Metro Bank Misleading Customers ( maybe breaching advertising standards )

friolento

groovyclam said:

You're not really understanding my problem as a new investor.

When you put money into a savings account, you are a saver, not an investor.

friolento

You might find this helpful.

From the ASA:

On the quick, I can only find anarchived version of the BBA Code of Conduct but I believe guidance still applies.

BooJewels

One of the ways some of us maximise on these options is to take the monthly interest paid out and then pay it into a Regular Saver - in my case, I have a 1 year old fix paying 4.22% monthly interest and I then pop that interest (along with interest from a couple of other accounts) into a Regular Saver paying 7.5%.  I can't just remember the numbers, but I gain something in the region of £57 per year over the AER for annual interest on that particular account.  So this arrangement suits me just fine.

So it really depends on your personal requirements and doing your due diligence on whether any particular account arrangements meet your needs.

ColdIron

groovyclam said:

AmityNeon said:

AER is advertised with the standard footnote:

AER stands for annual equivalent rate. It shows what the interest rate would be if interest was paid and compounded once each year.

Should providers make it explicitly clear whether a specific account can achieve published AERs? Yes, but they're not compelled to do so.

You shouldn't be allowed to quote an AER that is impossible to achieve products.

AER is not intended to tell you what you could achieve, it's not its job. As I'm sure you know it was intended to allow easy comparison of differing products. Before its introduction providers could (and did) play fast and loose with their rates to make their products appear better than they were

If you knocked it on the head and were left with only gross and wanted to compare accounts you would end up having to calculate the rates yourself and I'm guessing that the percentage of people that could do that would be in the single digits. And then you would just be left with AER anyway

I wonder if your real issue is not the expression of rates but that you did not grasp that 'the monthly interest wasn't being paid into the investment account but another separate account'

If you think about it there is little point in paying monthly interest that you can't access into a fixed term account

Edit: I see from your later post

groovyclam said:

You're not really understanding my problem as a new investor. I had no idea of accounts "paying away" interest.

groovyclam

ColdIron said:

groovyclam said:

AmityNeon said:

AER is advertised with the standard footnote:

AER stands for annual equivalent rate. It shows what the interest rate would be if interest was paid and compounded once each year.

Should providers make it explicitly clear whether a specific account can achieve published AERs? Yes, but they're not compelled to do so.

You shouldn't be allowed to quote an AER that is impossible to achieve products.

AER is not intended to tell you what you could achieve, it's not its job. As I'm sure you know it was intended to allow easy comparison of differing products. Before its introduction providers could (and did) play fast and loose with their rates to make their products appear better than they were

If you knocked it on the head and were left with only gross and wanted to compare accounts you would end up having to calculate the rates yourself and I'm guessing that the percentage of people that could do that would be in the single digits. And then you would just be left with AER anyway

I wonder if your real issue is not the expression of rates but that you did not grasp that 'the monthly interest wasn't being paid into the investment account but another separate account'

If you think about it there is little point in paying monthly interest that you can't access into a fixed term account

Edit: I see from your later post

groovyclam said:

You're not really understanding my problem as a new investor. I had no idea of accounts "paying away" interest.

I get all what you are saying now but, as you have read, I had no idea "paying away" accounts existed. And the only financial nouse I had was "compare AER rates". So it all started to feel rather shady to me when the AER's were said to be the same between the monthly version of the Metro account and the "pay it all at the end" account when it's, frankly, impossible for them to be.

My main focus was investing a large sum in various "products" so I would have;
a) a minimum monthly interest generated to live off
b) invest some in premium bonds for fun
c) make sure I could access £X for emergencies with little or no delay or financial penalty
d) lock anything left over in a notice period saver of best interest I could find.

The Metro Bank account we are talking about on this thread was to cover (a) so it is a bitter pill to swallow that I am losing some interest I actually thought I was going to get when planning all this endeavour. I'll just have to shop at Lidl instead of Ocado for Christmas now...

masonic

Nobody likes making an error based on a misunderstanding, but I honestly don't think this has cost you anything. You will have the interest to do with as you wish and this Metro savings account isn't the only game in town, as BooJewels has nicely illustrated.

ColdIron

Well I hope that now you understand it that you realise Metro Bank are not misleading customers as they like all banks and building societies are required to quote AER and that they are not breaching advertising standards as it seems that the Advertising Standards Authority are (at least) one of the bodies that require them to do so

You live and learn

BooJewels

groovyclam said:

ColdIron said:

groovyclam said:

AmityNeon said:

AER is advertised with the standard footnote:

AER stands for annual equivalent rate. It shows what the interest rate would be if interest was paid and compounded once each year.

Should providers make it explicitly clear whether a specific account can achieve published AERs? Yes, but they're not compelled to do so.

You shouldn't be allowed to quote an AER that is impossible to achieve products.

AER is not intended to tell you what you could achieve, it's not its job. As I'm sure you know it was intended to allow easy comparison of differing products. Before its introduction providers could (and did) play fast and loose with their rates to make their products appear better than they were

If you knocked it on the head and were left with only gross and wanted to compare accounts you would end up having to calculate the rates yourself and I'm guessing that the percentage of people that could do that would be in the single digits. And then you would just be left with AER anyway

I wonder if your real issue is not the expression of rates but that you did not grasp that 'the monthly interest wasn't being paid into the investment account but another separate account'

If you think about it there is little point in paying monthly interest that you can't access into a fixed term account

Edit: I see from your later post

groovyclam said:

You're not really understanding my problem as a new investor. I had no idea of accounts "paying away" interest.

