A good savings deal for you and charity
Affinity saving accounts rarely offer competitive rates, but a new fixed-rate bond from the Coventry in association with The Poppy Appeal aims to help you save and gives to charity at the same time.
The building society’s Poppy Bond pays you 6.25% AER until 31 December 2009 on a minimum deposit of £500. Coventry will also make a donation to The Royal British Legion’s Poppy Appeal equal to 0.25% of all funds in the bond.
Rachel Haworth, head of marketing at the Coventry, says it expects to donate hundreds of thousands of pounds to the charity early next year, thanks to savers opening a Poppy Bond. The Royal British Legion provides financial, social and emotional support to former and current members of the Armed Forces, as well as their dependents.
The Poppy Bond allows you to save between £500 and £250,000, with annual interest either added to your balance or paid away. You can also elect to earn monthly interest, but bear in mind that this must be paid into a separate account and will result in your actual interest rate falling slightly to 6.08%.
Haworth says: “Affinity accounts provide an excellent way for people to give money to causes close to their heart. Now more than ever, it is important for people to make the most of their savings, but for those people who also want to support a worthy cause, the Poppy Bond is the best of both worlds.”
The account can be opened from 31 October online or in one of the Coventry’s 48 branches. Although the account is fixed, emergency access is allowed without notice subject to 90 days loss of interest.
Kevin Mountford, head of banking at moneysupermarket.com, says the Poppy Bond strikes the right balance between providing a competitive rate with a good cause.
“Fixed savings rates are starting to fall and anyone thinking about locking in for a while until the market settles down might want to consider this deal," he adds.
How does it compare?
There are no other fixed-rate bonds linked to charities available at the moment, but even compared to traditional fixed-rate deals, the Poppy Bond stacks fairly up well.
Following the fall of Icelandic-owned saving banks Icesave, Heritable and Kaupthing Edge, all of which were well-known for their competitive fixed-rate deals, the choice on the market for people who want the security of a fixed rate has dried up slightly.
ICICI Bank’s HiSAVE 12-month fixed deal has been one of the best on the market for some time, but is due to be withdrawn this week.
That puts Anglo Irish Bank out in front in terms of rate. It offers two top fixed-rate deals; the first is fixed for 12 months and pays 7.05% AER, while the second is fixed for nine months and pays a slightly higher AER of 7.06%. You’ll need at least £500 to put away to qualify for both of these accounts.
Anglo Irish Bank allows post and telephone access, and the interest you earn will be added to your account on the first anniversary. However, bear in mind that no additional deposits are allowed after opening your bond, and no withdrawals are permitted from the nine-month deal.
The 12-month deal allows early withdrawals in the case of emergency but this will result in a loss of interest.
One key benefit of Anglo Irish Bank is that it is covered by the Irish government’s guarantee to protect 100% of savers’ money.
Another leading fixed-rate account currently on the market is from Birmingham Midshires, part of the HBOS group. Its six-month account pays 6.97% AER on deposits from £1. However, because this account pays interest on a monthly basis, rather than an annual one, you will only receive 6.76% net interest.
Withdrawals and additional deposits are not permitted.
SAGA also offers a six-month account again for deposits of £1. The AER on this deal is 7.02% but you can also opt for monthly interest (6.80%), which will be paid into a nominated bank account. Like many fixed-rate accounts, no withdrawals or additional deposits are allowed during the term.
SAGA also offers a one-year fixed-rate account paying 6.85% AER.
This is a mutual organisation owned by its members and not by shareholders. These societies offer a range of financial services but have historically concentrated on taking deposits from savers and lending the money to borrowers as mortgages, hence the name. In the mid-1990s many societies “demutualised” and became banks. One academic study (Heffernan, 2003) found demutualised societies’ pricing on deposits and mortgages was more favourable to shareholders than to customers, with the remaining mutual building societies offering consistently better rates. In 1900, there were 2,286 building societies in the UK; in 2011, there are just 51.
Where APR is the rate charged for money borrowed, Annual equivalent rate is how interest is calculated on money saved. The AER takes into account the frequency the product pays interest and how that interest compounds. So, if two savings products pay the same rate of interest but one pays interest more frequently, that account compounds the interest more frequently and will have a higher AER.