Balanced Savings Plan (previous issues)
How your interest is calculated?
Fixed Term Deposit account
Half of your total investment is placed in a Fixed Term Deposit account. The rate of this is set at the time of application and is guaranteed to be that rate for the term of the account, usually one year. The interest applicable is paid the day after maturity and the interest is calculated on a daily basis.
Guaranteed Savings Bond
The other half of your investment is linked to the performance of certain Stock Market index or indices. This could be just the FTSE 100, or a combination of several different indices, for example the FTSE 100, Nikkei 300 and S&P 500 indices. We measure the performance as follows:
Step 1. We record the start level of the index (indices) at the close of business on the start date (strike date).
Step 2. We take the value of the index (indices) at the close of business on each business day during the final year of the bond up until the maturity date.
Step 3. We then calculate the average of the index (indices) over that period (this is the average final year level†).
Step 4. We deduct the start level of each of the index (indices) from the average year 5 level (calculated in step 3), and divide each figure by the start level of the respective index (indices). We then multiply this by 100 to give the average percentage change over the five year period.
Step 5. We average the percentage change of the index (indices)
Step 6. The return on your specific bond may be a certain participation percentage of the index (indices) average rise. If this is the case then we multiply the average by the participation percentage to determine the gross interest payable on the bond at the end of the product term. For particular calculations based on the issue you hold please see your Terms and Conditions. There are also some bonds that offer a return of a set percentage if the average rise does not reach a certain level, again please refer to the individual Terms and Conditions.
Please note: On certain bonds if the average percentage change of the index or indices is zero or negative, no additional interest will be payable so you will lose what you could have earned in an ordinary deposit account, but the capital invested will be repaid in full. No interest will be paid during the life of the Bond.
†Final year averaging
In order to iron out any last minute fluctuations in the stock markets, index levels are averaged over the final year of the term (explained in step 3). This means that even if there were a stock market crash just before your bond where to mature, the interest paid is unlikely to be significantly affected. This will also have the effect of averaging out any rises in the final year and, in this instance, is likely to reduce the overall interest.
For the full term of the investment your money is held in a Co-operative Bank account and not directly invested in the stock market. This means you will not receive any individual dividend income.
