Calculation Amount
The interest for your Lifetime ISA is calculated on a daily basis in the background, based on the money you have at the end of each day. However, the interest amount is credited to your Lifetime ISA once a month, specifically on the final business day of the next month. For example, the interest you earn for November would be paid into your account on 31 December.
This monthly addition occurs because, in most cases, the daily amounts are too small to be individually added to your pocket. This is the formula we use every day in our system to calculate the interest for Lifetime ISA in Plum:
Compounding Frequency
Our Lifetime ISA compounds interest monthly. This means interest is calculated and added to your balance once a month rather than every day.
Interest compounds monthly, based on the accrued balance, not just the credited amount. For example, while the interest you earn on Month X will be credited at the end of the following month, the interest of Month X is already taken into account when calculating the total balance that earns interest.
So, even though the crediting occurs later, the interest still compounds monthly, ensuring your total balance grows consistently at the stated AER rate.
Calculation Period
The calculation period for the Lifetime ISA is from the first day of each month until the last day of the same month. However, keep in mind that the interest that has occurred, will be credited to your Lifetime ISA account on the last business day of the following month.
The Plum Bonus for the Lifetime ISA will be calculated daily in the background. However, it will be credited into your Lifetime ISA one year (12 months) after the opening of your account.