SAVINGS BANK INTEREST

Press, Volume XCIX, Issue 29108, 21 January 1960, Page 14

SAVINGS BANK INTEREST

Annual Crediting Explained

The annual crediting of savings bank interest was a world-wide practice and there was no knowledge of any savings bank which credited interest more frequently, said the Postmaster-General (Mr Moohan).

Mr Moohan was commenting on a correspondent’s letter to the editor of “The Press” which said that the insertion of interest in depositors’ accounts with the Post Office Savings Bank annually evaded the payment of compound interest during the year. The correspondent described the practice as “monetary injustice” and suggested interest be computed and credited at halfyearly intervals. “The average balance at credit in ordinary Post Office Savings Bank accounts is £l5l 8s and the annual interest due on this amount at 3 per cent would be £4 10s 7d,” said Mr Moohan. “If interest were credited on the last day of each quarter, a net accretion of interest of £4 Ils 5d would be earned, or an additional lOd. “Big Task” “If interest were credited halfyearly, the total interest for the year would be £4 Ils 2d,” said Mr Moohan. “The computation of interest ind the annual crediting of accounts is a very big task. If the work were to be done more frequently, costs of management would rise steeply,” he says.

‘‘lt would be difficult to justify such an increase in expenditure in order to enable the average depositer to receive an additional 7d or lOd in annual interest,” he said. Mr Moohan said that m 1956 the provisions affecting interest were changed so that deposits made on the first, second and third of a month earned interest on that month.

Another change which benefited depositors was that if money was withdrawn on the last business day of a month, no reduction of interest for the current month would be made in respect of the amount withdrawn. "These were worthwhile concessions, and from the point of view of monetary reward and convenience to the depositer. they are more to be desired than more frequent crediting of interest,” said Mr Moohan.