Coventry launches 3.7% two-year bond

Coventry Building Society has launched a fixed-rate bond that pays 3.7% before tax (2.96% after), which runs until 31 August 2012 on £1 or more. The rate puts it among the best payers for this term. 

Santander pays a slightly higher 3.75% (3%) but you need a minimum deposit of £25,000 to secure this rate. 

The Coventry also pays interest monthly at 2.91% (3.64%) - good news for savers that like monthly income.

The launch follows the withdrawal of NS&I's tax-free savings certificates on 19 July, which leaves savers with no risk-free way to beat inflation (currently running at 5%). See here for the full story.

Meanwhile the compensation limit for savers will be increased at the end of this year. The €100,000  (around £85,000) cover per institution per saver will come into force under the EU Deposit Guarantee Scheme from 31 December.

It will replace the £50,000 cover currently given to savers under the Financial Services Compensation Scheme.

The process of getting the money back to you, if a bank or building society does go under, will be speeded up and savers can expect their money back within seven days. 

Savers who had accounts with merged building societies before they joined forces will also be covered by the €100,000 per institution, They will no longer have separate cover for each merged societies.

For example savers with Nationwide Building Society will have a total of €100,000 cover in their holdings with Nationwide Group, which includes Nationwide, Cheshire, Derbyshire and Dunfermline building societies – not €100,000 with each one.