Tesco Bank has regularly been featured in our Best Buy tables, offering competitive easy access accounts and fixed rate bonds and ISAs from time to time. But it was announced last week that Barclays has entered into an agreement to acquire the retail banking business of Tesco, in a deal said to be worth £600m, which will include an exclusive long-term partnership to offer Tesco branded deposit accounts as well as credit cards and personal loans.
Just last month Sainsbury’s also announced that it plans to wind down its banking division, in order to focus on its core food business – but so far, no further announcements have been made.
In the late 90’s supermarkets entered the banking space with the logic that their grocery customers would want to do some banking at the same time that they were doing their weekly shop. But it appears that the shine has all but worn off, with both of these key supermarket challengers now leaving the sector.
The Tesco/Barclays acquisition and partnership are subject to regulatory approval and expected to complete in the second half of this year – so there is a little time until we’ll find out all of the terms and conditions.
Considering Barclays offers a pretty poor rate of interest on its mainstream easy access account, (1.66% on the first £10,000 deposited into the Everyday Saver and £1.16% AER on any excess) it’ll be interesting to see what the plan will be in terms of rates offered on any Tesco branded deposit accounts going forward.
And of course, the other aspect that we’ll be paying close attention to is what happens to the Financial Services Compensation Scheme (FSCS) protection on any existing Tesco Bank products.
What has happened in the past with other bank acquisitions, is that the two licences are retained for a period of time, but ultimately merged.
It’s always important to check the FSCS licence of any savings provider that you deposit money with as some will share a licence, even if they have more than one brand. For example, any savings with the Post Office are actually being deposited with the Bank of Ireland UK, (AA Savings is also part of the Bank of Ireland licence) so you need to add up all cash held with the three brands to check that it’s within the compensation scheme deposit limits.
And Cahoot is actually a division of Santander UK plc – so the same applies – if you have money with both, check that the total is not more than £85,000. Check our guide if you are unsure about the FSCS protection of your cash savings account.
It’s early days in this acquisition, but we’ll be keeping our eyes and ears open for any further developments.
@savingschampion
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