Hi,

I heard on the TV that Banks will soon launch new saving products with higher interests than the current ones in the attempt to raise cash and unblock the market. I think it was a report from the BBC.
This would be good news for savers!
I am thinking of new bonds perhaps since what is available at the moment is not very appealing (7.2%).

Has anybody heard anything similar or.....was I dreaming?

Thanks

You are certainly dreaming if you think that 7.2% is not appealing in the current climate.

and the flip side is they say the interest rate will have to start coming down pretty soon to help the economy which means bank rates may well be coming down for savers and not up!

Skywalker, considering it from the point of view of a small saver, 7.2% on a 12 month bond (ICICI) is ridiculous!

Let's say I have 5K I would like to put in a saving account.
Please tell me the reason why I should tie up my money for 12 months at 7.2% when I can put the same amount in 2 easy access accounts like Alliance&Leicester and Abbey at 8.5% and 8%. Even if the Bank of England cuts the interest I do still have a good margin before the two accounts "only match" ICICI fixed rate. Plus, their flexibility will allow me to move the money around in case I am no longer happy with them.

Does it make sense?


Justbrowsin, you are right and those were my thoughts before hearing the BBC report. If the Banks need cash they might offer more appealing saving accounts or the Government might even decide to further increase the ISA allowance. On the other hand, if Banks keep on merging together (Alliance&Leicester with Abbey-Santander, HBOS with Lloyds, ???) the lack of competition might will reduce the options for savers.

Thanks

Hi Knowlittle,

The thing to remember is that these accounts from Abbey and A&L are there to draw customers in to sell further products. They both require you to pay in a set amount per month, so you would have to withdraw and deposit monthly to retain the rate and the balance. Both also state that you use their switching service to get this account. That means switching your current account to them. In order to use this as a savings account, you will possibly need to get another current account (with no wage deposits and DDs) in order to 'switch' it to the new one.

7.2% on a 12 month bond is considerably easier. On a balance of £5k, the difference in interest is £50 over the year.

Is it worth the hassle?

Hi Mooreaz,

Oh yeah, it is definitely worth!

I did it a couple of months ago. I had a current account with RBS and one day I decided to wake up and stop flushing my money down the loo. I first opened an account with A&L (8.5%). They only require you to transfer in 500 a month. They don't require you to switch and I din't sign up for their switching service. I only have 2.5K sitting there (8.5% is only for the first 2.5 K in your account), which works out 14£/month = 168£/year. After 1 week, I opened an account with abbey (8%). Again, 2.5K sitting there, ca 13£/month = 156/year. They do say you need to switch and I only had my salary credited in by my employer. Nothing more.

To note that:
- I kept all my direct debit payments with RBS,
- I transfer the money around by standing order (Abbey>A&L>RBS)
- I didn't ask for credit cards, overdrafts or other catches.

Where is the hassle?

In comparison to last year, my money is still flexible and I am earning 300+ pounds for doing nothing.

Again, why should one tie up their money in a bond with a 7.2% interest?

Nobody has convinced me yet!

Thanks

If you are prepared to do the work and keep on top of your finances to this extent that there is no need at all to tie up your finances into a 12 month bond.

There is nothing to convince. You are using the system to your advantage by careful planning and execution. This is my only disagreement with your post above. You say you are earning £300+ for doing nothing. On the contrary, you are earning £300+ for your effort upfront researching, understanding and planning of the market.

All I would add is that you are in the minority group of people who are either prepared to or capable of doing this.

Thanks mooreaz.

I would like to say that I am not an expert at all. It doesn't take too much effort to understand that 8.5 is higher than 7.2 and the information is out there for any one to see. Thanks to online banking and automatic payments, my money flows from one account to the other. I don't need to do anything apart from collecting the interest earned at the end of the month. You are right, most people do not shop around. It really takes no effort to make some extra cash but some can't be bothered. We all blame governments and banks for our misfortune though!

A bond with ICICI does not make any sense for me.
Given the alternatives, they better come up with something better if they want to have my 5K.

Out of interest, I have just looked at the A&L one, and you have to pay a £10 fee each month for another account. So does this still make it a better option that ICICI ? (Forgot my calculator!).

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I love saving money - but my wife likes to spend it!

"Out of interest, I have just looked at the A&L one, and you have to pay a £10 fee each month for another account. So does this still make it a better option that ICICI ? (Forgot my calculator!)."

They might have changed the T&Cs, I don't know what you are talking about. It would help if you could clarify please.
I pay no fees and I'm pretty sure about it. Yes, A&L works out much better than ICICI for me.

knowlittle:They might have changed the T&Cs, I don't know what you are talking about. It would help if you could clarify please. I pay no fees and I'm pretty sure about it. Yes, A&L works out much better than ICICI for me.

I am sorry, I cannot find the link now !

So, please tell me the name of the accounts at A&L and Abbey that offer easy access at high rates.

Thanks.

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I love saving money - but my wife likes to spend it!

My pleasure.

A&L Premier Direct Current account (easy access, 8,5% on the first 2.5K on balance). No need to go to the branch, you can do everything online. It does not require you to switch. If you have a friend with the same account you can share with him 50£ reward from A&L.(I got it) If you switch they will give you 100£ but you won't be able to open the Abbey account!

