Focus on: Charity Poppy Bond pays 2.4%

Millions of us mark Remembrance Day by giving thanks to those who have lost their lives fighting for their country.

poppy field

Another way to show your appreciation for our service men and women is through Coventry Building Society’s Poppy Bond, which is issued every year.

The latest Centenary issue of the bond offers a generous fixed rate of 2.40% for three years.

The Coventry will make a donation to the Royal British Legion of 0.15% of the total funds invested in the bond by December 31, 2014.

What’s the deal?

Coventry Building Society has launched the latest issue of its Poppy Bond. The three-year bond pays an annual equivalent rate (AER) of 2.40% until December 31, 2017.

The account can be opened with a minimum investment of £1, and the maximum you can invest is £250,000. Your first deposit must be made within 10 days of opening the bond.

If you’re planning on paying in a big lump sum, remember that only the first £85,000 held with any one institution is protected by the Financial Services Compensation Scheme (FSCS).

Each individual has this protection, so a joint account is protected to £170,000.

The Coventry will donate 0.15% of total balances invested in the bond as at December 31, 2014 to the Royal British Legion.

The charity provides financial, social and emotional support to those who have served and are serving in the Armed Forces, as well as their dependants.

Mark Parsons, chief executive of the Coventry said; “It’s simple: the more our members save in this bond, the more we’ll donate to the Legion.”

You can apply for the account online, by telephone, or in branches.

Who’s it good for?

The Poppy Bond is a good choice if you’re looking for competitive returns and are happy to tie up your cash for the next three years.

It might suit you if you’ve got a specific savings goal in mind, such as building up a property deposit, and you want to avoid the temptation to dip into your money.

The Poppy bond is also worth considering if you are looking to supplement your income, as you can choose to receive interest monthly instead of annually if you want to.

Any catches?

Although 2.40% is a great rate given that the Bank of England base rate is still only at 0.50%, there are alternative fixed rate accounts available which pay marginally higher rates of interest.

For example, Punjab National Bank pays 2.55% AER on its three-year bond, although you need a minimum deposit of £1,000.

If you can afford to tie your money up for longer, then Shawbrook Bank pays 2.85% AER on Issue 7 of its four-year fixed rate bond, but you can only open this account with a minimum of £5,000.

You can’t make any withdrawals from Centenary Poppy Bond, and you can’t close the account early either. That means you must be absolutely certain you won’t suddenly need your money at any point during the three-year term.

You’ll need to get your skates on too if you want to invest in a Poppy Bond. It’s only open for a limited period, so could be withdrawn at any time.

Verdict

The Centenary Poppy Bond is a great way to show your support for the Royal British Legion, while also earning generous returns on your savings.

Since Coventry introduced the Poppy range in 2008, it has raised more than £10m for the Royal British Legion.

As the donation is made by the building society, and is separate from the interest you receive, there are no Gift Aid or tax implications for you.

The bond also has the advantage that you can open it with as little as £1, so savers with small or large lump sums to invest can both benefit.

Top tip!

Before investing in any fixed rate account, always think carefully about how long you’ll be tying your money up for.

It’s worth bearing in mind that while 2.40% is a competitive rate now, if interest rates go up over the next three years, better rates might become available.

But if you think rates will stay low for some time to come, then you might want to take advantage of the account now, and know that you are helping charity at the same time.

Please note: any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.

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