Savings Accounts

[Basil]

I may well be being thick here but even so it makes no sense to me, so could one of you with a 'financial insight' please try to explain to me the reson for the following.

 

There are many instant access savings accounts that have, for today, a reasonable rate of interest say 3.2%. However after they have been in operation for a year you lose the added additional bonus and they drop to maybe 0.5%. Now at the same time the same companies are offering a 'new' offer of 3.2% on new accounts for a year, which (so I have just learned) if you wish you can open and close (or leave open???) the origional account, taking a five minute phone call to complete the exchange.

 

My question, that I am finding hard to understand, is how can it be benificial/ cost effective for the company to do this rather than just continuing to offer these rates on the existing accounts as well as offering them to new comers, does anyony know?

 

Bas

[duetto owner]

because many people open an account and forget about it. these days you have to check all the time and move savings around to where ever the best easy access is. It is just one of the tricks banks use to cash in.

[Motor-caravan]

The word loyalty does not exist anymore, they just hope you will forget about your deposit and they will just pay you the 0.5%, I think one of the foreign based savings banks won't let there existing customers move their money into there new deposit account, you actually have to close your existing account and wait a period then re join as a new customer to get the new rate.

 

I believe if you look at some of the statistics British people just don't change or move there bank accounts from the ones they opened when they first started work, or there fuel suppliers for that matter either, they just don't seem to be bothered to change and the banks and utility suppliers etc. know this and make millions out of it every day, loyalty is just not part of the British system anymore.

[Guest pelmetman]

Fortunately we have no savings to account for anymore(lol)

[Guest Peter James]

Yes ING Direct won't let you open a new account within 6 months of closing an old one.

Incidentally their compensation scheme relies on the Dutch Government paying up if they go bust, wheras most of the others are guaranteed by the British Government who always print enough pounds to bail out the banks. ( Whether the pounds will be worth anything is another matter).

 

I am currently in Dispute with The Nationwide because when I closed my My Save Online Plus account and transferred the contents into a new My Save Online Plus account, I found they had not paid the bonus interest in the final month, even though I had no other withdrawals apart from the closure.

[Basil]

duetto owner - 2011-10-14 3:56 PM

 

because many people open an account and forget about it. these days you have to check all the time and move savings around to where ever the best easy access is. It is just one of the tricks banks use to cash in.

 

Yes I can see that, but I still cannot see how it can be cost effective to allow you open a new account and let you transfer your current savings into it, if you do realise that you are being left behind! Surely it would be in their interest to just up the rate on the existing account, as I said perhaps I am being thick!

 

Motor-caravan - 2011-10-14 8:24 PM

 

The word loyalty does not exist anymore, they just hope you will forget about your deposit and they will just pay you the 0.5%, I think one of the foreign based savings banks won't let there existing customers move their money into there new deposit account, you actually have to close your existing account and wait a period then re join as a new customer to get the new rate.

 

I believe if you look at some of the statistics British people just don't change or move there bank accounts from the ones they opened when they first started work, or there fuel suppliers for that matter either, they just don't seem to be bothered to change and the banks and utility suppliers etc. know this and make millions out of it every day, loyalty is just not part of the British system anymore.

 

The bank I am reffering to just opened a new account and told me to go on line and transfer the money from the existing account to the new one. It took all of 5 to 10 minutes on the phone (including having to listen to a 3 to 4 minute compliance statement) then I immediately went on line and the new account was there to which I instantly transferred all but £1 keeping the origional open.

 

 

Bas

[Dave225]

As mentioned by others they are relying on apathy so your money is getting virtually no interest. According to reports there are literally billions lying in accounts paying either 0.5% or even less. Of course many of these accounts actually have only a small balance so the owners think, 'why bother', but add them all together and it mounts up.

 

If you do open an account paying a bonus write down somewhere the date you opened it with a reminder as to when it will cease. Then in the last month move the money to another account. If you have an account with a small balance then close it and move the balance to another account. Every extra penny is in your pocket not the bank's. Of course many banks make it easy to open an account over the internet but make it difficult to close it as you often have to do this in writing, that is why note the dates.

