Aviva has recently announced the launch of a new cash savings platform, and with a big industry name like this getting involved, it illustrates just how important this developing aspect of the savings market is - even amid rock bottom interest rates.
What is a cash savings platform?
In simple terms, a cash platform is the technology that allows you to open multiple savings accounts with multiple providers – without having to apply each time you open a new account via that platform. It’s like a supermarket that allows you to choose from the savings accounts it holds on its shelves - a pick 'n' mix if you like.
So, you apply once via the platform – then you can pick the accounts you want, deposit your cash onto the platform and redistribute your money to the savings accounts of your choice.
As the platform is a portal to allow you to access more than one savings provider without making multiple applications, this means that you can also make use of the protection that the Financial Services Compensation Scheme (FSCS) has to offer, with each different bank you use on the platform.
But it’s also important to understand that if you also hold money with that provider either directly or via another platform, it is the total amount held via all channels that is important – you don’t get a separate FSCS allowance via each method that you have deposited your money.
For example, if you open a fixed rate bond with £85,000 with Aldermore via the Aviva platform and you already hold a bond for £50,000 with Aldermore that you took out directly, £50,000 of your money will not be protected by the Financial Services Compensation Scheme, as the amount per banking licence that is protected is £85,000 per person.
Some platforms are more evolved than others and as a result have a different place in the market – some would be considered the holistic answer to managing large cash holdings, whereas others would probably be used as a way of accessing some market leading rates when they are available in a simple manner.
What does this newcomer have to offer?
Well, at the moment it would be classed as underwhelming, to say the least.
At present there are just three providers, OakNorth Bank, Aldermore and Paragon, offering 15 fixed rate bonds and four notice accounts.
On its website, Aviva states: "We don't charge you to use Aviva Save. Instead we receive payments from the partner banks based on the amount of money deposited through Aviva Save."
Although this platform claims that there are no charges, it depends on what you consider to be a charge
It does also state "The savings accounts and interest rates offered directly by our partner banks may differ to those offered through Aviva Save."
But that doesn’t really clarify what this last statement means, at this point at least, if it means that the rates may be LOWER through Aviva Save.
For example, a one-year bond with OakNorth Bank on the Aviva Save platform is currently paying 0.28% AER – yet is you were to open an account directly with OakNorth, the rate would be 0.53% AER – so in effect there is a charge of 0.25% AER.
Of course, the whole point of a cash platform is that you apply just once and then you can open any of the accounts that are available – you don’t have to apply to each one. But other platforms don’t take their fees like this.
Either they say that they charge a fee which they state clearly (as is the cash of the Insignis, Akoni and Flagstone platforms), or there is no charge (as with Raisin UK and Hargreaves) – these platforms agree a fee with the banking partner, that does not impact the customer.
We know that this technology and convenience can’t be offered for nothing as there are costs to developing and maintaining a service like this – but it’s important to be clear about the costs!
How does Aviva stack up compared to the competition?
As mentioned above, currently Aviva has just three partner banks which is very low compared to the others we feature on our Platform Best Buy tables. With only three banks, savers will only be able to deposit £240,000 before breaching the FSCS protection.
At our last Savings Champion Awards which were announced at the end last year, the winner of the Best Cash Savings Platform was Insignis, with runner up, Akoni, coming in very closely behind.
These providers have partnerships with 33 banks and 13 banks respectively and are both working hard to increase these numbers.
We would consider these platforms, to sit in the holistic camp of cash management. What I mean by this is that those with larger sums of money who want minimum hassle can simply keep all their cash in one place, as they can deposit funds into easy access and notice accounts, as well as fixed term bonds.
Flagstone, another highly commended platform, has the largest number of bank partners at 49, but the minimum deposit is £250,000, which means it’s simply not accessible for many.
These platforms all declare an explicit fee that needs to be taken into consideration, but they make it absolutely clear what these fees are.
With a minimum deposit of £50,000 for the Insignis platform and no specific minimum on the Akoni platform, these are far more accessible – although remember, as these charge annual fees, they are probably better value for those who have more than the FSCS limit of £85,000 and/or looking to open multiple accounts and simply don’t have the time or the patience to make multiple applications.
For more details, take a look at these articles
Raisin UK features frequently in our best buy tables as it often has fixed rate bonds that are market-leading. This platform also offers a bonus for new customers, which can boost an already market leading rate by a little bit more. See the Raisin UK website for more details on eligibility for the Raisin bonuses.
Raisin mainly offers Fixed Term Products, which as mentioned above are often highly competitive, and although it does also have a small number of notice accounts and a couple of easy access accounts – it’s not as appropriate for those looking for a single solution to managing a large cash holding.
One feature that all these platforms offer, which can be invaluable, is a single interest statement, which shows the total of all interest (or Expected Profit Rate for Sharia-compliant products) earned on the accounts you hold on the platform, in one place. That saves the tedious job of checking all the interest you have earned each tax year, to clarify that you are either within your Personal Savings Allowance (PSA), or that you are paying the right amount of tax if you have breached your PSA.
It is clear that these platforms are gaining in importance – and as they develop I expect them to become more and more relevant to try and beat savers’ inertia that means many people leave funds languishing with their high street bank, earning virtually nothing with some of the very worst rates on the market and, if the amounts are greater that £85,000, without adequate protection.