INTEREST ON POST OFFICE INVESTMENT CERTIFICATES

Dominion, Volume 21, Issue 127, 27 February 1928, Page 10

INTEREST ON POST OFFICE INVESTMENT CERTIFICATES

Sir, —I notice the Government are bidding against the commercial banks for any loose cash lying about the Dominion as fixed deposits. Visiting our local post office a few days ago 1 found I had struck a somewhat busy time and so was unable to get served immediately. To put in the time I started to read the various notices posted up all round—a thing I rarelv do, their number being against it. Amongst them wak a bunch of leaflets. "Post Office Investment Certificates.” At a casual glance they seemeu all right. Then one began to wonder why the Government seemed to favour what one’s school books termed "Present Worth" in interest. In tiic commercial banks yon deposit a round sum and at the end of the fixed time you secure the interest thereon, but the Government favour your putting in the "present worth" and drawing the round sum at the end of the time.

I noticed that these certificates were for the duration of one, two and five years respectively, with varying rates of interest. Idly I started to work out the one-year examples. In the first case you paid in 19s. 2d. and at 4} per cent, interest drew out .L'l at the end of the year. That actually worked out to 7-20tlis of a penny over the £l, so we may say it was all right, but it is a funny thing that the Government ignore the fraction when paving out, but if they have to receive them they charge the full penny. The next example was ten times the amount —pay in £9 Ils. Bd. and draw out £lO at the end of the year. But this really works out to £lO os. 3}d., the 3Jd. being fen times the spare fraction on the £l, so instead of paying in £9 Ils. Bd. as notified, only £9 Ils. 4}d. should have been paid. In the third example £95 16s. Sd. paid in, £lOO withdrawn, the fraction turns up again, onlv this time it amounts to 2s. Ud., so only £95 13s. 9d. should be paid In. That is as far as I got, for by that time the counter clerk was nt liberty. I did m.v business and came away. Not intending t ( , take up any of those certificates, I have not bothered to work out the two and five-year schemes, but as they also folio .v the one. ten and hundred times the present worth of £l, I presume they would work out in the same way. One wonders whether the thing Is accidental or intentional on the part of the- Government. Suppose, as is quite possible, they collect a F ew millions by the schemes those fractious would run into thousands of pounds. Of course it may merely be an error of some junior clerk, but if so the officer responsible and all seniors who ought to have detected it should be instantly called to account. The position is that the Government is receiving money and professing to pay a certain rate of interest for it when in reality they are doing nothing of the kind. It.’ also places all Government money transactions under suspicion. During the war I took up quite a number of war bonds under a similar scheme, and now I am wondering if T were stung over them. Then again, the P.O. Savings Bank have millions of the people’s, savings in deposit, with quite a complicated system of interest in the monthly balances. Arc those interest calculations, trustworthy? Moral: carefully cheek all your money dealings with the Government. Since the above was written I have received a couple of circulars about these certificates addressed "Householder.” Al the top is a picture of a number of coins with "Profit of Thrift” printed across them. Presumably the “thrift" is on the part of the Government in not paying out full interest on tile sums deposited, and the coins represent wlrnt is kept back. I notice, too. that the circulars are subscribed "Win. Downic Stewart, Minister of Finance." Let us hope lie is proud of his circulars and the way he Ims been let down—if he is not lie ought to be. Fvery year the Press publishes columns of 'names of those who pass the civil service examination. 1 don’t know what sori- of a test, they undergo, but it seems as though some of the successful ones cannot work out a simple interest sum, ami anyone who I.as imd correspondence with a ( lovei mneni. Department knows by the addressing of tlie envelopes that many of them write "a fist.” not “a hand.’’ Does the Government employ the taihires and leave the successes for the commercial world?—l am, etc., “LOOM.R-ON.

[The questions raised, in respect of Post Office investment certificates wero referred to the Treasury Department, which makes the following reply:— With reference to the present issue of Post Office investment ceitificates and the points raised in the above letter, a reply may bo given that the interest calculations are. based on the purchase price of a certificate oi the face value of £l. All other amounts arc coniputed on the multiple system to avoid uneven and fractional amounts. Ihe method was fully considered before issuing the certificates at the prices quoted and the additional profit to the Government on this inetliod of calculating tho purchase price was not considered to be an imposition when spread over a large number of holders of this form of investment. The additional work which would be involved in issuing certificates otherwise than on the present basis would not compensate tor the advantage obtained by an individual investor.] I With reference to interest on havings Bank deposits, the Secretary ol the Post and Telegraph Department states: "The Post ami Telegraph Act provides that interest shall, in the case of each deposit, be computed from the first day of the month next following the day on which a complete pound has been deposited, and as to moneys withdrawn, shall cense on the first day of the month iu which they are withdrawn. Tho amount of principal standing to credit each mouth having been ascertained, interest is computed according Io the rates in force by tho use of standard tables. A double check is maintained to ensure the accuracy of ail calculations.”]