Cynergy bond renewal loyalty rates

mebu60

What am I not understanding about why the 1 Year AER and Gross rates are not the same?

Also, why would AER be compounded for durations < 1 year?

And surely both are the rates of interest before the deduction of income tax?

My brain is failing to compute!

Term	Loyalty AER* Rate	Loyalty Gross** Rate
6 Months	4.06 &#37	4.01 &#37
1 Year	4.21 &#37	4.16 &#37
15 Months	4.27 &#37	4.21 &#37
18 Months	4.27 &#37	4.21 &#37
2 Years	4.21 &#37	4.16 &#37
3 Years	4.25 &#37	4.19 &#37
4 Years	4.32 &#37	4.26 &#37
5 Years	4.37 &#37	4.31 &#37

*AER stands for Annual Equivalent Rate and shows what the interest rate would be if interest was paid and compounded once each year.

**Gross interest is the rate of interest before the deduction of income tax.

Rollinghome

When is interest paid? I assume that's the applied rate and the compounded Annual Equivalent Rate if held for 12 months.

mebu60

Nope. At least not with the 1 Year bonds. Interest frequency is 'At Maturity' and their previous 1 Year bonds have done just that. So shouldn't AER and Gross be the same for those?

Rollinghome

Yes, they should be. Ask them, perhaps they've made a mistake. I think it was RCI who were using the wrong terminology some while ago.

Once upon a time, when there was taxing at source, the terms used were "net" and "gross", with gross meaning before any deductions for tax, and life was simpler.

mebu60

Wanted to make sure I wasn't missing anything obvious first! Have sent them a secure message asking why the discrepancy in the 1 Year rate and to confirm what the interest payable on £1k would be at the end of the 1 Year term.

mebu60

I despair!

These are the people that reduced an interest rate without prior notification then belatedly reinstated it. Aren't they also the ones who paid out a bond by deducting the interest amount from the capital rather than adding it!

Annoyingly can't cut & paste their secure messages text. In summary on Weds I asked why 1 Year AER and gross weren't the same and how much interest would I receive for £1k at maturity of the 1 Year bond.

Two replies this morning three minutes apart. Response 1 refers to 4.22% AER (is 4.21% in the grid) and repeats the definition from the email. They tell me that when the bond is open the system will calculate the amount of interest. Second reply states I will get the gross rate (presumably 4.16%).

I was going to ring but decided my blood pressure probably doesn't need it. Instead I have pointed out they have not answered the point I raised re 1 Year AER and gross being different percentages and they have introduced a different AER %. And that I need clarity on the amount of actual interest I would receive so that I can make a decision before I open the bond!

My maturity instruction is set to close the current bond on Tuesday. Doubt I'll get a reply before then. But if it still doesn't explain why the 1 Year rates are different when it does arrive I will raise a formal complaint.

refluxer

Cynergy's rates presumably changed recently and it looks like they updated the Gross figures in the table you posted above but forgot to update the AER figures. The rates currently listed on their site appear to be as you'd expect…

mebu60

Thanks @refluxer that's rather what I expected to be the case, i.e. that the loyalty 1 Year rate is 4.16% and hardly much of an uplift (0.01%!) on the non-loyal rate available to everyone. Nor attractive enough to tempt me though 4.21% might have been.

Very poor that the Cynergy person replying hasn't picked up on the key issue I raised about the AER and the gross being shown as different amounts.

mebu60

Remarkable! Despite me explicitly pointing out their previous response failed to explain why the listed AER and gross loyalty rates were shown as different %s for the 1 Year Bond they have managed to ignore this fundamental point yet again!

Three replies today, the first telling me my existing bond had matured today and been paid out so I was no longer eligible for the loyalty rate! (a whole 0.01% more). The second cutting and pasting the AER definition again and the third the gross definition again.

I have the CEO's name and email address. I will provide him with the feedback that yet again his organisation has made an error and yet again no-one is listening or comprehending the issue and I have now been deprived of the opportunity (that I was never going to take up) of the loyalty rate. I will remind him of the fiasco eight months ago of the maturity bond paying out minus the interest (the original capital with the interest amount taken off that, i.e. short by 2 x the interest figure) and Cynergy frontline staff failing to comprehend and not communicating with the back-office. Plus in between these two events we had the EA interest rate reduced with no notification and again a long delay as they tried to grasp the implications before the inevitable reinstatement and backdating of the original rate.

Quite an impressive track record!