July Savings Roundup

James has a monthly column in Around Town Magazine, which goes out to 50,000 homes in Essex. July’s column is reproduced here for website readers with links to the sources and providers mentioned in his column.

Are Premium Bonds primed for a rate reduction at National Savings & Investments?

NS&I released its annual report at the end of June. At 149 pages you’ll need several cups of tea, or something stronger, to see you through it!

With the government savings provider now responsible for £157bn of the nation’s savings, it accounts for 11% of the savings market and ranks alongside Barclays and HSBC only lagging Lloyds Banking Group (which includes the likes of Lloyds Bank, Halifax, Bank of Scotland, BM Savings), the market leader, who hold over £200bn of savings.

What’s interesting is the funding target it has been set. Each year, HM Treasury gives NS&I a target and a range. Last year it was to grow savings by £8bn (with a range of £5bn – 11bn). It actually achieved £9.8bn. This year, its target is £6bn (with a range of £3bn - £9bn). This is a very low growth of just 3.8% and, when compared to the overall market growth of around 5%, could end up being a decrease in real terms.

Why is this important? Well, NS&I really has three main ways of reducing savings coming in. It can withdraw products, it can reduce maximum balances or it can cut pricing. It has already started on the first two options – it has withdrawn its Investment Guaranteed Growth Bond from sale (which launched in April 2017) and it has reduced the amount you can put in its popular Guaranteed Growth and Guaranteed Income Bonds from £1m to just £10,000.

Given that it’s no notice Direct Saver pays 0.95% (compared to the market leading 1.35%), it’s 1 Year Bond pays 1.50% (versus 2.05% being the best rate) and its 3 Year pays 1.95% (versus 2.35%), it’s not obvious where it could look for rate reductions in its ordinary savings range. However, its Premium Bonds prize fund interest rate is 1.40% which compares very favourably to the best instant savings accounts which offer around 1.25% - 1.30%.

With £75bn now invested in Premium Bonds, they account for almost half of all NS&I’s deposit book and they grew by almost £6bn in 2017/18 tax year. Given the highly attractive rate, they must surely be a prime candidate for NS&I to slow down inflows and I’d be very surprised if there isn’t a rate reduction before the end of 2018. 

NS&I annual report: https://nsandi-corporate.com/performance

Premium Bonds: https://www.nsandi.com/premium-bonds

  

Why straight forward instant savings accounts are a better deal for savers

We’ve noticed an increase recently in instant savings accounts with alluringly attractive interest rates but hidden catches, which can prove costly. 

The number of bonus accounts is on the rise. While we don’t cover these on our own website, other comparison sites do, and we feel they seek to take advantage of savers who forget to move at the end of a lengthy bonus period. Post Office Money pay a headline 1.33% but a whopping 1.08% of this is a 12 month bonus. Coventry Building Society, usually a bastion of fair play, have also joined in with their 1.30% account boosted by a 0.30% bonus, also for a year.

Limited withdrawals are another feature being used. Virgin Money’s Double Take E-Saver (paying 1.30%) is limited to two withdrawals a year, and closing your account counts as a withdrawal. 

So if you take out cash twice, you can’t have access to the remainder of your money until the following year.

Sainsbury’s Bank Defined Access Saver, also paying 1.30%, allows savers three withdrawals a year but, if you make more, your rate will drop significantly to just 0.50%.

RCI Bank and Shawbrook Bank both pay 1.30%, with £100 and £1,000 minimum balances respectively, without any such restrictions, and have appeared in our best buys for the past year. We’d suggest savers looking for consistently attractive interest rates without any catches could do worse than look at these straight forward providers.

 

Shawbrook Bank Easy Access: https://www.shawbrook.co.uk/personal/savings/easy-access/easy-access/

RCI Bank Freedom Saver: https://www.rcibank.co.uk/savings/freedom 

 

Interest rates continue to rise, but slowly!

In our May column, we ran a comparison on interest rates for savings accounts to show that rates had increased during the year, but only by very small margins and nothing like what many commentators were portraying.

The good news for savers is that rates have continued to increase since with increasing competition driving the upward movement. The Financial Times reported last month that the number of savings accounts is at a six year high.

The market can move quickly, so we always recommend that you check our website for the latest rates. At time of going to print, our best paying rates are:

Term 

Interest Rate

Provider

Instant Savings

1.35%

National Counties Building Society

Notice

1.74%

OakNorth Bank

1 Year

2.05%

Atom Bank

2 Year 

2.20%

Bank of London & Middle East

3 Year

2.35%

Bank of London & Middle East

4 Year

2.52%

Vanquis Bank

5 Year 

2.68%

Gatehouse Bank

  

That’s all for this month. As always, this article is reproduced on our website www.thesavings.guru, with links to all the accounts and providers mentioned.

I hope you all continue to enjoy the heatwave and that England continue to progress in the FIFA World Cup! See you again in August.

About The Savings Guru

We help savers get the best deal for their money by providing unique insight in to the savings market.  We help prospective banks apply for a banking licence and we help build customer services, products and marketing for them.  We also work with existing banks and building societies to improve their savings propositions.  This  insider view of savings means we are uniquely placed to help savers.

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