Archive for the ‘Savings’ Category

Savings Focus: Masthaven Bank launches with some market leading fixed rate bonds

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Last updated: 14/02/2017

Masthaven Bank is the latest bank to launch a range of fixed term deposits to the UK retail market and based on its initial range of products, looks set to be a real challenger, even amongst the challenger banks. So, if you have a minimum of £500 that you can tie up for at least 6 months, and you want to take advantage of some of the highest savings rates on the market, their first tranche of products is certainly worth reviewing. Here we take a closer look at what the bank has to offer savers.

Lending history

Masthaven is a brand new bank and the first new bank to be awarded a banking licence in 2016. However, they are not completely new to lending. Since 2004, they have been providing a flexible and personalised approach to lending in the specialist areas of bridging loans and secured lending (second charge mortgages), areas in which they remain one of the most competitive propositions in the market.

UK based fixed rate savings accounts

Headquartered in London, and with a knowledgeable and experienced team of savings specialists based in their UK contact centre, they have just launched their retail banking arm with a highly competitive range of fixed term and flexible term fixed rate savings accounts.

Masthaven Bank Fixed Term Bonds – up to 2.06% AER

Masthaven Bank’s fixed rate savings accounts are aimed at savers who are able to tie their money up for a fixed period, and are also looking for a fixed and regular rate of interest. They have four fixed term products, with terms ranging from 1 year to five years, and as you would expect, the rate of interest available increases with the length of term you choose: their 1 Year Fixed Term Bond pays 1.25% AER, whilst their 5 Year Fixed Term Bond offers a market leading 2.06% AER.

Summary of Fixed Term Bond rates

A summary of Masthaven’s fixed term bond rates is as follows:

  • 1 Year Fixed Term Bond:     1.25% AER
  • 2 Year Fixed Term Bond:     1.58% AER
  • 3 Year Fixed Term Bond:     1.76% AER
  • 5 Year Fixed Term Bond:     2.06% AER

Click here for more information on the Masthaven Fixed Term Bonds »

Masthaven Flexible Term Saver – create your savings account

Masthaven also offers the option to choose your own term, with their Flexible Term Saver. Terms can be selected in whole months, ranging anywhere between 6 months and 60 months, with rates between 0.60% AER and 1.96% AER respectively. This means you can tailor to the month the exact term you want, whilst also benefitting from a top rate of interest which is fixed for term of the account.

The Flexible Term Saver is an innovative account designed for customers who may be saving for a key event, such as a holiday of a lifetime, a wedding, university fees or a deposit for a house. The flexibility around term choice allows you to create a savings account based on your own needs and timeframes, so that you take advantage of a fixed interest rate but without having to sacrifice a competitive rate of return. Example interest rates are as follows:

  • 15 Month Flexible Term Saver:     1.33% AER
  • 18 Month Flexible Term Saver:     1.42% AER
  • 30 Month Flexible Term Saver:     1.67% AER
  • 48 Month Flexible Term Saver:     1.91% AER

See rates and find out more about the Masthaven Bank Flexible Term Saver »

How much can you save?

All Masthaven savings accounts have a minimum balance of £500 and a maximum balance of £250,000 per account. You may have as many savings accounts with them as you want at any one time, however there is a maximum total balance of £1,000,000 that can be held across all of their savings accounts. Any funds held jointly will count towards each of your own individual limits.

Interest

Interest will be calculated from the day on which you make your deposit and is calculated daily based on the funds held in your account. You can have interest paid either monthly or annually and importantly, interest can either be paid into an account of your choice, or added to the balance of your fixed rate bond account, in which case you can benefit from compound interest. Interest will be paid to you gross, without tax deducted.

Account set up

Each account can be set up as a single or joint account. Accounts are opened online and access to account information is online or via telephone. As with most fixed term accounts, no early withdrawals are permitted.

Financial Services Compensation Scheme

Masthaven Bank is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority. As a UK regulated bank your deposits are protected up to £75,000 by the Financial Services Compensation Scheme (‘FSCS’). For further information about this protection you can read ‘How FSCS protects your money’ or you can visit the FSCS website.

The UK’s only owner-managed bank

Masthaven Bank was awarded the first 2016 retail banking licence back in April, and launched officially on 28th November with the suite of fixed term savings accounts detailed above. It aims to offer an alternative to the one-size-fits-all approach of many conventional banks, and is the UK’s only owner-managed challenger bank with a partnership model which at launch sees 80% of employees already shareholders in the business.

The Board of Directors is as follows:

  • The Chairman is Peter Harrison, ex-CEO of the UK Financial Services Practice at KPMG, Chairman of the Audit Committee of a FTSE 250 Company and ex-Chair of the Audit Committee for CIT Bank Ltd.
  • Andrew Bloom is CEO. After working for KPMG and Strand Hanson he founded Masthaven Finance in 2004. Andrew has built Masthaven into an award-winning mortgage, development finance and bridging finance provider.
  • Managing Director is Jon Hall who joined the business in December 2014. Previously Mr Hall was Chief Executive of Saffron Building Society where he grew the mutual’s ranking from 31st to 13th largest in the UK and the largest in Eastern England.
  • Three Non-Executive Directors join Masthaven’s Board: Anne Gunther, previously Chief Executive of Norwich & Peterborough Building Society and Standard Life Bank; Ashley Machin, who most recently was Chief Digital Officer at TSB Bank and Michael Baker, FD of Joint Ventures at the William Pears Group.

Access to this expert leadership team along with a strong team of support staff approaching 100 in number, combined with straightforward digital services, means Masthaven will offer what it calls human digital banking.

Click here to compare all Masthaven Bank fixed rate savings accounts »

 

Please note that Masthaven Bank fixed rate bonds are fixed term products which means you cannot withdraw your funds or close your account until the end of the agreed term.

AER stands for the Annual Equivalent Rate and illustrates what the interest rate would be if interest was paid and compounded once each year.

Fixed rate bond holders face significant falls: our roundup of the latest fixed rate options

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Last updated: 17/01/2017

For those bond holders with maturing accounts, many are facing significant falls in the level of returns on offer when comparing their maturing account with the current crop of fixed term deposits on offer, especially those coming out of four or five year fixed rate bonds. And yet despite this low interest rate environment, fixed rate bonds continue to play an important role for many savers. With this in mind, we give you a roundup of our latest fixed rate bond offers, as well as take a look at some of our most popular alternatives.

Fixed rate bonds a popular choice

With interest rates looking set to continue at their record lows for some time to come, and whilst top instant access accounts only offer around 1.0% AER, savers looking for the certainty of knowing exactly how much they will receive, when and for how long, still look towards the fixed rate bond which remains a popular choice for those wanting to combine a fixed return with full capital protection.

Short term: up to 2 years

Fixed rate bonds

For those looking at the shortest fixed terms, Habib Bank offer a 6 Month Fixed Rate Deposit paying 0.80% AER, whilst new entrants Zenith Bank and Masthaven Bank offer 1.30% AER and 1.35% AER respectively if you can tie your money up for a year with their 1 Year Fixed Term Deposit. Minimum deposits start as low as £500 and your deposits are eligible for the Financial Services Compensation Scheme (FSCS). Interest is paid at maturity and as is standard with most fixed term deposits, no withdrawals are permitted during the term of the bond. Zenith Bank also offers a top rate of 1.52% AER if you fix for 2 years with their 2 Year Fixed Term Deposit account, with deposits available from £1,000, whilst Masthaven’s 2 Year Fixed Term Bond is slightly more competitive at 1.53% AER with a £500 minimum balance.

Fixed rate Cash ISAs

Bank of Cyprus UK offer market leading rates in this category, with their 1 Year Fixed Rate Cash ISA paying 1.05%, and marginally higher at 1.10% AER if you want to fix for 2 years, both with a low minimum deposit of just £500. These accounts are available to anyone aged 16 or over and interest is paid annually into your Cash ISA. ISA transfers are permitted and eligible deposits are covered by the UK FSCS. Aldermore Bank offers a market leading 1.20% AER on their 2 Year Fixed Rate Cash ISA but the minimum is slightly higher at £1,000. Aldermore Bank is the five time winner of the Consumer Moneyfacts ISA Provider of the Year Award (2011-2015).

Medium term: 3 to 4 years

Fixed rate bonds

In the three to four year space, our top deal comes from the new kid on the block, Masthaven Bank, and their 3 Year Fixed Term Deposit, currently paying 1.67% AER. The minimum deposit is £500 and interest can be paid monthly or annually. For those looking specifically for monthly interest, United Bank UK’s 3 Year Fixed Term Deposit pays a slightly lower rate of 1.55% AER, but also offers a monthly interest option, in addition to having it paid annually or at maturity. No withdrawals are permitted from these accounts.

Leading our tables over 4 years is Vanquis Bank offering 1.85% AER and Masthaven Bank offering 1.84% AER with their 4 Year Fixed Term Bond, for those with between £500 and £250,000 to deposit. Both accounts have annual or monthly interest options, but no withdrawals are permitted during the term. Accounts can be opened in sole or joint names.

Fixed rate Cash ISAs

Bank of Cyprus UK continues to be very competitive in the fixed rate Cash ISA market with their 3 Year Fixed Rate Cash ISA, currently paying 1.20% AER and with a respectable minimum deposit of just £500. Aldermore are offering a higher rate of 1.25% AER fixed over 3 years with their 3 Year Fixed Rate Cash ISA whilst both of these accounts allow you to transfer in existing ISAs from other providers, and can be set up easily online.

Longer term: 5 years+

Fixed rate bonds

Although the highest rates are still rewarded with higher savings rates in return for locking your money away for longer, the interest rate gap between short term and longer term is also at record lows. For those prepared to commit their savings for five years, Vanquis Bank’s 5 Year Fixed Rate Bond is paying 2.00% AER with a minimum deposit is £1,000 whilst Masthaven Bank’s 2.01% AER is currently market leading and interest can be paid monthly or annually.

Fixed rate bond holders facing significant falls

Just over a year ago we were talking about savings rates of around 2.10% for a 1 year fixed rate, 2.35% for a 2 year fixed whilst a 3 year would get you 2.70% AER fixed. Our best rates above will earn you 1.35%, 1.53% and 1.61% AER respectively, equivalent to reductions of between 35% and 40%. And the situation is even worse for longer term bond holders. We have many customers who are coming out of five year fixed rates where the rate on offer was around 4.60%. Now, they are looking at 2.01% as the market leading five year fixed rate, a significant reduction in interest of 56%. For someone with a maturing lump sum of £50,000, this is equivalent to their income dropping from £2,300 per year to £1,005.

Investing for fixed income

It is therefore perhaps unsurprising that many fixed rate savers have had to consider a wider range of options than ever before in the search for higher levels of income, and in doing so this inevitably involves considering investments and the associated risk to your capital. One of the main issues facing those in this situation is that most traditional income investments only offer a variable income, and so comparing with a fixed rate bond can be more difficult. This is perhaps one reason which helps to explain why the Enhanced Income Plan from Investec has been such a popular plan with our customers.

Fixed income, fixed term

The plan offers a fixed income, which is paid to you regardless of the performance of the stock market, whilst the investment also has a fixed term, so you know exactly how much you will be paid and for how long. The current issue offers 5.04% fixed income each year, which is paid as 0.42% each month.

In addition to offering a fixed income, this plan is different to most investment funds in that is also offers some capital protection against a falling stock market. Known as conditional capital protection, this means that your original investment is retuned in full unless the FTSE 100 Index falls by more than 50% during the plan term. If it does, and also finishes the fixed term lower than its value at the start of the plan, your initial investment will be reduced by 1% for every 1% fall, so you could lose some or all of your initial investment.

The Enhanced Income Plan is also available as an ISA and accepts ISA transfers with a minimum investment of £3,000.

Cash versus investment – understand the risks first

One of the main differences between the fixed rate bond and the fixed income investment is that with the former, your capital is treated as a deposit and is therefore protected and returned to you at the end of the term, subject to the bank in question remaining solvent. You also have access to the deposit protection available from the UK FSCS.

An investment into the Enhanced Income Plan is used to purchase securities issued by Investec Bank plc, which means the bank’s ability to meet and repay their financial obligations is equally an important consideration. However, since this is not a deposit, you are not eligible for compensation under the FSCS for default alone, and as highlighted above, the return of your capital is also dependent on the performance of the FTSE 100 Index and so is at risk.

Risk v reward

The principle of risk versus reward means that the search for higher fixed returns usually leads to the need to consider putting your capital at risk. A good benchmark for assessing your fixed rate investment is to compare what you could get from a fixed rate deposit over a similar timeframe, and then consider whether you are prepared to accept the level of risk to your capital in return for the higher fixed rate.

Our best five year fixed rate is currently offering 1.90%. By accepting risk to your capital, the Investec plan offers 5.04% over six years, thereby offering more than two and half times the level of income each year. The main risk is that your capital is at risk if the FTSE 100 Index falls below 50% and so once you have understood how the plan works, the decision then is whether you are comfortable with putting your capital at risk in return for the higher fixed return on offer.

 

Compare fixed rate bonds »

Compare fixed rate Cash ISAs »

Find out more about the Investec Enhanced Income Plan »

 

No news, feature article or comment should be seen as a personal recommendation to invest. Prior to making any decision to invest, you should ensure that you are familiar with the risks associated with a particular investment. If you are at all unsure of the suitability of a particular investment, both in respect of its objectives and its risk profile, you should seek independent financial advice.

Tax treatment of ISAs depends on your individual circumstances and is based on current law which may be subject to change in the future. Always remember to check whether any charges apply before transferring an ISA.

The Investec Enhanced Income Plan is a structured investment plan which is not capital protected and is not covered by the Financial Services Compensation Scheme (FSCS) for default alone. There is a risk of losing some or all of your initial investment. There is a risk that the company backing the plan or any company associated with the plan may be unable to repay your initial investment and any returns stated. In addition, you may not get back the full amount of your initial investment if the plan is not held for the full term. The past performance of the FTSE 100 Index is not a guide to its future performance.

AER stands for the Annual Equivalent Rate and illustrates what the interest rate would be if interest was paid and compounded once each year.

5 percent fixed for 12 months – our best selling current account…

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Last updated: 25/10/2016

With more and more high interest current account providers announcing reductions to their interest rates, the 5% fixed for 12 months from Nationwide now looks even better than before. Here we take a more detailed look at the pressures savers are facing in these difficult economic conditions, as well as help reveal why the FlexDirect continues to be our best selling current account.

Nationwide FlexDirect account summary

  • 5.0% AER (4.89% gross p.a.) fixed for 12 months
  • Paid on balances up to £2,500, no interest paid above this amount
  • 1.0% AER variable on balances up to £2,500 after 12 months
  • You must pay in £1,000 per month to qualify
  • No requirement to set up direct debits
  • Contactless Visa debit card available
  • 12 month fee-free arranged overdraft available
  • Free text alerts to help you manage your account
  • No monthly account fee
  • Covered by the Current Account Switch Guarantee and Financial Services Compensation Scheme

Savings rates in dire straits

Our market leading instant access account (RCI Bank Freedom Savings Account) is currently paying 1.0% AER variable, whilst our best long term fixed rate (Vanquis 5 Year Fixed Rate Bond) will get you 1.95% AER – that’s an increase of less than 1% per year for tying up your money for five years, albeit the rate from Vanquis is fixed for the full term. Then of course there are a load of accounts offering rates in between these, mainly fixed rate bonds of different durations. It may be repeated far too often, but unfortunately it makes it no less true – savings rates are at record lows – and it would seem this at the very least, this is set to continue, and possibly get even worse.

Inflation into the mix

If record low savings rates weren’t enough to worry about, the Consumer Price Index rose from 0.6% to 1.0% in September, the biggest monthly rise in more than 2 years and its highest level for 22 months. Since this rise, less than half of all savings accounts are able to match or beat this level, which means many savers are seeing the value of their cash eroded in real terms. According to the Bank of England, the average easy access account now pays under 0.3%, and with further cuts to savings rates on the cards, inflationary rises are a serious cause for concern.

