals

With this being the case, hopefully the provider will show full the interest as being paid, and also the associated charge for withdrawal.

Why ‘hopefully’? 

As MDMD said, if it is a charge, (rather than a reduction in interest) it would not be an allowable deduction to set against the full amount of interest. 

What I was trying to understand was if they would show the full interest as paid, or reduced interest.

If you need to pay tax on the full amount, and they showed an amount of interest with a reduction for the withdrawal, you would likely use that lower figure in your tax return.