AER Confusion

jacko74

Hi all, a question...

If you had £50k invested in a fixed term 18 month savings account advertising 6% AER how much approximate interest would you expect to receive on maturity?

£3,000
or
£4,500

masonic

Neither. Somewhere in the region of £4,590.

saverkev

I calculate £4590 interest
£50000 @ 6% for 12 months adds upto £53000
£53000 @ 6% for 6 months   adds upto £54590
Not taking into account what dear old HMRC will grab!

jacko74

Thanks yes I did say approximate just to avoid calculating down to the last penny.

I'm just curious why when I'm 15 months into an 18 month fixed term account at 6%aer yet its only showing £3,000 interest accrued to date.

masonic

jacko74 said:

Thanks yes I did say approximate just to avoid calculating down to the last penny.

I'm just curious why when I'm 15 months into an 18 month fixed term account at 6%aer yet its only showing £3,000 interest accrued to date.

They will be paying annually, and therefore "accrued" probably means "credited". You'll get the rest at maturity.

Middle_of_the_Road

jacko74 said:

Thanks yes I did say approximate just to avoid calculating down to the last penny.

I'm just curious why when I'm 15 months into an 18 month fixed term account at 6%aer yet its only showing £3,000 interest accrued to date.

The interest would be credited annually,  and again on maturity.

General_Grant

jacko74 said:

Thanks yes I did say approximate just to avoid calculating down to the last penny.

I'm just curious why when I'm 15 months into an 18 month fixed term account at 6%aer yet its only showing £3,000 interest accrued to date.

Because that is the amount of interest accrued for the first year and paid into the account.  Though that £53,000 is earning interest it will not be paid until the final day.

It wouldn't have shown any interest until the whole of the £3000 was added to the account.  

jimjames

jacko74 said:

Thanks yes I did say approximate just to avoid calculating down to the last penny.

I'm just curious why when I'm 15 months into an 18 month fixed term account at 6%aer yet its only showing £3,000 interest accrued to date.

Surely for the first 11 months it wasn't showing any interest at all?

jacko74

jimjames said:

jacko74 said:

Thanks yes I did say approximate just to avoid calculating down to the last penny.

I'm just curious why when I'm 15 months into an 18 month fixed term account at 6%aer yet its only showing £3,000 interest accrued to date.

Surely for the first 11 months it wasn't showing any interest at all?

This was the first time I've checked it since opening it 15 months ago so I don't know how they've been calculating or showing the interest.

I was expecting it to show either the 15 months of accrued interest to date or not show any interest at all until its at maturity.

Can't quite understand why its showing 12 months interest at the 15 month point.

masonic

jacko74 said:

Can't quite understand why its showing 12 months interest at the 15 month point.

You'll find that most savings accounts that pay interest annually will do this.