High interest current accounts

Although historically, current accounts offered little if anything in the form of interest on your account balance this has changed significantly in the last few years, and against this harsh economic backdrop for savers, it is hardly surprising that the high headline rates of interest on offer have made compelling reading. Indeed, high interest current accounts have been one of the most popular safe havens for those looking to combine all of the usual account features you would expect from a full banking service with a highly competitive rate.

5% fixed for 12 months

Top of the rate table is Nationwide’s FlexDirect account which offers 5.0% AER (4.89% gross p.a.) fixed for the first 12 months. This rate is paid on all in-credit balances up to £2,500 and you must pay in a minimum of £1,000 per month to qualify (this excludes internal transfers). After 12 months the rate reverts to 1.0% AER variable. There is no monthly account fee, and with top rates on instant access and fixed term deposits ranging between 1.0% and 1.95%, it is easy to see why this account has attracted so much attention.

Others falling short

TSB Bank also offers 5.0% AER but this is variable and is only paid on balances up to £2,000, rather than the £2,500 on offer from Nationwide. The rate is, however, paid ongoing rather than for a fixed period of 12 months. But TSB has recently announced that with effect from 4th January 2017, the rate will reduce to 3.0% AER variable and will only be paid on balances up to £1,500. This follows in the footsteps of Santander who announced back in August that the 3% top tier interest rate on its flagship 1|2|3 Account would be halved to 1.50%, taking effect from 1st November this year. Lloyds has also announced that the rate on their Club Lloyds current account will halve from 4% to 2% in January 2017.

So whilst Nationwide’s main competitors are reducing their rates, this makes the FlexDirect offering even more competitive, especially since the rate is fixed for the first 12 months. Currently we are not aware that Nationwide has any plans to reduce its rate, although they state their rates are constantly under review.

Fair Investment view

Commenting on the account, Oliver Roylance-Smith, head of savings and investments at Fair Investment Company said; “The FlexDirect from Nationwide offers a market leading interest rate on balances up to £2,500, although the £1,000 you are required to pay in each month is at the higher end compared to other current accounts offering competitive interest rates. There is also no monthly account fee, so all of the interest earned goes straight into your pocket. Although the rate drops to 1% variable after the first 12 months, this is still considerably more than most other current accounts and on a par with some of the top instant access accounts currently on offer. With the Current Account Switch Guarantee running alongside, there really is no excuse to finding out more.

Santander still the top choice on larger balances

With effect from 1st November, Santander’s 1|2|3 account offers 1.50% AER variable on all balances up to £20,000. If you were to compare this with the best instant access accounts on offer, it would be a clear market leader, albeit with the cap on the amount you can earn interest on. You can also earn up to 3% cashback on selected household bills such as council tax, gas and electricity, broadband, mobile phones and more. You must pay in at least £500 per month and have at least two active direct debits to receive interest and cashback. There is also a £5 monthly account fee, which may be cancelled out if you make the most of the cashback on offer – their site has a simple calculator to help you work out how much cashback and interest you might earn, versus this monthly cost.

A note on the Personal Savings allowance

Remember that since the start of the current tax year (6th April 2016), most people receive a personal tax free allowance for interest earnings on savings. For basic rate taxpayers this is set at £1,000 each tax year, whilst higher rate taxpayers get an allowance of £500. Beyond these allowances, basic rate taxpayers will pay 20 percent on savings income and higher rate taxpayers pay 40 percent. Additional rate tax payers will not receive a personal allowance. Also note that income from ISAs does not count towards your Personal Savings Allowance (it’s already tax-free).

An important part to play for savers?

Even with the Personal Savings Allowance, there is no doubt that every penny counts in these days of record low rates, creeping inflation and economic pressures all round, and so the returns on offer from the best high interest current accounts cannot be ignored. 5% on £2,500 equates to £125. Our market leading instant access currently offers 1.0% and so you would need £12,500 in that account to achieve the same level of return. Although these are first and foremost current accounts, they also have every right to be considered amongst the range of options for savers.

7-Day Switch

Apart from the low interest rates generally on offer, one of the main reasons many of us have stayed with our current account provider far longer than other type of account, is the fear that something would go wrong with the direct debits associated with our account. However, since the introduction of the current account switch service in September 2013, the whole process of switching banks is easier and will now be completed in seven working days – the 7-Day Switch.

Over 40 banks have signed up to the service (including Nationwide and Santander), which makes sure that all outgoing payments, such as standing orders and direct debits, will be transferred across to your new bank on your behalf. The service also guarantees that should any incoming payments be sent to your old account in error, these will be automatically redirected to your new account for up to 36 months after your switch date. This means the banks do all the hard work for you, making switching smoother and faster.

To switch or not to switch?

The 7-Day Switch rules therefore offer peace of mind to anyone considering a switch from their current account provider. However, you don’t necessarily have to switch your current account – although Santander requires you to have at least two active direct debits, Nationwide does not and so if maximising interest is your top priority, you could also consider taking one of these accounts out in addition to your existing current account, thereby leaving everything you already have in place. You will of course have to make sure you pay in the minimum amount required each month in order to earn the level of interest on offer.

Could you get more from your current account?

Many existing accounts pay no interest at all, so with up to 5.0% available it is always worth comparing what the market has to offer. Staying put simply because you have all of your direct debits set up is no longer a valid reason, especially since the introduction of the current account switch guarantee (see below for further details). As a minimum, these accounts should be considered an important contributor to the overall returns from your savings.

 

Click here for more information on Nationwide’s FlexDirect account »

Click here for more information on TSB’s Current Plus account »

Click here for more information on Santander’s 1|2|3 account »

Click here to compare high interest current accounts »

 

Please note that all rates and charges quoted are subject to change.

Overdrafts are only open to customers aged 18 or over and are subject to approval.

AER stands for Annual Equivalent Rate and illustrates what the interest rate would be if interest was paid and compounded once each year.

Gross is the interest you will receive before tax is deducted.

Savings Focus: Investec Retirement Deposit Plan offering 3.75% each year

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Last updated: 08/11/2016

There’s no denying that the outlook for traditional Cash ISAs at the moment is bleak. Not only are savings rates at rock bottom, but banks don’t really want the additional cost of having to run the Cash ISA tax wrapper that goes with it – most high street banks simply do not want your Cash ISA money – and therefore for those that do, they only need to offer a low rate of interest to get it. For those looking for alternatives, this new launch Cash ISA from Investec Bank plc offers an interesting way to receive tax efficient withdrawals each year, combined with the potential to receive back an amount equal to your initial deposit at the end of the fixed term. Here we take a closer look to see how it stacks up.

Traditional Cash ISAs offering low returns

The banking and economic environment continue to create challenges for savers, brought about in the main by the impact of record low interest rates on our savings and our future. The current market for traditional Cash ISAs still offers some of the lowest rates ever seen. In fact, you are hard pushed to get much over 1.50% in return for tying up your money for five years, which is why many looking for a fixed rate are considering shorter term options.

Currently our most popular deals come from Aldermore Bank, paying 0.95% AER, 1.15% AER and 1.20% AER on their 1, 2 and 3 year fixed rates respectively. You can save from £1,000 and can transfer existing ISAs. Our leading instant access account is the AA Cash ISA Easy Access, paying 0.75% AER variable.

Cash ISA alternative – potential for higher returns

By linking the amount of capital that is returned to you at the end of the plan to the FTSE 100 Index, this structured deposit plan offers the potential for higher returns than those that are available from more traditional products such as fixed rate Cash ISAs. So the upside is the potential for higher returns, whilst the downside is that since your return is linked to the performance of the UK stock market, unlike a fixed rate it is not guaranteed. This is the trade off for the opportunity to receive higher overall returns.

Fixed payments of 3.75% each year

The Investec FTSE 100 Retirement Deposit Plan has a fixed term of 6 years and pays a fixed payment of 3.75% each year, paid to you regardless of what happens to the FTSE 100 Index. Over the six year term this equates to 22.5%.

