Trick or treat? Are the new fixed rate savings bond launches spookily good or likely to give you a fright?
31/10/2017
Trick or treat? Are the new fixed rate savings bond launches spookily good or likely to give you a fright?
On the eve of Halloween, we’ve seen a range of new fixed rate bonds launched from Coventry Building Society, Fidor and Vanquis. Are these a sweet treat or will an investment in to these savings bonds come back to haunt you?
Coventry Building Society’s Poppy Bond
Coventry have launched their annual poppy bond supporting The Royal British Legion (RBL). This year, they are offering 2% on a 3 Year Bond and, for the first time, an ISA version, also paying 2%. Coventry will donate 0.15% of the total balances invested to the RBL. Since 2008, Coventry have donated £14.7m because of its members’ savings in Poppy Bonds.
This year’s offering is not particularly competitive on the mainstream bond with a whole host of providers paying between 2 and 2.25% and seven providers paying more than the combined 2.15%, allowing for the Coventry donation. Savers may feel inclined to invest elsewhere and make a larger donation from the extra interest or match the donation and pocket the extra interest themselves.
However, the ISA version is excellent with only Clydesdale and Yorkshire Bank offering a better rate for a similar term. However, to get the 2.20% on offer there, savers will need to put their money away until the end of January 2021, rather than the end of November 2020 for the Poppy Bond. Savers looking at transferring an existing ISA, or starting a new one, may want to consider the Poppy ISA.
Our verdict: Poppy ISA = Treat
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Fidor
Fidor have come back in to the market with new pricing this week and are also offering a Halloween giveaway of £5 of Starbucks vouchers if you save £100 or more and £10 if you save £200 or more. Normally with savings, the longer you save, the more you are rewarded. However, with Fidor, the rates reduce after 18 months. Although their short-term rates are ok, there’s plenty better in the market.
The exception is their 18 Month Bond paying 1.90% which beats the best 1 Year rates and is only bettered by the Bank of London & Middle East (2.05%) but the £25,000 minimum deposit there and expected profit pay-out (rather than guaranteed interest) will make the Fidor offer more attractive for many savers.
Our verdict: for Starbucks aficionados, the 18 Month Bond is a treat
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Vanquis Bank
Vanquis has been a regular player in the longer-term savings market and often appears in our best buys for 4 and 5 Year Bonds and currently features in our top five for both terms.
It has just launched newly priced 1, 2 and 3 Year Bonds at 1.85%, 2% and 2.25% respectively. The 1 and 3 Year Bonds are both best buys in their terms and the 2 Year is a whisker away from a top five appearance.
Vanquis Bank is a subsidiary of the troubled Provident Financial Group, who have recently seen their share price drop from over £30 a share to below £6, before recovering to £9. A restructure of the doorstep lender has not delivered as hoped and has resulted in the departure of their chief executive.
The competitive pricing may reflect that the group is having to pay more, because of the poor news flow. It is possibly more a sign of the company trying to turn itself around and move forward with its various personal lending businesses which include Satsuma and Moneybarn.
Should any of this put savers off? Given that deposits with Vanquis are covered by the FSCS up to £85,000 (£170,000 for joint accounts) then savers should have no need to worry, if they stick within these limits. Those tempted by the competitive rates should move quickly as we doubt Vanquis will sustain this pricing for long.
Our verdict: Treat – but only within FSCS limits!
For more information: