To clarify this Plum "switch after 3 months" but bonus interest is payed yearly.

Arc_2

Is my understanding of what the savings guide is suggesting correct that you could save with Plum for 3 months.
Monthly get the normal interest.
Transfer out & Switch elsewhere after 3 months.
Then 9 months later you would still be payed the bonus interest for those 3 months, even though you left Plum 9 months ago.

Is that correct?
(also confusing that the summary and main text list different interest rates.)

masonic

That's not my understanding. If you fully transfer out then you forfeit interest for the month of your switch and the bonus interest for all 3 months. To receive the bonus interest you must maintain the minimum balance of £100 for the full 12 months. Plum does not support partial transfers out of current year subscriptions, so the only way to transfer out is if you pay at least £100 in for 2024/25 (not just 2025/26) or transfer in at least £100 from a previous year ISA.

Arc_2

Thanks for the information.
I just don't get what the recommendation was them.

ordnancesurvey84

@masonic - is this correct?

The Plum Cash ISA terms state:

"If you close your Cash ISA with Plum or Transfer Out within the 12 month period after opening your Cash ISA account with Plum, you will lose your bonus that is not earned and forfeit any interest earned that month. Only full transfers-out for the current tax year are accepted. Partial transfers-out are accepted for previous tax years."

But the 3 month current promotional bonus of 5.92% is paid at the end of the three months:

"Earnings from the Plum Bonus rate are paid at the end of the promotional 3-month period."

So wouldn't the bonus interest be classed as "earned" at that point and not be clawed back in the event of a complete transfer out?

masonic

It would be earned once you'd fulfilled all criteria, including maintaining any minimum balance that is required for the period it is required. There has been some discussion here: https://forums.moneysavingexpert.com/discussion/comment/81385690/#Comment_81385690

Happy to be corrected about maintaining a minimum balance. Website just says "and other conditions are met" and I cannot access the full bonus offer T&C.

Where does it say it is credited after 3 months? This contradicts the information on the main MSE site.

ordnancesurvey84

It's on their website, here: https://withplum.com/cash-isa

Scroll down to the FAQs:

What's the Plum Cash ISA interest rate?

Our best rate for a new Plum Cash ISA is 5.92% AER (variable), including our Plum Bonus of 2.38% in the three months. The Annual Equivalent Rate shows the account yield after accounting for compounding (i.e. returns are calculated not just on the principal amount saved, but also on any previous interest paid).

Interest rates vary depending on when you opened your Cash ISA. See the full breakdown here.

For Cash ISA transfers, customers can earn our basic rate of 3.54% AER (variable).

To qualify for the bonus rate on new contributions, customers must meet the following conditions:

1. Maintain a minimum balance of £100
2. Make no more than 3 withdrawals during the bonus rate period

Interest earnings (including any applicable Plum Bonus) are calculated daily. Basic earnings (at the 3.54% rate, excluding the Bonus) are paid monthly, at the end of the following month, throughout the year.

Earnings from the Plum Bonus rate are paid at the end of the promotional 3-month period.

masonic

Thanks, then I agree it looks like this will not be clawed back. Which just leaves the meaning of "forfeit any interest earned that month" unclear. Interest is paid "at the end of the following month", meaning interest earned during month 3 isn't paid until the end of month 4, so if you transfer at the start of month 4, do you forfeit all of month 3's interest? Does this mean you'd need to hold for 4 months before transferring to benefit from 3 months of high interest?

ordnancesurvey84

There's an example given here: https://help.withplum.com/en/articles/8999066-withdraw-from-cash-isa which seems to refer to a "full withdrawal" - but I suspect this is referring to a scenario in which the account remains open and can therefore still receive interest at the month's end. It doesn't explain what would happen if the account was closed mid-month e.g by a full transfer out. 

My guess is that interest earned during July (for example), would be added to the account as part of the closing balance if doing a full transfer out at any point in the month of August, and that it's just August's interest that would be forfeit.

masonic

ordnancesurvey84 said:

There's an example given here: https://help.withplum.com/en/articles/8999066-withdraw-from-cash-isa which seems to refer to a "full withdrawal" - but I suspect this is referring to a scenario in which the account remains open and can therefore still receive interest at the month's end. It doesn't explain what would happen if the account was closed mid-month e.g by a full transfer out. 

My guess is that interest earned during July (for example), would be added to the account as part of the closing balance if doing a full transfer out at any point in the month of August, and that it's just August's interest that would be forfeit.

The full withdrawal example is helpful. It is only the weird schedule of paying interest that creates any confusion. It must be that the remaining interest would be credited at the time of transfer. If not, I think they will be dealing with a high volume of complaints in about 3 months time.

eskbanker

masonic said:
If not, I think they will be dealing with a high volume of complaints in about 3 months time.

I think they'll be dealing with a high volume of complaints then anyway!  The FAQ quoted above does say that "our Plum Bonus of 2.38%" is included in the inflated AER rate but isn't expressly labelled as an AER there, so I suspect that there'll be plenty of indignant punters expecting a bonus of 2.38% (of the balance), rather than the sub 0.6% applicable over three months....

masonic

A couple of worked examples. If someone opens and subscribes to a Plum ISA today while this bonus is still available:

Bonus period: 6th April - 5th July, credited 6th July (assumed) = 2.38% * 91/365 = 0.59% of balance

Interest if transferred out during July = 3.54% * 86/365 = 0.83% of balance

Interest if transferred out during August = 3.65% * 117/365 = 1.17% of balance

Assume transfer out takes 5 working days (7 calendar days)

July interest void period = 13 days

August interest void period = 8 days

Effective interest rate 6th April - 13th July = (0.83 + 0.59) * 365 / 98 = 5.29%

Effective interest rate 6th April - 8th August = (1.17 + 0.59) * 365 / 124 = 5.18%

Effective interest rate between 1st July - 1st Aug = (2.38 * 5/31) + 3.54 = 3.92%

So nobody is going to achieve the headline 5.92% if they switch when the rate drops, let alone get 2.38% of the balance as a bonus. It may be better to ditch and switch as soon as the bonus is in if other ISAs are paying >4% at that time. This threshold will increase the later in the month you open the Plum ISA.

Chip, Moneybox and T212 are all preferable due to lack of shenanigans with interest.