I get all what you are saying now but, as you have read, I had no idea "paying away" accounts existed. And the only financial nouse I had was "compare AER rates". So it all started to feel rather shady to me when the AER's were said to be the same between the monthly version of the Metro account and the "pay it all at the end" account when it's, frankly, impossible for them to be.

My main focus was investing a large sum in various "products" so I would have;
a) a minimum monthly interest generated to live off
b) invest some in premium bonds for fun
c) make sure I could access £X for emergencies with little or no delay or financial penalty
d) lock anything left over in a notice period saver of best interest I could find.

The Metro Bank account we are talking about on this thread was to cover (a) so it is a bitter pill to swallow that I am losing some interest I actually thought I was going to get when planning all this endeavour. I'll just have to shop at Lidl instead of Ocado for Christmas now...

It is recommended that under FSCS protection, you shouldn't really save more than £85k in one financial institution.  If you were to put £85k in this account and have monthly interest paid away as income - the difference per month between 5.91% (£418.63) and 5.76% (£408) is £10.63 per month.  Not really a lifestyle changing difference and 5.76% is still a decent rate for paid away monthly interest at the moment - I've just signed up for one a bit less than that and am happy with it as it suits my needs.

EthicsGradient

masonic said:

groovyclam said:

eskbanker said:

Anyone looking to compare accounts that will only pay away interest can compare on gross rate, but they'd all use the same conversion process to AER, so comparing via AER will still give the same indication of relative performance across multiple providers.

You're not really understanding my problem as a new investor. I had no idea of accounts "paying away" interest. Now that I've been through it I understand the problem and, yes, I should only look a Gross rates to compare one "paying away" product to another. But I wasn't in the market for comparing one "paying away" product from another - I was just looking for good savings accounts.

Metro Bank advertise this product as 1 single product and you get to choose to have your interest paid at the end in one go or "paid away" monthly and both products are advertised as the same AER. But if you didn't have the alarm bell go off in your head when they tell you the interest would be paid into another account you would be left far more out of pocket if you opt for the monthly account ( because you are being told right in front of you they have same AER ).

The choice is there for people who already want to take an income from their savings account. For those people this option is identical to choosing an access account paying the same AER and withdrawing the interest as soon as it is credited. Think of having interest paid away as a means of making withdrawals from an account that doesn't normally permit withdrawals.

Anyone who does not wish to access the interest during the term should opt for the option where it is paid at maturity, unless they want to take a chance of reinvesting the interest at a higher rate elsewhere. 

Taking into account the above, I don't think a reasonable person would believe money paid out to an external account would continue to earn interest in the savings account from which it came.

This is the correct explanation, and show why no one is missing out on anything. If you want the interest compounded inside the account, you opt for it to be paid on maturity. If you want it paid monthly to another, you opt for the monthly one. They are the same equivalent rate - "Annual Equivalent Rate".

It's a little disappointing the person in the branch couldn't explain that - this is the kind of question that customers will have.

The thread really should have stopped after masonic's explanation.

ColdIron

groovyclam said:

ColdIron said:

groovyclam said:

AmityNeon said:

AER is advertised with the standard footnote:

AER stands for annual equivalent rate. It shows what the interest rate would be if interest was paid and compounded once each year.

Should providers make it explicitly clear whether a specific account can achieve published AERs? Yes, but they're not compelled to do so.

You shouldn't be allowed to quote an AER that is impossible to achieve products.

AER is not intended to tell you what you could achieve, it's not its job. As I'm sure you know it was intended to allow easy comparison of differing products. Before its introduction providers could (and did) play fast and loose with their rates to make their products appear better than they were

If you knocked it on the head and were left with only gross and wanted to compare accounts you would end up having to calculate the rates yourself and I'm guessing that the percentage of people that could do that would be in the single digits. And then you would just be left with AER anyway

I wonder if your real issue is not the expression of rates but that you did not grasp that 'the monthly interest wasn't being paid into the investment account but another separate account'

If you think about it there is little point in paying monthly interest that you can't access into a fixed term account

Edit: I see from your later post

groovyclam said:

You're not really understanding my problem as a new investor. I had no idea of accounts "paying away" interest.

My main focus was investing a large sum in various "products" so I would have;
a) a minimum monthly interest generated to live off

The Metro Bank account we are talking about on this thread was to cover (a)

Just to add that Metro bank are still achieving (a) and as they are currently the top monthly interest paying account going you couldn't have done better elsewhere

https://moneyfactscompare.co.uk/savings-accounts/1-year-fixed-rate-bonds/?id=null&business-type=16&activity-type=null&investment-amount=25000&investment-type=1&account-types=1&interest-paid-frequencies=2&terms=2&account-opening-methods=null&account-management-methods=null&notice-periods=null&include-notice-period=true&include-term=true&age=21&has-withdrawal-restrictions=2&existing-customers-only=2&is-shariaa=2&joint-account-only=2&quick-links-first=false