Capital returned at the end of the plan

The aim of the plan is to withdraw fixed annual payments from your initial deposit over 6 years, and repay the remainder of your initial deposit plus an additional return at maturity. The amount of capital returned at the end of the plan therefore, is either the remaining 77.5% of your initial deposit, or the remaining 77.5% plus an additional return of 22.5%.

This additional return is paid provided the FTSE 100 is higher than 90% of its level at the start of the plan, so the Index could have fallen up to 10% and you would still receive this additional return. If the FTSE has fallen by 10% or more, the amount returned to you will only equal the remaining amount of your initial deposit (i.e. no growth will be achieved).

‘Defensive’ feature

Since the additional return on offer is dependent on the performance of the FTSE 100 Index, the defensive feature of the plan is an important one to understand. Rather than the Index having to finish higher than its value at the start of the plan, the Index can fall up to 10% and the fixed return of 22.5% is still paid.

The use of averaging

When calculating the final level of the FTSE 100 Index the plan takes the average of the closing levels of the Index on each business day during the last 6 months of the plan term. The use of averaging can reduce the adverse effects of a falling market or sudden market falls whilst it can also reduce the benefits of an increasing market or sudden increases in the market during the last six months of the plan.

Returns compared

The 3.75% annual payment is well over double any fixed rate on offer from a traditional Cash ISA. However, it is important to remember that in the case of a traditional fixed rate Cash ISA, your initial deposit is always returned in full at the end of the fixed term. Although the annual payments from the Investec plan are fixed and paid each year, it is only if the additional return is paid at the end of the plan term would you be better off overall.

Capital protection

Since the plan is a structured deposit you will receive the remainder of your initial deposit back in full at the end of the six year term regardless of what happens to the FTSE 100 Index, and as long as the deposit taker for the plan, Investec Bank Plc, is able to repay your money. The bank’s ability to stay solvent and repay your capital is known as counterparty risk and is the same risk you take with any capital deposited with an institution with a UK banking licence.

In the event that Investec is unable to meet its liabilities, this deposit plan is eligible for Financial Services Compensation Scheme (FSCS) protection. Therefore, eligible depositors could be entitled to claim up to £75,000 per person.

Investec Bank plc profile

Investec is an international specialist bank and asset manager with its main operations in the UK and South Africa. Established in 1974, they currently employ around 9,000 people and as at 31st March 2016, look after £121.7 billion of customer assets. They provide a range of financial products and services and specialise in a number of areas, particularly within the banking sector. Their banking operation looks after £24.0 billion of customer deposits and they are also a market leading provider of investment plans and structured deposits in the UK.

Cash ISA only

Please note that this plan is only available as a Cash ISA. The plan also accepts ISA transfers, from both Cash ISAs and Stocks & Shares ISAs and has a minimum deposit of £3,000 and the maximum deposit for a new current year ISA (2016/17) is the ISA limit of £15,240.

Fair Investment view

Commenting on the plan, Oliver Roylance-Smith, head of savings and investment at Fair Investment Company Limited, said: “There’s no getting around the fact that the rates on offer from traditional Cash ISA savings products remain at record lows, and this looks set to continue. This is a real challenge for savers. By combining capital protection, fixed annual payments and the potential for an additional 22.5% return at maturity, this new launch from Investec offers an interesting alternative. The best long term fixed rate Cash ISAs are currently only offering a little over 1.50%, so if this plan pays the growth return at maturity, your overall return will be well over double these top deals.”

He continued: “Both are treated the same for FSCS purposes (up to the usual deposit scheme limits) but unlike the fixed rate Cash ISA, the maturity payment on the Investec plan is dependent on the FTSE and is not therefore guaranteed. So if you are prepared to sacrifice a guaranteed rate of interest, then the potential higher returns on offer could be appealing in the current economic climate.”

This plan is open now for new ISA deposits up to the £15,240 allowance for the current tax year (2016/17), as well as Cash ISA and Stocks & Shares ISA transfers. The minimum investment is £3,000.

 

Click here for more information about the Investec FTSE 100 Retirement Deposit Plan »

 

No news, feature article or comment should be seen as a personal recommendation to invest. Prior to making any decision to invest, you should ensure that you are familiar with the risks associated with a particular investment. If you are at all unsure of the suitability of a particular investment, both in respect of its objectives and its risk profile, you should seek independent financial advice.

Tax treatment of ISAs depends on your individual circumstances and is based on current law which may be subject to change in the future. Always remember to check whether any charges apply before transferring or switching an ISA.

This is a structured deposit plan that is capital protected. There is a risk that the company backing the plan or any company associated with the plan may be unable to repay your initial capital and any returns stated. In this event you may be entitled to compensation from the Financial Services Compensation Scheme (FSCS), depending on your individual circumstances. In addition, you may not get back the full amount of your initial deposit if the plan is not held for the full term. The past performance of the FTSE 100 Index is not a guide to its future performance.

AER stands for the Annual Equivalent Rate and illustrates what the interest rate would be if interest was paid and compounded once each year.

Summer sizzlers: our selection of the hottest deals on offer this summer

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Last updated: 12/09/2016

As the Olympic Games continue to keep us gripped with excitement, it’s not just the GB Team that’s sizzling this summer. The news that the Bank of England base rate has fallen to a new record low has meant the need for both savers and investors to review their options has really heated up. So to help you stay on top of all the action, we bring you a selection of the hottest savings and investment deals on offer this summer.

Interest rates

Since the recent reduction to a new record low for the Bank of England’s base rate, savings rates have started to fall at a significant pace. Needless to say the outlook for savers is not good, but it’s not just savings rates that are falling. Bond yields also face record lows whilst the share prices of many of the higher yielding FTSE 100 companies have gone up as more investors search for income. So the outlook is bleak for both savers and investors, and the need to make the most out of your capital has suddenly become priority number one this summer.

So what’s hot?

For many savers, longer term savings rates are not offering enough of an increased rate to justify tying your money up for longer, and so we see most activity is in the short term space, from instant access up to 2 years. Whilst as you might expect, with interest rates coming down, many savers inevitably start to consider taking on more risk with their capital in the hunt for higher returns, so we also cover some of our income and growth investment best sellers.

Combining every day banking with up to 5.0% interest

The fact remains that loyal bank customers are rarely rewarded and so usually face far lower rates on their savings compared to those who shop around. Well this is now also true of current accounts. Although historically these accounts have been renowned for offering very low rates of interest, this has started to change significantly in the last few years with some offering very competitive returns indeed.

Low monthly balance top pick – Nationwide’s FlexDirect account pays 5.0% AER fixed for the first 12 months on all in credit balances up to £2,500. Thereafter the rate reverts to 1.0% AER variable.

Higher monthly balance top pick – Santander’s 1|2|3 account pays 3.0% AER variable on your entire balance up to £20,000 provided your balance is at least £3,000. This rate is set to change to 1.50% AER on all balances up to £20,000 from 1st November 2016. It also offers some competitive cashback rates on a wide selection of household bills. A £5 per month account fee applies.

Instant access – market leading 1.20% AER variable

When longer terms savings rates are low, instant access accounts see far greater inflows as savers use this as a safety net whilst reviewing other options. The Freedom Access Account from RCI Bank is a market leading instant access account paying 1.20% AER variable and you can save from £100 up to £1m, with free and unlimited payments and withdrawals. RCI Bank is part of the Renault global banking group and so the first €100,000 equivalent is protected by the French deposit guarantee scheme (FGDR) rather than the UK FSCS.

For those where the UK FSCS is more of a priority, Aldermore’s Easy Access Account offers 1.00% AER variable on balances from £1,000 to £1m, whilst the B account is an innovative new banking service from Clydesdale and Yorkshire Banks which combines a current account with an instant access account, the latter offering 1% AER variable on all balances. The interest rates alone are worth a closer look but this account might particularly appeal to the more technically savvy saver due to the intuitive B banking app which forms part of the overall proposition.

