The business savings account market is a mine field; hopefully our tips will help you secure thousands in more interest while reducing the risks.
Philip Irwin-Brown, Senior Account Manager from the Concierge Team, gives us his top tips.
1. Earn more interest by shopping around. It may sound obvious but what isn’t obvious is that best buy tables are unlikely to be the best source of interest rate information for your business. The turnover of your business, where it is located, who you currently bank with and the size of your deposits make it unique and best buy tables simply can’t cater for this as they are compiled for the masses, so will normally exclude accounts that have eligibility restrictions. Also many best buy tables are designed to encourage you to open accounts that pay commission which are rarely the best and often the real best buy is excluded.
For example did you know that, right now;
- 3 out of the top 4 easy access accounts require minimum deposits of £250,000 or more.
- 9 out of the top 10 easy access accounts have eligibility restrictions, including requiring large minimum deposits.
Savings Champion covers the whole UK savings market and our advice is totally independent. You are welcome to call us for free on 0800 321 3581 and we will happily tell you the best rates available for your circumstances.
2. Earn more interest by being more flexible. Decide how flexible you can be about access to your company’s deposits. How much cash does your business need to be able to access on an immediate basis? This amount should be deposited into easy access accounts. If you can lock some away for longer in fixed rate bonds and/or notice accounts it could improve the interest you can earn.
Notice accounts will normally require a set notice period to access your cash, however some will allow you to subject to a penalty equal to the interest that would be accrued in the notice period. Planning ahead is important so that you can give the notice required before making a withdrawal.
Fixed rates often pay better than easy access or notice account rates. Rates are fixed for the life of the deal, so you know what you are going to earn from the outset. However, normally no withdrawals are permitted within the term, so you need to be happy to leave your money untouched.
3. Reduce risk by taking advantage of the free protection offered by the Financial Services Compensation Scheme (FSCS). Should your bank or building society fail, the maximum pay out is £85,000 per organisation, per FSCS licence. If your business has savings of over £85,000 and wants full protection this will require extra administration as you may need to open and monitor multiple accounts and switch when fixed rate bonds mature, bonuses end, rates drop or a better paying account enters the marketplace. However do not let this extra administration put you off as the reward is the peace of mind of knowing your businesses deposits are safe.
As an indicative guide only, for the purposes of deposit and investment claims, smaller companies are protected. A smaller company must meet two of the following criteria (as set out in section 247 of the Companies Act 1985 or section 382 of the Companies Act 2006 as applicable):
- Turnover: not more than £6.5 million
- Balance sheet total: not more than £3.26 million
- Total number of employees: not more than 50
However even if your business does not meet two of the above criteria, given the ongoing economic uncertainty, you may well be concerned about the safety of your company’s deposits. Therefore in this case you may well want to spread your deposits over a number of banks and building societies so that if any one fails only a proportion of the total amount would be lost.
4. Reduce risk by checking for FSCS licence conflicts. When you need to open a new account check there are no clashes with amounts in existing accounts and therefore the overall amount with any one licence does not exceed £85,000. There are over 125 banks and building societies covered by just 90 licences. Feel free to use our tool to do this.
5. Earn more interest by checking the small print carefully and diarising bonus end and maturity dates. Some business accounts will come with strings attached, such as a bonus rate which drops away after a certain period. While it can be beneficial to have the initial rate bolstered by a bonus or to lock in a good rate using a fixed rate bond you will need to diarise when it ends so you remember to review your account at that time.
6. Earn more interest by regularly monitoring your accounts. How will you know if your bank or building society drops your interest rate? If you are lucky, they may write to you, but for many reasons they may not be obliged to do so and many don’t. To be sure you will need to check with them regularly, if possible on a weekly basis.
7. Earn more interest by regularly monitoring the savings market. Even when you have found the best accounts and deposited your money, new accounts enter the marketplace; how will you know if they offer better returns? To do this you will need to monitor the market; you should compare any new accounts against the ones you already have and their corresponding FSCS licences to see if the account is suitable. Also you will need to check the account terms and conditions to make sure you are eligible to apply. This can be complicated and time consuming as you are already aware that the best accounts for your business are unlikely to be in best buy tables; but keep reading as there is a solution.
8. Earn more interest and reduce risk by letting us do the hard work for you, use our Managed Savings Service - Concierge. After all, what company wouldn’t want a better, more secure return for its deposits without the hassle? To find out more simply enquire without obligation and we will review your existing deposits for free. It’s simple and easy to setup and you could be in the best rates within 48 hours of your enquiry.