Fixed Term ISA Monthly Interest Tax?

refluxer

eskbanker said:

That Barclays summary box makes no sense to me at all!

They're saying that monthly interest can only be paid out, rather than retained within the ISA, and they do make it clear that monthly interest therefore won't compound, but their illustrative final balances are stated as being 5.3% higher than starting balance for both monthly and annual interest, which can't be true, as there won't be any interest added to the balance at all with the monthly option....

I'd be intrigued to find out the rate of interest actually being paid monthly - as above this would typically be a lower gross rate than the AER, but they're obliged to specify this in their product literature, so if they've failed to do so then they are effectively obliged to pay out at the higher rate, and OP will indeed be winning by stashing the monthly interest elsewhere.

I would imagine the figure quoted in the monthly part of the 'estimated balance' table is based on the theoretical scenario whereby the monthly interest is paid into the account, despite the fact this isn't possible - I guess it's no different from quoting the 5.3% AER figure itself that isn't actually achievable with the monthly option for this account !

eskbanker

refluxer said:

eskbanker said:

That Barclays summary box makes no sense to me at all!

They're saying that monthly interest can only be paid out, rather than retained within the ISA, and they do make it clear that monthly interest therefore won't compound, but their illustrative final balances are stated as being 5.3% higher than starting balance for both monthly and annual interest, which can't be true, as there won't be any interest added to the balance at all with the monthly option....

I'd be intrigued to find out the rate of interest actually being paid monthly - as above this would typically be a lower gross rate than the AER, but they're obliged to specify this in their product literature, so if they've failed to do so then they are effectively obliged to pay out at the higher rate, and OP will indeed be winning by stashing the monthly interest elsewhere.

I would imagine the figure quoted in the monthly part of the 'estimated balance' table is based on the theoretical scenario whereby the monthly interest is paid into the account, despite the fact this isn't possible - I guess it's no different from quoting the 5.3% AER figure itself that isn't actually achievable with the monthly option for this account !

I see them as different, to be honest - AER is a notional calculated figure based on an agreed standard, but there's no guarantee that it can actually be achieved, especially where, for example, a six month fixed term applies.

However, to me the illustrative post-interest balances in the summary box format are intended to reflect what can be achieved, so to state that £1,000 will be turned into a balance of £1,053 (albeit 'estimated') with the monthly option is factually incorrect!