Fixed rate bonds – short terms hit the top spots

Whilst instant access offers 1.20%, a top deal on a 5 year fixed rate is only offering 1.0% per year more at 2.20% AER. These are without doubt some of the lowest long term fixed rates in history and this 1% margin has resulted in more money staying in shorter term fixed rates. Here are our current top picks for those who can tie their money up for between 6 months and 3 years, all of which are eligible for the UK’s FSCS:

6 months top pick: Habib Bank 6 month Fixed Rate Deposit, offering 0.80% AER

1 year top pick: Bank of Cyprus 1 Year Fixed Rate Bond, paying 1.30% AER

2 year top pick: Bank of Cyprus 2 Year Fixed Rate Bond, paying 1.40%

3 year top pick: Bank of Cyprus 3 Year Fixed Rate Bond, paying 1.50%

The minimum deposit with Bank of Cyprus accounts is £10,000 whilst for Habib Bank it is £1,000. For those looking for a 1, 2 or 3 year fixed rate account with a lower minimum, Aldermore Bank pays 1.40% AER over 3years, 1.30% AER over 2 years and 1.20% AER fixed for one year, all with a minimum of £1,000.

Long term savings alternative – potential 24% growth return

For those looking for the potential for higher growth and are prepared to tie their money up for the longer term, the Investec 6 Year Defensive Deposit Plan offers an alternative that some savers might find attractive. By linking your return to the FTSE 100 Index, this deposit plan offers the potential for a 24% fixed return, which is paid provided the value of the Index at the end of the plan, is higher than 95% of its value at the start of the plan (subject to averaging). So the FTSE can fall up to 5% and you still receive the fixed return. However, if the Index is lower, you will only receive a return of your original capital.

The best long term fixed rate savings bonds are paying around 2.20% AER whilst by linking your deposit to the FTSE, if this Deposit Plan pays out the 24% return is equivalent to 3.65% AER. With record low longer term fixed rates forcing some savers to consider a wider range of options, the combination of capital protection plus the potential for a high growth return could be a compelling opportunity. Taxpayers can also benefit from tax free growth as the plan is also available as an ISA.

Fixed income investment

Another consequence of this sustained period of low longer term fixed rates is that savers start to consider taking on more risk with their capital in the hunt for higher returns. One such plan that has been popular in this area is the Enhanced Income Plan from Investec Bank. Unusually for an investment, it has a fixed term and offers a fixed income each year, paid to you regardless of the performance of the stock market. It also pays income each month which is the most popular payment frequency. The latest issue pays 4.92% per year, paid as 0.41% each month.

Also unusual for an investment is the inclusion of some capital protection, or ‘conditional capital protection’. This means that your initial capital is returned at the end of the investment unless the FTSE falls by more than 50% during the fixed term of the plan. If it does, and the Index also finishes below its starting level then your original capital will be reduced by 1% for each 1% fall, so you could lose some or all of your original investment.

Up to 6.0% investment income, quarterly payments

The Focus FTSE Quarterly Contingent Income Plan offers up to 6% per year which is higher than the income on the Investec plan however it is not fixed, but rather dependent on the performance of the FTSE 100 Index. A quarterly payment of 1.50% is made provided the value of the Index at the end of each quarter is at or above 75% of its value at the start of the investment. If the Index is below 75% of its opening level, no income payment will be made for that quarter.

Your initial investment is returned in full unless the FTSE has fallen by more than 40%, measured at the end of the fixed term only. If it has fallen below this level, capital will be reduced by 1% for each 1% fall and so you could lose some or all of your initial investment.

Both of these plans are available as an ISA and accept ISA transfers, in which case your income would be tax free.

Defensive growth plans

Finally, in the investment growth space, defensive plans have been popular on the back of the UK’s decision to leave the UK and the uncertainty around what impact this might have on our growth and economic prospects. These defensive plans offer the potential for investment level returns even if the stock market goes down, in some case by up to 50%. They are therefore proving popular with investors concerned about the historically high level of the FTSE and would therefore like to include a defensive element to their investment. This plan may appeal to those who think the FTSE might fall slightly, stay the same, or rise in the coming years but not significantly.

Defensive Kick Out top pick: Investec’s FTSE 100 Step Down Kick-Out Plan offers the opportunity for 8.0% for each year invested (not compounded) even if the FTSE falls up to 20% over the term of the plan. Capital is at risk is the FTSE falls by more than 50%.

Fixed term defensive growth top pick: Investec’s FTSE 100 Defensive Growth Plan offers a 33% fixed return at the end of the plan, provided the Index it at least half its value at the start of the plan (i.e. it can fall up to 50% and you still receive the 33%, along with a full return of capital). Your capital is at risk if the FTSE has fallen by more than 50%, in which case you could lose some or all of your initial investment.

 

Compare our Top 3 current accounts »

Compare instant access accounts »

Compare fixed rate bonds »

Compare income investments »

Compare growth and defensive growth investments »

 

AER stands for the Annual Equivalent Rate and illustrates what the interest rate would be if interest was paid and compounded once each year. Gross is the interest you will receive before tax is deducted.

No news, feature article or comment should be seen as a personal recommendation to invest. Prior to making any decision to invest, you should ensure that you are familiar with the risks associated with a particular plan. If you are at all unsure of the suitability of a particular product, both in respect of its objectives and its risk profile, you should seek professional advice.

Tax treatment of ISAs depends on your individual circumstances and is based on current law which may be subject to change in the future. Always remember to check whether any charges apply before transferring an ISA.

The investments in this article are structured investment plans that are not capital protected and are not covered by the Financial Services Compensation Scheme (FSCS) for default alone. There is a risk of losing some or all of your initial investment due to the performance of the FTSE 100 Index or shares listed within the Index. As share prices can move by a wide margin, plans based on the performance of shares represent higher risk investments than plans based on the FTSE 100 Index as a whole.

There is also a risk that the company backing the plan or any company associated with the plan may be unable to repay your initial investment and any returns stated. In addition, you may not get back the full amount of your initial investment if the plan is not held for the full term. The past performance of the FTSE 100 Index or shares listed within the Index is not a guide to their future performance.

Current account focus: our Top 3 high interest current accounts

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Last updated: 27/09/2016

Although we use our current account more than any other, it is often the one that we review the least in terms of comparing it with the latest the market has to offer. But with interest rates as high as 5.0% on offer, various types of cashback and other financial incentives, along with a 7-Day Switch service that offers peace of mind to those that do switch, the market for current accounts is the best its ever been. So here we take a look at the three accounts which are proving most popular with those either making the switch, or choosing to take out a second account.

High interest

Historically, current accounts have been renown for offering paltry rates of interest, and it is only fairly recently that this has significantly started to change. What this now means is that, provided you are usually in credit with your account, you can now be rewarded with very healthy rates of interest indeed. Not only do all of the accounts featured offer full banking services and have VISA debit cards available, but because of the interest rates on offer the amount that can be achieved when compared with leading instant access and short term fixed rate bonds, can be compelling in its own right.

Current account versus savings account

Therefore, although these should be technically described first and foremost as current accounts, they also have every right to be considered amongst the range of options for savers, especially since they are predominantly offered by the main high street banks and building societies and so eligible deposits are covered by the Financial Services Compensation Scheme.

Could you get more from your current account?

Many existing accounts pay no interest at all, so with up to 5.0% available it is always worth comparing what the market has to offer. Staying put simply because you have all of your direct debits set up is no longer a valid reason, especially since the introduction of the current account switch guarantee (see below for further details).

Our top three selections

Each account has its own features and criteria, and most usually require a minimum amount to be paid in each month to qualify for the headline interest rate, with different rates being paid for different levels of account balance. Here we take a look at our three most popular high interest current accounts.

5.0% on balances up to £2,500 for 12 months

Nationwide’s FlexDirect is our most popular current account, mainly due to the level of interest it pays on all in-credit balances up to £2,500. The interest rate is 5.0% AER (4.89% gross p.a.) which is fixed for the first 12 months of the account being opened. To receive this rate, you must pay in a minimum of £1,000 per month (excluding internal transfers). There is no monthly account fee, a fee-free overdraft is included for the first 12 months and you can manage your account online or via automated telephone banking. After 12 months the rate reverts to 1.0% AER variable.

