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Fixed rate bonds
Ian Waite
Posted: 08 September 2010 13:23:43(UTC)
#1

Joined: 12/08/2009(UTC)
Posts: 2


Why have some banks stopped paying compound interest on fixed rate bonds
This exclusion is never mentioned in there terms & conditions
Thank you
Terry Nicholas
Posted: 08 September 2010 18:14:32(UTC)
#2

Joined: 04/12/2006(UTC)
Posts: 3

Check whether the advertised rate includes "AER", if it does the bank must apply interest to the account annually and compound it. If the rate does not state "AER" they are trying to be clever, by saving on the amount of interest paid out, but they lose a lot of goodwill. If, like me , you are credited interest on a bond that has not been compounded yet the rate advertised showed "AER" send an email to the complaints department and include a definition,ie, 'AER' means "Annual Equivalent Rate" and is a notional rate which illustrates the contractual interest rate (excluding any bonus payable) as if paid and compounded on an annual basis.
Chairman2
Posted: 08 September 2010 18:56:05(UTC)
#3

Joined: 26/06/2009(UTC)
Posts: 11

didn't know they had

most bonds quote an AER and pay interest yearly

if they pay monthly that usually doesnt affect the quoted AER

Ian Waite
Posted: 10 September 2010 10:31:15(UTC)
#4

Joined: 12/08/2009(UTC)
Posts: 2


Yes they pay interest yearly but not into the account.The interest has to be paid into a seperate nominated account.Hence
no compounding.
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