Monthly interest less than last month, ISA balance actually gone up

Zuzi
Zuzi Posts: 205
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edited 14 November 2023 at 9:02PM in ISAs & tax-free savings
I am curious whether anyone knowledgeable and willing to help will know... I am planning to call the bank tomorrow and will update with what they tell me.

I opened a Lloyds fixed rate cash ISA earlier this year, and funded it via two transfers in. I opted for monthly interest paid into an external account (ETA - via a standing order)

First interest payment was mid Sept - 149.75 pounds
Second mid Oct - 144.57
Third Nov 13th - 133.79 

Both transfers completed in September and I am not querying the first amount, however what can the reason be for the Nov interest being less than October? There were no withdrawals from the ISA during this period, in fact in November (ca 10 days before the interest payout) additional 10K were transferred in, so there's about 36K in the ISA now. Let's ignore the amount added in November for now - how come the November interest is less than the month before?

My interest rate is 5.37% tax free, 5.50% AER and as the name of the ISA says, it should be fixed. 
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  • jimjames
    jimjames Posts: 17,489
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    Number of days interest was different in each month? You say mid month but if that's a different date then number of days used for the calculation will vary.
    Remember the saying: if it looks too good to be true it almost certainly is.
  • Hi,
    mid Oct would be 16th, Nov payment 13th, so not a full month.
    Interest is usually calculated daily.
  • Nikkster
    Nikkster Posts: 6,389
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    jimjames said:
    Number of days interest was different in each month? You say mid month but if that's a different date then number of days used for the calculation will vary.
    It can also depend if the interest date gell on a weekend - eg its credited on a Monday bit was actually calculated on say Saturday so appears to be a day or two short (this has happened with my ISA)
  • Zuzi
    Zuzi Posts: 205
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    Nikkster said:
    jimjames said:
    Number of days interest was different in each month? You say mid month but if that's a different date then number of days used for the calculation will vary.
    It can also depend if the interest date gell on a weekend - eg its credited on a Monday bit was actually calculated on say Saturday so appears to be a day or two short (this has happened with my ISA)
    I think this will be it... although, if a few days' difference can have such an impact, I would also think that a ~25K balance growing by 10K would counteract that somewhat and increase the interest. I'm sure there is a perfectly logical and innocent explanation.
  • frugalmacdugal
    frugalmacdugal Posts: 10,077
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    edited 15 November 2023 at 3:46PM
    Hi,
    Zuzi said:
    Nikkster said:
    jimjames said:
    Number of days interest was different in each month? You say mid month but if that's a different date then number of days used for the calculation will vary.
    It can also depend if the interest date gell on a weekend - eg its credited on a Monday bit was actually calculated on say Saturday so appears to be a day or two short (this has happened with my ISA)
    I think this will be it... although, if a few days' difference can have such an impact, I would also think that a ~25K balance growing by 10K would counteract that somewhat and increase the interest. I'm sure there is a perfectly logical and innocent explanation.
    you don't seem convinced,
    You said,
    First interest payment was mid Sept - 149.75 pounds
    Second mid Oct - 144.57
    Third Nov 13th - 133.79
    Mid month, and about ~25K, then + 10K added mid mid month, doesn't help calculation, so no actual details.
    If you give exact dates and end of month balance, some whizz kid here will crunch the numbers for you.
    Do you think you are being cheated from interest?



  • Zuzi
    Zuzi Posts: 205
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    No, I don't think I am being cheated, I just expected last interest payment to be higher than the one before, that's all.

    I spent an hour on the phone (mostly on hold) to Lloyds today, and the outcome of it was that the very nice lady who picked up the phone consulted several other colleagues but in the end still didn't have an answer and logged "a complaint" so that someone can look into it properly.

    I used an interest calculator afterwards (should really have done it beforehand) and I am starting to think that the October interest was an overpayment of some sort, the balance then was 24,850.17 pounds and that works out as around 110 pounds interest and not the 140+ I actually got. I don't know why they would have done that since I expected all potentially backdated interest from the transfer in etc to have been paid out in Sept, and I did not check the October amount when I first got it.

    My only source of irritation was the unexpected downward trend between the last two payments, that's all. 
  • Zuzi said:
    I opened a Lloyds fixed rate cash ISA earlier this year, and funded it via two transfers in. ... Both transfers completed in September and I am not querying the first amount...

    Any reason why not? At a rate of 5.37%, a balance of £24,850.17 generates daily interest of £3.656, so a mid-September interest payment of £149.75 should be impossible considering the two transfers forming the balance were only completed earlier that same month.

    October's interest should be approximately: £24,850.17 * 5.37% * 30/365 = £109.68.

    November's interest should be approximately equal to 21 days of the lower balance plus 10 days of the current balance:

    £24,850.17 * 5.37% * 21/365 = £76.78
    £34,850.17 * 5.37% * 10/365 = £51.27
    £76.78 + £51.27 = £128.05
  • masonic
    masonic Posts: 22,824
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    edited 17 November 2023 at 5:14PM
    I was looking forward to an update following your phonecall with the bank, as something doesn't seem right about the details you've provided. It is interesting that so far you've had no joy.
  • Zuzi
    Zuzi Posts: 205
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    I heard from the Lloyds complaint team today. The last payment (which my "complaint" was about) was 21 days at 24.850,17 and 10 days at 35.230,28 and the corresponding interest apparently comes to within pence of what I got (I have not double-checked but it makes sense)

    The person I spoke to said he did not look at the previous (October) interest payment as closely, when I explained that I am pretty sure that it was higher than it should have been mathematically - 24.850,17 pounds at 5.37% rate will not yield 144 pounds.

    @AmityNeon your calculation is spot on I think, my transfer in at the start of Nov was actually 10.380,11, apologies, I could really have provided exact figures right from the start.

    I did not query the first payment because I knew it would probably be inflated and no reliable indication of future monthly payments (not even if I hadn't added to the ISA since then). I had problems with the transfers in, they took about two months each and I had a separate complaint logged with Lloyds then because it seemed that the fault is purely on their side. I did not know how much, if any, backdating of interest would take place, because I was receiving conflicting information from all sides. 

    It seems that the second payment was inflated too, and I'll probably never find out why, but I am not going to argue about it with Lloyds  ;)

    I mean, this should all be quite simple maths really, right?  :) All done by computers, doesn't need any human input I imagine... The guy today said that while he can't see the exact calculation and reasoning behind the previous interest amounts, it wasn't the matter of the complaint and seeing he supplied a good explanation of the most recent payment he will resolve the matter, and I agreed with that. 



  • If you want to pursue it further, we can determine more precisely what you're owed and whether Lloyds managed to pay it (which could explain October's interest figure):
    1. When was the Lloyds account opened?
    2. What were the amounts of the two transfers in?
    3. On which dates did the two transfers in each leave their respective accounts?
    4. On which dates were the transfers and additional deposit credited to the Lloyds account?
    5. On which dates was interest paid out?
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