Fair Investment view: “The FlexDirect from Nationwide offers a market leading interest rate on balances up to £2,500 although the £1,000 you are required to pay in each month is at the higher end. There is also no monthly account fee, so all of the interest earned goes straight into your pocket. Although the rate drops to 1% variable after the first 12 months, this is still considerably more than most current accounts and not that far off some of the top easy access accounts currently on offer.”

5.0% variable on balances up to £2,000

TSB’s Classic Plus account also offers 5.0% AER (variable) interest, payable on balances up to £2,000. No interest is paid on balances above this amount and although the 5.0% is variable, it is paid ongoing (i.e. is does not drop down after a set period of time). In order to receive this rate you must pay in a minimum of £500 per month, as well as register for internet banking, paperless statements and paperless correspondence. The account also offers 5% cashback on your first £100 of contactless or Apple Pay payments each month (this offer ends December 2016 and terms and conditions apply).

Fair Investment view: “The 5.0% headline rate matches that from Nationwide’s account although it is a variable rate (rather than fixed) and is paid on a slightly lower account balance of £2,000 – however, the amount you are required to pay in each month is at the lower end of the high interest current accounts available. As with Nationwide’s account, there is no monthly account fee and the fact that the variable interest rate continues without a time limit could make this an attractive option for those looking beyond 12 months.”

Up to 3.0% interest and 3% cashback

The Santander 1|2|3 account combines a competitive rate of interest with the opportunity to receive cashback on a number of your main household bills. You will receive 3.0% AER variable once your balance is at least £3,000, payable on your entire balance up to a maximum of £20,000, with lower rates of interest paid on balances of less than £3,000. Please note that interest paid on the account will change to 1.50% AER on all balances up to £20,000 from 1st November 2016. You can also earn up to 3% cashback on selected household bills such as council tax, gas and electricity, broadband, mobile phones and more. You must pay in at least £500 per month and have at least two active direct debits to receive interest and cashback. There is a £5 monthly account fee.

Fair Investment view: “Because of the way the interest is calculated, this account is likely to appeal to those with higher in credit balances, particular those who regularly have over £3,000 available. For example, if you had £4,167 in your Santander 1|2|3 account, you would earn the same interest as you would be paid on 5.0% AER on a balance of £2,500, whilst this account continues to pay interest on higher credit balances up to £20,000. So if you’ve got savings of £3,000 or more, this account could offer a compelling overall rate of interest, as well as cashback on your monthly bills.”

7-Day Switch

Apart from the low interest rates generally on offer, one of the main reasons many of us have stayed with our current account provider far longer than other type of account, is the fear that something would go wrong with the direct debits associated with our account. However, since the introduction of the current account switch service in September 2013, the whole process of switching banks is easier and will now be completed in seven working days – the 7-Day Switch.

Over 40 banks have signed up to the service (including Nationwide, Santander and TSB), which makes sure that all outgoing payments, such as standing orders and direct debits, will be transferred across to your new bank on your behalf. The service also guarantees that should any incoming payments be sent to your old account in error, these will be automatically redirected to your new account for up to 36 months after your switch date. This means the banks do all the hard work for you, making switching smoother and faster.

To switch or not to switch?

The 7-Day Switch rules therefore offers peace of mind to anyone considering a switch from their current account provider. However, you don’t necessarily have to switch your current account – Santander is the only provider in our top three which requires you to have any active direct debits (at least two), and so if maximising interest is your top priority, you could also consider taking one of these accounts out in addition to your existing current account, thereby leaving everything you already have in place. You will of course have to make sure you pay in the minimum amount required each month in order to earn the level of interest on offer.

Always compare

Do not let the thought of moving your current account put you off. The competition for current accounts has rocketed in the last couple of years and hundreds of thousands of people have already made the move to a new account. So as major banks and building societies compete for your custom, always remember to compare the interest rate and any other benefits your current account offers with the best market has to offer – you may be surprised at just how much difference it could make…

 

Click here for more information on Nationwide’s FlexDirect account »

Click here for more information on TSB’s Current Plus account »

Click here for more information on Santander’s 1|2|3 account »

Click here to compare high interest current accounts »

 

AER stands for Annual Equivalent Rate and illustrates what the interest rate would be if interest was paid and compounded once each year.

Gross is the interest you will receive before tax is deducted.

 

Fixed rate head to head: Cash versus Investments

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The appeal of a fixed return from our capital is obvious, which is why the fixed rate bond has been such a popular choice over the years with both savers and income seekers alike. But whilst savings rates continue at their record lows, it is also understandable why some are choosing to consider moving up the risk spectrum in the hunt for higher returns. Although investments generally only offer a variable income, our most popular investment plan offers a fixed income, and so the ability to compare the two options becomes easier. Here we offer a fixed rate head to head, as we compare the pros and cons of our best selling income investment with the top fixed rate bond deals available.

Fixed rate bonds

Fixed rate bonds, or more accurately fixed term deposits, have for some time been a cornerstone of many a saver’s portfolio. Probably the main reason is that they offer a fixed rate of interest, known at outset and which does not change for the duration of the product, so you know exactly how much you will receive and when.

These products also combine a fixed term, so you know exactly how long you will receive the level of fixed income, and provided the bank remains solvent, your capital is protected and returned to you in full at the end of the fixed term. The longer the fixed term, normally the higher the fixed rate of interest offered, as compensation for tying up your money.

Fixed income investments

The income from collective investments (such as funds) invariably comes from equity dividends, bond interest or rental yields from property. Combined with the fluctuation in value of the underlying asset, be this a share, bond or property, then by its very nature the value is neither fixed nor guaranteed and so investments normally offer a variable income – and of course your capital is at risk.

Fixed income investments therefore are not common, which perhaps partly helps to explain why the Enhanced Income Plan from Investec has been our most popular income plan. The plan offers a fixed income and means that you receive your income regardless of the performance of the stock market, so the investor has the certainty of knowing at the outset exactly how much he will receive each and every year.

Cash v investment

The most important difference between the two is that with a fixed term deposit, your capital is treated as a deposit and is therefore protected and returned to you at the end of the term, subject to the bank remaining solvent. However, whilst Investec’s fixed income investment also relies on the bank remaining solvent throughout the term of your investment, the return of your capital is also dependent on the performance of the FTSE 100 Index, therefore your capital is at risk.

Whilst income remains a top priority for many and the appeal of fixed rate remains as high as ever, having a good understanding of the main differences between these two fixed rate options is often not fully explored, so here we compare the key features of each of them:

Fixed rate

The current market leading long term fixed rate bond is the 5 Year Fixed Rate Deposit Account from State Bank of India, which offers 2.50% AER fixed. By historical standards this is one of the lowest on record. The latest issue of the Enhanced Income Plan offers an annual income of 5.04%, which is more than double that offered by the best cash-based fixed rate available.

Payment frequency

Another important feature of fixed rate products is how often the interest is paid. State Bank of India’s fixed rate only pays interest annually, and when you set up your account, an instant access savings account is automatically opened and the interest is paid into this account on an annual basis, so there is also no option to compound your interest either. This is not particularly attractive for those looking to supplement their income with a regular fixed rate payment, or who would like the option to have the interest paid into another account.

The Enhanced Income Plan pays income monthly (0.42% per month), which can often be the most useful in terms of budgeting and is attractive when looking to supplement existing income or boost retirement income from your capital. A monthly option for cash savers is available from Aldermore Bank’s 5 Year Fixed Rate Account which also includes the option for this to be paid into an account of your choice, but the rate is 0.25% lower than the State Bank of India product at 2.25% AER fixed.

Fixed term

Both the fixed term deposit and the Enhanced Income Plan have fixed terms. Historically, five year fixed rates have been the most common long term fixed rate and have offered the higher rates of interest in return for tying your money up a longer period. The Enhanced Income Plan also has a fixed term but this is one year longer at six years. Fixed terms often appeal to those who wish to plan around this and combined with a fixed rate, offer the peace of mind of knowing exactly what will be paid, when and for how long.

