natwest isa 7.32%

Could someone tell me which of the following two providers is offering a better rate and what is the difference between the two - I am really confused!

Natwest
Balance AER (variable) Gross Rate
£1 - £8,999 6.67% 6.51%

First Direct
AER(1) Tax free(4)
5.85% 6.125%

jimbow25 wrote: »

I don't follow why the tax free rate is higher than the AER. Maybe someone else can make sense of that.

Because the 6.125% gross p.a. rate is not fixed for a full year. It's only fixed until June 2009, when it falls to 4.41% gross p.a.

With each month that passes (between now and next June, and if the account remains available) the AER will reduce from it's current 5.85% AER.

Milarky wrote: »

This is a minor aggravation - it is merely saying that the account is at a bonus a rate for a 'fixed' period - and the period starts when you apply for it. Were the transfer to take longer than 30 days then the FOS may be mentioned by the customer

Let's assume they take the maximum 30 days permitted and do some quick sums:

You have £27000 to transfer, compared with a 6.25% ISA
The extra interest you'd gain over 11 months would be 27000*((7.32-6.25)/100)*(11/12) = £264.83

If you lose one month's worth of interest on your old account due to the transfer you'd lose:
27000*(6.25/100)*(1/12)=£140.63

So you're still quids in to the sum of £264.83-£140.63 = £124.21

Now let's say you have £3600 to transfer and so are on the 6.67% tier:
11 months extra interest = £13.86
Lost month interest at 6.25% = £18.75

So you've gained £13.86-£18.75 = £-4.89 - in other words you'd lose a fiver.

I haven't calculated for what might happen at the other end, when every man and his dog wants to transfer out their money in a year's time.


I suppose the question for this ISA is: what's the likelihood that in a few months the 'variable' rate will be quickly wound down? The bonus rate is based on the 'whole balance in the account for 12 months from receipt of the Cash ISA transfer request', which I take to mean that it's only on the balance that stays in the account for the whole year - ie the minimum balance over that time. Does that mean the first 30 days when the transfer hasn't come through has a balance of zero, which would prejudice your bonus?

Doesn't it also mean your money is effectively locked in unless you're willing to forfeit a significant chunk of the bonus? The ISA seems to be NatWest's main cash ISA, so it's unlikely to suffer from the 'issue N effect' (where the account is withdrawn and quietly the rate wound down in the hope customers won't notice). But NatWest aren't known particularly for their competitive rates, so winding down the non-bonus part wouldn't surprise me.

What if you want to transfer from 2 different ISA's into the new NatWest one?
If you have 2, say, with 15k in each... then its obviously worth doing both so you can hit the 27k required to get the highest rate.
But, if they only pay the bonus on the initial transfer amount, does that mean u'd only get the bonus rate on the first 15k?
Might pop into a branch on Monday... need to wait a few weeks anyway for my other ISAs fixed rate (with penalty to withdraw) to end.

runciblespoon wrote: »

Doesn't it also mean your money is effectively locked in unless you're willing to forfeit a significant chunk of the bonus? The ISA seems to be NatWest's main cash ISA, so it's unlikely to suffer from the 'issue N effect' (where the account is withdrawn and quietly the rate wound down in the hope customers won't notice). But NatWest aren't known particularly for their competitive rates, so winding down the non-bonus part wouldn't surprise me.

Actually, I now realise since it's monthly interest including the bonus the opportunity for funny business is much reduced. If you think you're doing anything which might prejudice your bonus you can just transfer the whole lot out just after interest payday with no loss. If they wind down the rates you won't compromise your bonus by moving part way through the year. Unless there's a clause by with NatWest can claim back some of the interest previously paid.

This is unlike RBS' offering where the interest is annual and paid in two lumps, one past the end of the bonus year. So if you don't keep it in for the whole year then there's a chance you might lose some bonus.

I'm tempted to give them a ring and record the call (and tell the operator I'm doing so)...