 

Also make use of your spouse/partner by opening accounts in his/her name and swopping between them.

 

Also, read the small print as some accounts will offer a high rate of interest if you deposit £1000 per month or more, such as salary. However, if you try to just move the £1000 from account to account they will refuse to pay the interest if the money comes from an account, even with another bank, in your or your spouse's name.

 

Banking is known as legalised theft, now you know why.

[Guest Peter James]

Dave225 - 2011-10-16 3:38 PM

 

Also, read the small print as some accounts will offer a high rate of interest if you deposit £1000 per month or more, such as salary. However, if you try to just move the £1000 from account to account they will refuse to pay the interest if the money comes from an account, even with another bank, in your or your spouse's name.

Some may, but Santander don't.

I got the £100 bonus, 5% interest, and commission free ATM withdrawals in Spain*, just by transferring £1,000 per month from another of my accounts online, plus a standing order from one of my current accounts to another with Santander.

 

*Although Santander's 'commission free' ATM withdrawals still cost me more than Nationwide, even after Nationwide started charging, because Nationwide use the Visa rate, wheras Santander make up their own *-)

[CliveH]

We were recommending the NS&I index linked plan that guaranteed inflation plus a little bit extra as a good buy. Simple, no gimmicks and your buying power protected.

 

Max was £15K per person, and you could come out after a year but with a reduced %'age on top of inflation.

 

It has now been withdrawn, but if similar does get re-issued I would recommend it.

 

Compared to the rates on offer now from deposit accounts that are subject to tax and do not match inflation these sorts of plans take some beating - when you can get them!! :-S

 

You can register for updates on the NS&I site:-

 

http://www.nsandi.com/savings-index-linked-savings-certificates

 

 

 

 

[Dave225]

Peter,

 

I suggest you read the letter you received from Santander earlier this month outlining 'Changes in Conditions' for accounts. As of 1st January next year the restrictions I mentioned come into force, and it was Santander I was describing. Like you I get the benefit now but note that my time is limited.

[Mel B]

We moved from Lloyds TSB to Santander a couple of years ago to get the benefits of £100 for switching plus the interest etc and used to play 'ping pong' with Santander to meet the terms and conditions to get the benefit in their accounts, paying in from another account and then a day later moving it back again. :D

 

However, we got fed up to the back teeth of how long it took to move money around when we wanted to access it (5 days instead of 24 hours with Lloyds TSB) and having to always go into town to sort things out instead of just down the road, so we moved back to Lloyds TSB in the end.

 

I assume they must've cottoned on at last! :$

[Colin Leake]

NationWide seem to have got the message to some extent as we have had letters informing us that the bonus period on some of our accounts has been considerably extended. You just have to keep an eye on things and play the game. We keep a list of our accounts with the dates beside them when we may need to change them into new accounts. Don't forget that if one of you is below the tax threshold you should keep the accounts in their name and you can then fill in a form which will mean they will not deduct the tax at standard rate at source thus giving you an effective extra 20 percent on the interest. If like me you are a higher rate tax payer this is especially beneficial.

[Guest Peter James]

Dave225 - 2011-10-17 8:42 PM

 

Peter,

 

I suggest you read the letter you received from Santander earlier this month outlining 'Changes in Conditions' for accounts. As of 1st January next year the restrictions I mentioned come into force, and it was Santander I was describing. Like you I get the benefit now but note that my time is limited.

 

Must admit I haven't read that because I have already had the £100 bonus, 5% interest for a year, so have almost emptied the account. You certainly do have to watch them. I was putting my (British) Santander card in a (Spanish) Santander cash machine, with the promise of 'commission free cash withdrawals', so my guard was down and in an absent minded moment when they ask you if you want to pay for your Euros in pounds or Euros I pressed the pounds button. I realised as soon as I had done it but you can't go back. So they did the conversion there and then and charged commission on top.

Even when Santander didn't charge commission and Nationwide did, it still worked out cheaper to use my Nationwide card in a Santander cash machine, than my Santander card.

[Guest Tracker]

This looks interesting - does anyone have any experience of it please?