Early closure

Premature withdrawals, additional deposits or early closures are not permitted during the term of the State Bank of India fixed term deposit. The Enhanced Income Plan does include the option to withdraw your money early, however the investment is designed to be held for the full term and early withdrawal or closure could result in you getting back more or less than you originally invested, depending on how long your investment has been running and market conditions at the time

ISA option

State Bank of India’s 5 Year Fixed Term Deposit is a non-ISA fixed rate and so is not available as a Cash ISA whilst the Investec plan is available as both an ISA and non-ISA, whilst it also accepts ISA transfers. If you are someone who would otherwise pay basic rate income tax on some or all of the interest received from their capital, by using your ISA allowance you could be up to 20% better off, with greater tax savings for higher rate tax payers.

Market leading five year fixed rate Cash ISAs are only offering 2.0% AER, and so by comparison, the Investec plan offers an even higher increase to your fixed income in return for putting your capital at risk.

Treatment of capital

Since the income from both of these products is fixed for the term of the plan, their main difference is the treatment of your initial capital. The fixed term deposit is capital protected, which means that your initial capital is returned in full at the end of the fixed term (subject to credit risk which is covered below), whilst the Enhanced Income Plan puts your initial capital at risk.

Unlike most income investments, the Enhanced Income Plan does include some capital protection from a falling stock market. This is commonly known as conditional capital protection and means that the return of your initial capital is conditional on the performance of the FTSE 100 Index and will be returned in full at the end of the six year term, provided the FTSE does not fall by more than 50%. If it does fall below 50%, and also finishes the fixed term lower than its value at the start of the plan, your initial investment will be reduced by 1% for every 1% fall, so you could lose some or all of your initial investment.

Credit risk

Repayment of your capital at the end of a fixed term deposit is reliant on the bank being solvent at the time the capital repayment becomes due, whilst an investment into the Enhanced Income Plan is used to purchase securities issued by Investec Bank plc, which means its ability to meet and repay their financial obligations is equally an important consideration. Both of these products therefore contain counterparty credit risk, which means that in the event of the bank going into liquidation, you could lose any future returns as well as some or all of your initial capital.

Credit ratings and agencies

One accepted method of determining credit worthiness of a company is to look at credit ratings that are issued and regularly reviewed by independent companies known as ratings agencies. Fitch is a leading credit agency and as at 1st May 2016, Investec Bank has a BBB rating and the State Bank of India has a BBB- rating, both with a stable outlook. The ‘BBB’ rating signifies both institutions are considered to have a good credit quality with low expectation of failure to repay its debts whilst the ‘-‘ denotes being at the lower end of this particular rating grade. A stable outlook indicates the rating is not likely to change in the short to medium term (around 6 months to 2 years).

Compensation scheme

Provided the deposit taker offering the fixed rate bond has a UK banking licence, your initial capital is normally eligible to be covered by the Financial Services Compensation Scheme which covers potential deposit claims up to a maximum of £75,000 per person, per institution. The Enhanced Income Plan is not a deposit so it would not be covered by the Financial Services Compensation Scheme for default alone.

Risk v reward

The principle of risk v reward means that the search for higher income returns often leads us to consider putting our capital at risk. A good benchmark for assessing Investec’s fixed income investment is to compare the best fixed term deposit rates on offer over a similar timeframe, and then consider whether you are comfortable with the risk to your capital in order to receive a higher fixed return. As detailed above, by accepting risk to your capital the Investec plan offers just over double the market leading fixed term deposit, with a higher increase when compared with leading fixed rate Cash ISAs. The risk is that is if the FTSE falls by more than 50%, you could lose some or all of your initial investment.

Fair Investment conclusion

Whatever fixed rate option is undertaken, it is imperative that the risks of each are fully considered and understood. Whether this is inflation risk, risk of capital loss or credit risk, it should always be remembered that it is the income and capital loss/rise combined that produce your overall return.

Commenting on the cash versus investment fixed rate options, Oliver Roylance-Smith, head of savings and investments at Fair Investment Company, said: “Whilst fixed term deposits offer the peace of mind of a safe return of our initial capital, we cannot also escape the fact that the current rates on offer are some of the lowest on record. But when making a comparison between a cash product and an investment, we must always bear in mind that one offers capital protection, whilst the other puts your capital at risk.”

He continued, “With fixed deposit rates as they are, the pressure is clearly on savers to think long and hard about what to do with their money, and yet whilst the high level of fixed income and the monthly payment frequency are attractive features of the fixed income investment, before considering any investment it is important to understand the balance of risk v reward. The decision is therefore whether you are comfortable with putting your capital at risk combined with the terms of the conditional capital protection offered, in return for the higher fixed returns.”

 

The Investec Enhanced Income Plan is now available for ISAs, ISA transfers and non-ISA investments, with a minimum investment of £3,000. Click here to find out more »

The State Bank of India 5 Year Fixed Term Deposit is now available as a deposit only (non-ISA), with a minimum deposit of £10,000. Click here to find out more »

 

No news, feature article or comment should be seen as a personal recommendation to invest. Prior to making any decision to invest, you should ensure that you are familiar with the risks associated with a particular investment. Fair Investment Company does not offer advice and any investment transacted through us in on a non-advised basis. If you are at all unsure of the suitability of a particular investment, both in respect of its objectives and its risk profile, you should seek independent financial advice.

The Investec Enhanced Income Plan is a structured investment plan which is not capital protected and is not covered by the Financial Services Compensation Scheme (FSCS) for default alone. There is a risk of losing some or all of your initial investment. There is a risk that the company backing the plan or any company associated with the plan may be unable to repay your initial investment and any returns stated. In addition, you may not get back the full amount of your initial investment if the plan is not held for the full term. The past performance of the FTSE 100 Index or any shares listed within the Index is not a guide to their future performance.

Tax treatment depends on your individual circumstances and is based on current law which may be subject to change in the future. Always remember to check whether any charges apply before transferring an ISA.

AER stands for the Annual Equivalent Rate and illustrates what the interest rate would be if interest was paid and compounded once each year.

Our 10 best last minute ISA ideas

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With just one week to go until the deadline for using your 2015/16 ISA allowance of £15,240, this really is your last opportunity to make use of this valuable tax break and help protect your returns from the taxman. If you are yet to make use of some or all of your allowance, here we give you our 10 best last minute ISA ideas. Including both Cash ISA and Investment ISAs, as well as opportunities where you can include your 2016/17 ISA allowance (£15,240) as well, there should be something for everyone.

1.   Our best-selling Investment ISA

For those looking for growth but also with the opportunity to mature early or ‘kick out’ each year, the Enhanced Kick Out Plan offers 11.50% for each year invested provided the FTSE 100 Index at the end of each year is higher than its value at the start of the plan (subject to averaging). Capital is at risk if the FTSE falls by more than 50%. This is our best selling Investment ISA during the current ISA season and also features a Double ISA option.  Click here for more information »

2.   Fixed income Investment ISA

The Enhanced Income Plan is a regular ISA season top seller, paying a fixed income of 5.28% per year regardless of what happens to the stock market. The plan also has monthly income payments, so you know exactly how much you will paid, when, and for how long. Capital is at risk if the FTSE 100 Index falls by more than 50%. This plan features a Double ISA option.  Click here for more information »

3.   Self-select Investment ISA top seller

Barclays Stockbrokers has been voted ‘Best Execution-Only Broker’ at the Shares Awards 2015 whilst they have also been voted Self Select ISA Provider of the Year 2016 at the ADVFN International Financial Awards. Their investment ISA offers over 2,000 funds as well as a wide range of other investments including shares, exchange traded funds, investment trust, gilts and bonds.  Click here for more information »

4.   Defensive Investment ISA best seller

The Defensive Growth Plan from Investec offers a fixed return of 36% (equivalent to 5.25% compound annual growth) plus a return of your original capital, provided the FTSE 100 Index has not fallen by 50% or more at the end of the investment term. If it has, no growth will be achieved and your capital will be reduced by 1% for each 1% fall. This plan also features a Double ISA option.  Click here for more information »

