Trading 212 Cash ISA's GROSS interest rate?

freeguy1984uk

Hello,  I'll keep this post short...
Am I correct in my calculations that the GROSS rate is 4.88% right now? (AER is 5.00%).

Many thanks if you have the answer   : - )

masonic

That would be correct. Unusually it is paid and compounded daily, so gross rate is 365 x the 365th root of the AER.

freeguy1984uk

Hi, thanks for the reply.

This is the first time I've had to figure it out for myself, as I couldn't find the gross rate anywhere on their website.

I've just recreated the maths I used yesterday (I'm no maths expert), and this was how I did it...

I've had the account for a few weeks now so I took yesterday's daily interest amount and timed this by 365.25 (days in a year, including leap year).

Then I used a random online percentage calculator to see what percentage the above was of my total savings amount.

Then I rounded the percentage to 2 decimal places.

: - D

gravel_2

If you want to save yourself the bother in the future... https://optimly.co.uk/calculators/aer-gross.html

slinger2

See https://www.trading212.com/interest-on-cash section "How is the daily interest payment calculated?"

masonic

slinger2 said:

See https://www.trading212.com/interest-on-cash section "How is the daily interest payment calculated?"

While that question contains useful info, it's worth noting that this page relates to the S&S ISA and so the stuff about QMMFs is not relevant to the cash ISA.

slinger2

masonic said:

slinger2 said:

See https://www.trading212.com/interest-on-cash section "How is the daily interest payment calculated?"

While that question contains useful info, it's worth noting that this page relates to the S&S ISA and so the stuff about QMMFs is not relevant to the cash ISA.

True. I'd missed the fact that the thread title clearly says "Cash ISA"

freeguy1984uk

gravel_2 said:

If you want to save yourself the bother in the future... https://optimly.co.uk/calculators/aer-gross.html

Thanks for this, I've bookmarked it for future use!
It was useful for me to figure out the maths for myself as I've only recently got my head around Gross vs AER.
Now I have a website to confirm my results too  

freeguy1984uk

I just have to post Trading 212's responses to my messages here as they are quite odd, it's as if they don't know what Gross interest means? Or am I the one that's misunderstanding them? It doesn't really matter as I have the answer now from this forum, but still...

MESSAGE 1: I ASKED THEM QUITE SIMPLY "WHAT IS THE GROSS RATE RIGHT NOW, WITH THE AER BEING 5.00%...

"The interest on GBP is 5 % APY. However, we could not share any information related to the enquiries about how the interest is being formulated."

MESSAGE 2: I SIMPLY SAID "IS THE ANSWER 4.88%"...

"You are responsible for calculating and paying any applicable taxes on your profits.
You may also need to declare your profits from financial trading in your tax return according to the tax laws in your country.
For more detailed information, it is recommended to consult with a tax advisor or contact the relevant tax authorities in your country.
However, keep in mind that any income you make from an ISA is tax-free"

sausage_time

These are indeed very strange replies!  The current AER of 5% is clear enough on their web site, it's the (unusual) daily payment of interest that makes the gross rate less obvious.  But that it is predictable, and I can't see why the don't list it too.  Or at least post a link to this discussion!  

Detail_Merchant

freeguy1984uk said:

I just have to post Trading 212's responses to my messages here as they are quite odd, it's as if they don't know what Gross interest means? Or am I the one that's misunderstanding them? It doesn't really matter as I have the answer now from this forum, but still...

MESSAGE 1: I ASKED THEM QUITE SIMPLY "WHAT IS THE GROSS RATE RIGHT NOW, WITH THE AER BEING 5.00%...

"The interest on GBP is 5 % APY. However, we could not share any information related to the enquiries about how the interest is being formulated."

MESSAGE 2: I SIMPLY SAID "IS THE ANSWER 4.88%"...

"You are responsible for calculating and paying any applicable taxes on your profits.
You may also need to declare your profits from financial trading in your tax return according to the tax laws in your country.
For more detailed information, it is recommended to consult with a tax advisor or contact the relevant tax authorities in your country.
However, keep in mind that any income you make from an ISA is tax-free"

Your use of the word 'Gross' seems a little strange to me.
My experience the word Gross for financial matters is usually in contrast to Net, where Gross is the bigger value, and Net is the smaller value, and the difference is whether tax is included or not.
e.g. a item sold for £40 excluding VAT, when VAT was 17.5% might be described as £47 gross or £40 net.

Years ago, when (non-ISA) savings accounts withheld basic rate income tax automatically, then sometimes the interest rates were shown as Gross (before tax was deducted) e.g. 5% and Net (after basic rate was deducted) e.g. 4%.

To me, what you are asking for, is the Simple interest rate, rather than the Compound interest rate.
I think the AER (which is a compound rate) is useful for like-for-like comparisons of savings accounts that pay interest at different frequencies, e.g. daily (such as Trading 212), monthly or annual.