Moneybox ISA annual interest

eskbanker

masonic said:

The FCA points out in BCOBS 2 Annex 1 that it expects firms to take account of the BBA/BSA Code of Conduct for Advertising of Interest Bearing Accounts...

'expecting' firms to 'take account of' something is pretty woolly though, isn't it, especially when the BBA ceased to exist in 2017!  I don't know if these two fintechs are members of the relevant associations but suspect that the FCA handbook needs to be updated - however, the same BCOBS section does also require the presentation of a standardised summary box, which T212 appear to ignore, although perhaps it's visible after registering with them....

Ultrasonic

I opened a 212 Trading cash ISA last week and going by the app interest will be paid monthly but I can only see the AER stated.

From my personal perspective I have no issue with only the AER being displayed as realistically this is the only figure I really wanted to know.

Ultrasonic

Oh, and it gives a daily update of pending interest, but says it actually pays it monthly.

masonic

eskbanker said:

masonic said:

The FCA points out in BCOBS 2 Annex 1 that it expects firms to take account of the BBA/BSA Code of Conduct for Advertising of Interest Bearing Accounts...

'expecting' firms to 'take account of' something is pretty woolly though, isn't it, especially when the BBA ceased to exist in 2017!  I don't know if these two fintechs are members of the relevant associations but suspect that the FCA handbook needs to be updated - however, the same BCOBS section does also require the presentation of a standardised summary box, which T212 appear to ignore, although perhaps it's visible after registering with them....

Imagine the FCA not moving with the times! It does seem there is a lack of supervision of these fintechs in general. Moneyfarm still quotes it's cash ISA as offering FSCS protection, while neglecting to mention that the money is wholly invested in money market funds with the potential for a capital loss that would not attract any FSCS compensation, and no capital at risk statement. They do state in the footer of the website "By making an investment, your capital is at risk", but do not provide cash ISA customers enough information to discern that they are making an investment, rather than a deposit.

Ultrasonic said:

I opened a 212 Trading cash ISA last week and going by the app interest will be paid monthly but I can only see the AER stated.

From my personal perspective I have no issue with only the AER being displayed as realistically this is the only figure I really wanted to know.

If you wish to verify how much interest you should have received, then you would need to know or back-calculate the gross rate. Was the gross rate not mentioned anywhere during your application? As that is the contractual rate of interest, whereas AER is a theoretical one (when interest is not compounded annually).

slinger2

When I click on the "i" button next to the interest rate it says "The AER (Annual Equivalent Rate) is a percentage that represents the total amount of interest you can earn on your uninvested cash over a year taking daily compounding into account." Mind you it says exactly same for my S&S ISA which still uses daily compounding. And the concept of "uninvested cash" is surely not relevant for a Cash ISA.

masonic

slinger2 said:

When I click on the "i" button next to the interest rate it says "The AER (Annual Equivalent Rate) is a percentage that represents the total amount of interest you can earn on your uninvested cash over a year taking daily compounding into account." Mind you it says exactly same for my S&S ISA which still uses daily compounding. And the concept of "uninvested cash" is surely not relevant for a Cash ISA.

I wonder if any more care has been taken with the interest calculation than that description.

Ultrasonic

masonic said: If you wish to verify how much interest you should have received, then you would need to know or back-calculate the gross rate. Was the gross rate not mentioned anywhere during your application? As that is the contractual rate of interest, whereas AER is a theoretical one (when interest is not compounded annually).

I've just done a search for the word 'gross' in the various documents provided when I opened the account and got no results. I don't recall seeing anything on screen about a gross interest rate but I also wasn't specifically looking for one.

I'm not realistically going to try to verify the interest calculation. It's a flexible ISA that I may withdraw money from and then top up again, with a variable interest rate.

danlightbulb

I went for Moneybox in the end, opened it via app this morning.

In the app when you select cash ISA as the account type to open, you're presented with two options, the unlimited withdraw version (open access cash ISA) at 5.05% and the version with the 3 month bonus rate (just called cash ISA).

Now interestingly, the open access version was shown as 5.05% AER in the app.

The cash ISA was shown as 5.71% AER.

Which is completely incorrect! Its only 5.71% for the first three months. No other rate was shown.

So there is some real misleading information going on here.

clairec666

Somewhat bends the rules of what "AER" means.

"AER (Annual Equivalent Rate)​​ Illustrates what the interest rate would be if interest was paid and compounded each year."

Yet this rate isn't applicable over the whole year!

eskbanker

clairec666 said:

Somewhat bends the rules of what "AER" means.

"AER (Annual Equivalent Rate)​​ Illustrates what the interest rate would be if interest was paid and compounded each year."

Yet this rate isn't applicable over the whole year!

AER isn't only used for rates that are in place for at least a year - it's an standardised calculation that's evidently more suited to long-running rates but its annualisation is technically appropriate for shorter periods too.