Top-paying savings bonds and ISAs
BM Savings (the former Birmingham Midshires) has launched a two-year fixed rate bond, paying 3.6% before tax (2.88% after tax) on a minimum £1 deposit.
The deal is available over the internet only. BM Savings is part of HBOS.
Sainsbury’s new two-year bond is also still available, paying 3.55% (2.84%).
Coventry Building Society pays a slightly higher 3.7% (2.96%) for those willing to tie their money up for slightly longer – until December 2012.
BM Savings has also launched a two-year fixed rate ISA at 3.3% tax free, but you have to run the account through the post.
Northern Rock has a new ISA Breaker 3, minimum £500, paying 2.85% fixed for a year, one of the best deals on offer.
But you can't transfer in existing cash ISAs and at the end of the year you only have easy access to your money for 30 days, after which it becomes a 30-day notice account.
Meanwhile Manchester Building Society has delivered a sharp warning to savers that they need to check the rate they are earning regularly – even though base rate remains at 0.5%.
The society has cut rates by as much as 0.25 percentage points on some accounts closed to new savers. Its Premium Notice Issue 7 now pays 1.56% (1.25%). The first issue of Premier Notice pays just 0.26% (0.21%).
Stroud & Swindon Building Society became part of Coventry Building Society at the start of this month. It has closed some of its top paying accounts – including Bonus Guarantee and Postal Account - to new savers.
Savers at both Coventry Building Society and Stroud & Swindon at the time of the merger will continue to enjoy £50,000 cover at both brands under the Financial Services Compensation Scheme until 30 December. After this, the new European limit of €100,000 (around £83,000) over both brands comes into effect.
A savings account on which the account holder is required to give a period of notice before making a withdrawal or face a penalty, usually a loss of a specific number of days’ interest or pay a fee. Notice periods of 30, 60 or 90 days are common. These accounts usually pay higher than average interest rates and require large initial deposits (£1,000 minimum) so the notice period and penalties are there to discourage withdrawals. Some of these accounts will only allow a certain number of withdrawals a year.
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.
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.
Also referred to as the bank rate or the minimum lending rate, the Bank of England base rate is the lowest rate the Bank uses to discount bills of exchange. This affects consumers as it is used by mainstream lenders and banks as the basis for calculating interest rates on mortgages, loans and savings.