 

http://www.thisismoney.co.uk/money/saving/article-2046424/RateSetter-savers-7-9m-peer-peer-firms-year.html

[Guest Peter James]

Peter James - 2011-10-14 11:06 PM

I am currently in Dispute with The Nationwide because when I closed my My Save Online Plus account and transferred the contents into a new My Save Online Plus account, I found they had not paid the bonus interest in the final month, even though I had no other withdrawals apart from the closure.

 

Update: Just received a phone call from the Nationwide (a withheld number!) to tell me they will be paying me the bonus interest in the final month of my MSOP account and backdating it.

 

[Guest Peter James]

Tracker - 2011-10-18 10:29 AM

 

This looks interesting - does anyone have any experience of it please?

 

http://www.thisismoney.co.uk/money/saving/article-2046424/RateSetter-savers-7-9m-peer-peer-firms-year.html

 

Looks a great idea. Like the whole thing has gone full circle with building societies being set up all over again :-)

But I have no experience of it so don't know how well the idea is being implemented (?)

[Mel B]

Been to Yorkshire Bank today to speak to a financial advisor as we have a savings bond with them maturing shortly so wanted to see what they had to offer. Apart from anything else, the chap mentioned some sort of 'income bond' - you pay in a lump sum and this is then invested and gives a guaranteed income for the rest of your life from age 55 onwards at a set minimum rate which will not reduce but could increase each year depending on how well the invested capital does.

 

Once you've paid in the capital though you cannot get it back as it would only be paid out on death, at which point the capital will be paid out less any income which has taken in the time it has been running, which, if the original capital amount has lost value, would mean your family would get less than you actually would have got if you invested it in a normal savings account but, of course, you have the benefit of having a regular income. For example if you paid in £100,000 at a rate of 5%, you'd get an income of £5,000 per year for life. If you took this for 10 years and then 'popped your clogs' you'd have received £50,000 as income, so long as the capital had grown over the years and was then at £130,000 your family would get £80,000, ie £130,000 less £50,000, leaving £80,000.

 

Whilst this isn't really something which we are considering is right for us at our tender ages of 53 and 48 (!) it is something that I've vaguely heard of before but not in a good way!

 

[CliveH]

Be careful here Mel.

 

These things sold by banks on the high street are rarely good value.

 

If you want to PM me with details or email me details I will be happy to give an independent view.

 

[Guest Peter James]

Mel B - 2011-10-18 10:02 PM

 

Been to Yorkshire Bank today to speak to a financial advisor as we have a savings bond with them maturing shortly so wanted to see what they had to offer. Apart from anything else, the chap mentioned some sort of 'income bond' - you pay in a lump sum and this is then invested and gives a guaranteed income for the rest of your life from age 55 onwards at a set minimum rate which will not reduce but could increase each year depending on how well the invested capital does.

 

Once you've paid in the capital though you cannot get it back as it would only be paid out on death, at which point the capital will be paid out less any income which has taken in the time it has been running, which, if the original capital amount has lost value, would mean your family would get less than you actually would have got if you invested it in a normal savings account but, of course, you have the benefit of having a regular income. For example if you paid in £100,000 at a rate of 5%, you'd get an income of £5,000 per year for life. If you took this for 10 years and then 'popped your clogs' you'd have received £50,000 as income, so long as the capital had grown over the years and was then at £130,000 your family would get £80,000, ie £130,000 less £50,000, leaving £80,000.

 

Whilst this isn't really something which we are considering is right for us at our tender ages of 53 and 48 (!) it is something that I've vaguely heard of before but not in a good way!

 

That was quick again Clive - 7 minutes :-)

 

There are no shortage of people willing to invest your money for a comission Mel, but look at what some of them charge http://www.telegraph.co.uk/finance/personalfinance/pensions/8837642/Prudent-savers-hit-by-excessive-hidden-fees-on-pensions.html

 

But you don't need them. Just contact a stockbroker and buy and hold shares yourself. Then you pay no extra charges at all. Its that simple.

 

Of course, there is always a risk when you are investing your own money. The only way you can avoid risk altogether is to become a financial advisor and invest other people's money. Then you really can't lose.