Deal of the week: Get the best pan-European savings rates with Raisin
If you’re fed up with low rates on your savings, you might be able to boost your returns by casting your net further afield. Savings website Raisin allows you to do just that, providing a platform for savers to open accounts in other European countries.
Rates aren’t much better than you’ll find in the UK, but if you think Brexit will push the value of the pound further down against the Euro in the long run, the exchange rate might boost your returns.
Better yet, it’s offering a €75 bonus to new customers.
What’s the deal?
Anyone joining the Raisin savings platform will get a bonus of up to €75 Euros, depending on how long they lock their money away for. Accounts with terms of up to 18 months will earn €25, terms of two to three years get €50, and people locking their money away for more than three years will get €75.
Through Raisin’s website people can directly open savings accounts with Czech, Austrian or Polish banks, with more banks to be added in future.
Your savings can be managed through Raisin, meaning you can manage several accounts through a single site.
All banks on the system are covered by the local country’s deposit protection scheme, protecting savings of up to €100,000, per person, per institution.
Why should I care?
With savings rates so low, any avenue to a better rate is worth investigating.
However, the rates Raisin’s offering aren’t much to write home about. The top account on the site pays just 1.1% interest, and that’s if you’re willing to lock your money away for five years.
But there’s another factor that you may wish to consider. Since Brexit the exchange rate has got more volatile, and if this European rally continues the sterling value of your savings will be multiplied.
The Euro has soared 17% against the pound since the start of the year, largely in response to the UK’s vote to leave, and the following rate cut from the Bank of England. In January one Euro was worth about 74p, but now it is worth just under 86p. If you’d put £10,000 in a Raisin account in January, this exchange rate fluctuation would boost your savings’ value to £11,690, even before considering the interest.
Click the graph below to enlarge:
Source: Bank of England, 22 September 2016
What’s the catch?
Currency effects can work both ways, and there’s no guarantee the Euro’s rally will continue. Some people may even think the Euro’s run means it’s now overvalued, and is more likely to fall against the pound as a result.
- Read Moneywise’s Beginners’ guide to currency exchange.
While your savings up to €100,000 will be covered by European law, that protection only applies to the value in Euros, and offers no cover against exchange rate risk. If the pound falls in value against the Euro, you could end up in a much worse position, even if you were to find an account that pays a much better rate. A 10% fall, which is very unusual in the short term, but quite possible over a five-year savings term would knock £1,000 off a £10,000 investment.
What are my other options?
You could simply stick to UK accounts, which you can find listed on Moneywise. Or, if you wanted access to a Euro-based account, then the likes of Nationwide International offer offshore accounts that are deposited in Euros, though their leading rates are well under 1%.
Where can I find out more?
See Raisin.com for more information.
The practice of locating your financial affairs (banking, savings, investments) in a country other than the one you’re a citizen of, usually a low-tax jurisdiction. The appeal of offshore is it offers the potential for tax efficiency, the convenience of easy international access and a safe haven for your money. However, offshore is governed by complex, ever-changing rules (such as 2005’s European Union Savings Directive) and, as such, is the exclusive province of the wealthy and high-net-worth individuals.