Abbey current account (easy acces, 8% on the first 2.5K on balance). I suggest you read carefully the T&Cs. You need to switch your current account. I opened it at the local branch and I suggest you do the same. I did have my salary paid in the abbey account but I told the manager that I only had 1 direct debit with my old bank and I was going to close it anyway. As a result, the manager wrote a note to the Abbey Switch team saying that there were no direct debits to be transferred. You also have to opt for the credit in option. I refused any overdraft and did not take credit cards.

As a matter of fact I use these accounts as a bond. Only remember to move money in and out to meet the high interest conditions (500 A&L, 1K Abbey per month). I use the cards sometimes at Tesco or to pay my bills at the post office just to make sure nobody from the Banks will say I am not using them as current accounts.

It has worked out pretty well for me.

knowlittle:Hi Mooreaz, Oh yeah, it is definitely worth! I did it a couple of months ago. I had a current account with RBS and one day I decided to wake up and stop flushing my money down the loo. I first opened an account with A&L (8.5%). They only require you to transfer in 500 a month. They don't require you to switch and I din't sign up for their switching service. I only have 2.5K sitting there (8.5% is only for the first 2.5 K in your account), which works out 14£/month = 168£/year. After 1 week, I opened an account with abbey (8%). Again, 2.5K sitting there, ca 13£/month = 156/year. They do say you need to switch and I only had my salary credited in by my employer. Nothing more. To note that: - I kept all my direct debit payments with RBS, - I transfer the money around by standing order (Abbey>A&L>RBS) - I didn't ask for credit cards, overdrafts or other catches. Where is the hassle? In comparison to last year, my money is still flexible and I am earning 300+ pounds for doing nothing. Again, why should one tie up their money in a bond with a 7.2% interest? Nobody has convinced me yet! Thanks

Anything you can do to increase your income by careful financial planning has to be applauded.Well done.

Just looking at your analysis,though I think you are overeggiing the benefits. The claim is £300 for doing nothing and then comparing it to ICICI bond rate.The relevant benefit is £5,000 multiplied by the differential between the rates. i.e. 8.5% minus 7.2% = 1.3%. That gives an after tax benefit of just over £50. p. a.

It is still beneficial and provided you have the time and inclination,other marginal gains can be made via Regular Saver Accounts, Cash ISA's and so on.I think many of us already do this to some extent or other.

The comparison between a one year bond and what you are doing is not very meaningful. Most investors/savers will use a one year bond to tuck away cash for a term after they have dealt with their easy access cash. The rates on bonds have held up well and are historically quite good.I personally class 7.2% on such a product as good,especially given the stock market uncertainties.

I am not a fan of these low level gimmicks to draw custom in. A&L are notorious for using them to attract custom only to drop rates back later.There are often onerous conditions connected with these headline rates and then you get bombarded by cross selling thereafter. (HBOS).

backfoot, I respect your analysis. I only would like to stress these two aspects :

1) look at it from the point of view of a small saver, "Mr T". Let me draw this comparison. Let's say most of the money Mr T saves goes into an ISA. Let's say the best ISA available was the Barclays 6.5% fixed. Mr T invests the full allowance, which will give him ca £230 interest after 12 months. Apart from his ISA, Mr T has 5K to put away. Do you think Mr T would rate £50 as a minor benefit in comparison to the 230£ interest is getting from his ISA? I think Mr T will definitely apply for A&L 8.5% and take on "the hassle" of making sure every month 500£ go in and out. My argument is valid for all the Mr Ts in UK who'd rather be 50£ better off at the end of the Year. Why should they leave it to the banks?

2) Forget about ISAs, let's assume that is always the first option. As I said, I'm not an expert and it should be clear by now I am not a native either. However I do know that the interest a saving product gives you is proportional to its restrictions. By loosing the benefit of flexibility and easy access, bonds should in theory have higher interests. Undoubtedly A&L current account is a better product than the ICICI bond, which is odd. Is this because people at A&L are crazy or maybe ICICI playing down? To be honest, I can't care less. I can't see a single reason to put my money into ICICI . You are right, most banks attracts you with bonuses that won't last. When this happens - when current accounts will offer less than 7.2% - I will join ICICI. Until then I am happy to keep the extra cash, even if it is 5£!

The reason why I opened this thread is to understand whether it is possible that there will be better bonds in the future given the need of cash from the Banks. It seems that many consider ICICI an unbeatable product while I think it can be beaten by simple current accounts.

Thanks

I think you are doing the right thing for your circumstances. I do much the same with a certain amount of my monthly income. There comes a point,where juggling different accounts becomes onerous and can cause problems and costs if you forget to do something. Provided you can keep on top of it,its got to be a sensible approach.

I was just pointing out that the products you have talked about are not directly comparable. Very much apples and pears. For me, I have savings for which it is better to find longer term bonds and the rates are quite attractive at the moment.With the clamour to kick start the housing market,interest rates may well start to fall once inflation calms and fixing some investments at higher fixed rates looks like a decent option to me. These bond rates are still quite high because of the need for liquidity amongst the financial institutions.

Good luck with your savings.