Bank Interest

[sstein]

Hi

Before christmas I set up an account with the RBOS, it was a 6 month fixed rate bond. I put a sum of money in it and opened it and didn't touch it for the 6 months.

I got the interest paid in the other day from it maturing. Now, the woman in the bank who set it up said it was 5%. Tell me if my calculations are duff.

5% = 1 year
6 months = 2.5%
take off tax 2.0% << which is what I should have got.

The actual interest payment I received was 1.4%, have I been done?

I think I am going to close all the accounts with RBOS and go to a building society. 1.4% for 6 months where I cant access it seems very low.

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Stuart

[tigger1]

5% in one year, that'll be (probably) a compound monthly interest - an equivalent rate.

So, what rate, per month, is 5% in a year? Ignoring tax: -

Adding 0.444% interest to £100 per month (amount * 1.00444) gives you £105 after a year (so 5% annual). At six months you have £102.24 - a 2.24% return...what I'm saying is that 6 months interest is not half of 12 months. It seems you were possibly misled / fooled by their advertising 5% interest.

Hope that explains it...although I could be mistaken in my numbers.

Edited by tigger1 on Friday 6th July 09:45

[sstein]

tigger1 said:

5% in one year, that'll be (probably) a compound monthly interest - an equivalent rate.

So, what rate, per month, is 5% in a year? Ignoring tax: -

Adding 0.444% interest to £100 per month (amount * 1.00444) gives you £105 after a year (so 5% annual). At six months you have £102.24 - a 2.24% return...what I'm saying is that 6 months interest is not half of 12 months. It seems you were possibly misled / fooled by their advertising 5% interest.

Hope that explains it...although I could be mistaken in my numbers.

Edited by tigger1 on Friday 6th July 09:45

Hi,

You are probably right, that just isnt the way their financial adviser explained it in the bank. If I had know that I would get 1.4% I would have put the money elsewhere. This seems like a very poor rate!

Banks!!!

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Stuart

[tigger1]

It does seem like a porr rate, but remember that's 5% for a year, which isn't awful. Naughty if they said you'd get a 5% return though

[Fidgits]

yeah, did they say 5% AER or 5% return?

[Robin Hood]

tigger1 said:

It does seem like a porr rate, but remember that's 5% for a year, which isn't awful. Naughty if they said you'd get a 5% return though

6% at Sainsburys and manage it on the net:

http://www.sainsburysbank.co.uk/savings/sav_intern...

[sstein]

Fidgits said:

yeah, did they say 5% AER or 5% return?

They said it paid 5% interest, I assumed after opening it that meant since it was a 6 month bond, the interest would be 2.5% less tax.

I think im going to close all the accounts with them as the interest is pathetic. Does anyone know If I can move my ISA. I have not made any payments to it this year yet, the money from the bond maturing was going to into the ISA for the year.

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Stuart

[NorthernBoy]

sstein said:

Fidgits said:

yeah, did they say 5% AER or 5% return?

They said it paid 5% interest, I assumed after opening it that meant since it was a 6 month bond, the interest would be 2.5% less tax.Stuart

If it pays 5% per year then, alsmost by definition, it cannot pay 2.5% after six months.

Look at it this way. You put in £100, and, six month later, you get £102.50 back.

You put the £102.50 back in again, and you get £102.50 * (1.025) = £105.0625

Not a huge difference I know, but it shows 5% a year just cannot be 2.5% over 6 months.