5.   Income Investment ISA top seller

The FTSE Quarterly Contingent Income Plan pays a quarterly income of 1.875% for each quarter the FTSE 100 Index does not end less than 25% below its value at the start of the plan. So even if the FTSE falls up to 25% each quarter, you would still achieve 7.50% annual income. Capital is at risk if the FTSE has fallen by more than 40% at the end of the investment term. This plan features a Double ISA option.  Click here for more information »

6.   Managed and regular saver Investment ISA

The Standard Life Stocks & Shares ISA includes their ‘Easy Option ISA’, which allows investors to invest in one of their MyFolio Managed Funds run by a team of experts at Standard Life Investment Ltd. You can manage your account online and your ISA can be opened from just £50 per month with transfers from other ISAs permitted.  Click here for more information »

7.   Defensive supertracker Investment ISA

Defensive plans remain popular and the FTSE Defensive Supertracker from Meteor tracks any growth in the FTSE during the plan term and then trebles it, subject to a maximum growth return of 60%. The plan is defensive since the growth is based on any rise above 80% of the FTSE’s value at the start of the plan – that’s a 60% return even if the FTSE ends the same. Capital is at risk if the FTSE has fallen by more than 40%. This plan also features a Double ISA option.  Click here for more information »

8.   Instant access Cash ISA

For savers looking to combine a top interest rate with access to their money at all times, the Easy Access ISA from AA offers a simple, bonus-free savings rate of 1.25% AER variable. The account can be opened and managed online with just £100 and there are unlimited free withdrawals. The account also accepts transfers in. There are no penalties, notice periods or tiered interest rates, whilst interest is calculated daily and paid in March each year.  Click here for more information »

9.   Fixed rate Cash ISA

If you are looking for the reassurance of a fixed savings rate and don’t need access for your money for at least a year, fixed rate Cash ISAs are a popular option. The 1 Year Fixed Rate Cash ISA from AA currently offers 1.35% AER fixed and can be opened with a single deposit of £500. The account also accepts transfers in. Withdrawals are not permitted and 90 days loss of interest will apply if you access your money during the fixed term. You can apply and manage your account online whilst interest is calculated daily and paid at the end of your 12 month fixed rate period.  Click here for more information »

10.  Help to Buy Cash ISA

First time buyers can benefit from a 25% bonus of their Help to Buy ISA balance with a minimum bonus of £400 (so you need at least £1,600 saved) and a maximum of £3,000 (on a savings balance of £12,000) although you can have more saved. That means for every £200 you save HM Government will add £50, up to a maximum of £3,000. Eligibility criteria and Help to Buy: ISA Scheme Rules apply. Also note that any funds withdrawn before closing the account will not count towards the Government Bonus. The Nationwide Help to Buy: ISA is currently offering 2.00% AER variable with a minimum opening balance of £1.  Click here for more information »

 

Click here to compare Cash ISAs »

Click here to compare Investment ISAs »

Click here to compare our Top 10 Investment ISA plans »

 

No news, feature article or comment should be seen as a personal recommendation to invest. Prior to making any decision to invest, you should ensure that you are familiar with the risks associated with a particular investment. Fair Investment Company does not offer advice and any investment transacted through us in on a non-advised basis. If you are at all unsure of the suitability of a particular investment, both in respect of its objectives and its risk profile, you should seek independent financial advice.

The value of investments and income from them can fall as well as rise and you may not get back the full amount invested. Different types of investment carry different levels of risk and may not be suitable for all investors. The past performance of the FTSE 100 Index is not a guide to its future performance.

Some of the investments mentioned are structured investment plans that are not capital protected and are not covered by the Financial Services Compensation Scheme (FSCS) for default alone. There is a risk of losing some or all of your initial investment. There is a risk that the company backing the plan or any company associated with the plan may be unable to repay your initial investment and any returns stated. In addition, you may not get back the full amount of your initial investment if the plan is not held for the full term.

Tax treatment of ISAs depends on your individual circumstances and is based on current law which may be subject to change in the future. ISA transfer charges may apply, please check with your provider.

Savings Focus: RCI Bank’s market leading instant access and fixed rate selections

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RCI Bank is a relative newcomer to the UK, but is currently offering some of the best deals out there. We take a closer look at their story as well as reveal their market leading and award winning instant access account and their top fixed rate bond deals.

RCI Bank

The story behind RCI Bank is a unique one since it originated from the Renault Group, one of the world’s largest car companies. Developed as their own internal bank, RCI Banque was founded in 1974 and was created in order to meet the need to help customers finance their vehicles. Forty years later and the RCI Banque group is still privately owned by the Renault Group and operates in 37 countries across every continent, lending over €12 billion a year. RCI Bank launched in the UK in 2015 in conjunction with RCI Financial Services who combined have over 200 staff and lend over £2 billion each year.

Current selections

Despite only launching earlier this year, RCI Bank already has a compelling range of award-winning products. With a range covering a market leading instant access account and fixed term savings accounts up to two years, the focus is on relatively short term cash, which should appeal to anyone with half an eye on future interest rate rises.

Market leading instant access: offering 1.65% AER

The Freedom Savings Account is currently offering 1.65% AER variable gross, which is market leading for this type of account. This top rate is available to both new and existing customers and is free from notice periods, penalties, bonus periods, tiered rates and fees (although a £15 fee for CHAPS transfers applies). What you see is what you get, which perhaps also explains why it has been given a Moneyfacts rating of Outstanding*.

The account is available as a single or joint account and is free to use so you can make unlimited payments and withdrawals without charge. You have the option of interest being paid monthly or annually which will also compound provided you don’t move it to another account. There’s no limit or fees on the number of withdrawals you can make and it can be opened with a low minimum of just £100. You can apply online and RCI Bank state opening an account takes less than 15 minutes, whilst you also benefit from full UK customer support available 7 days a week

Click here to find out more about the RCI Bank instant access account »

 

RCI Bank short term fixed rate bonds: up to 2.35% AER

For those who are able to tie their money up for a fixed period and are also looking for a competitively priced fixed and regular rate of interest, RCI Bank also offers a duo of fixed rate savings accounts, over one and two years respectively. As you would expect, the rate of interest increases with the fixed term, the 1 year fixed term deposit offering 2.06% AER while the 2 year fixed term deposit is currently paying 2.35% AER. Both accounts have a Moneyfacts rating of Excellent*.

These fixed term deposits offer a guaranteed rate so you’ll know exactly how much you will earn by the end of the fixed term, whilst interest can be paid monthly or annually and can be compounded. Both deposits also give you the flexibility of unlimited top-ups for 30 days from your application however you cannot close your account once opened or make a withdrawal before the end of the term. You can apply online and the account has a low minimum of £1,000.

Click here for more info on the RCI Bank 1 Year Fixed Term Savings Account »

Click here for more info on the RCI Bank 2 Year Fixed Term Savings Account »

 

Deposit Guarantee Scheme

Deposits held with RCI Bank are not covered by the UK Financial Services Compensation Scheme but instead fall within the scope of the French deposit protection scheme, known as the FGDR or Fonds de Garantie Dépôts et de Résolution. Eligible deposits with RCI Bank are protected, and all of the accounts above are covered by the FGDR, protecting the first €100,000 per customer within the RCI Banque group. As with the FSCS, the protection covers each customer rather than each account and for joint customers, each customer is protected up to €100,000 (so up to €200,000 between them). Since the maximum eligible is based in Euros, the UK sterling equivalent at any given time will depend on the exchange rate between the British Pound and the Euro.

Further information – FDGR

Created by law, the FGDR compensates depositors for an amount up to €100,000 per person, per institution, when a banking institution fails. This guarantee benefits all bank customers, private individuals, businesses of any size and associations. For more information and to check their status, visit www.garantiedesdepots.fr/en.

* Moneyfacts awards valid as at 01.10.2015

AER stands for the Annual Equivalent Rate and illustrates what the interest rate would be if interest was paid and compounded once each year.