Savings Rate Rundown 14 November 2014

14th November 2014

Whilst on the whole, providers are still reducing the rates on offer, particularly amongst Fixed Rate Bonds, there have been a few interesting new launches that we will concentrate on. Investec has re-launched its innovative Base Rate Plus account, along with its Step Up Bond. There have been a couple of providers going against the current trend with some increased rates and we have seen the first provider launch retirement bonds, taking advantage of the increasing interest in the NS&I Pensioner Bonds announced in the budget earlier in the year. We've seen Coventry Building Society launch its Poppy Bond for this year, meanwhile we have also seen the sub-brands of Bank of Scotland plc having an interesting tussle at the top of the easy access table.

Investec has launched a new version of its 3 Year Base Rate Plus, guaranteeing to pay 1% above the Bank of England Base Rate, subject to a minimum interest rate of 2.50%.

Investec has also launched a new version of its 5 Year Step Up Bond. The bond pays 3% for the first 3 years and then increases to 3.50% for the last 2 years, the average rate over 5 years will be 3.20%.

Both of these accounts are lower than the previous versions that were withdrawn towards the end of October (2.60% minimum rate and 3.25% average rate), but the 5 year average rate is market leading and the minimum rate guarantee of the Base rate plus sits just below Punjab’s 3 year fixed rate bond (2.55%).

The Base Rate Plus account gives savers an interesting option, allowing them to take advantage of rises in the Bank of England Base Rate, but with the added benefit of a competitive guaranteed minimum rate.

It is good to see innovation in the savings market, but the interest rates have to still be worth considering and Investec seems to have ticked both boxes on this occasion.

Kent Reliance has launched new, improved one and two fixed rate bonds paying 1.90% for one year and 2.20% for two years. These replace the previous issues that offered 1.75% and 2.10% respectively.

Whilst it is good to see Kent Reliance going against the current trend by increasing its fixed rate offerings, we need to see more providers join in to force rates back in the right direction. At the moment we seem to be seeing the odd provider encouraging funds in with a decent rate and then taking themselves out of the running again. What the savings market desperately needs is a sustained effort from a group of providers, providing real competition in the savings market.

Furness Building Society has launched 1, 2 and 3 Year Fixed Rate Retirement Bonds, paying 2%, 2.40% and 2.80%. These accounts are only available to those receiving a pension and can only be opened in Branch.

Given the publicity at the moment surrounding the Pensioner Bonds from NS&I that were featured in the budget earlier in the year, this may be something that providers latch onto and launch their own versions. These bonds pay competitive rates in the current market and whilst not everyone can get to a branch to open one, they could be the first of a new group of similar accounts.

Coventry Building Society has launched the Centenary Poppy Bond which pays 2.40% until 31/12/2017. The provider will make a donation of 0.15% of the total balances held in the account to The Royal British Legion.

There are some better rates available amongst 3 year bonds at the moment, but savers do get to support The Royal British Legion by opening the account. It is good to see this type of account offering a competitive return, as quite often savers have to compromise the interest rate to help a good cause.

Also this week, we have seen Bank of Scotland plc making adjustments to the rates on offer, seeming to shift the best rates between the various brands that they have under their umbrella.

BM Savings withdrew its Online Extra Issue 14 paying 1.60%, replacing it with an alternative paying 1.35% which is not a bad rate, but no longer a best buy. The provider also withdrew its ISA Extra Issue 12 paying 1.60%, the replacement paying 1.55% which is still a best buy rate, but a reduction all the same.

Meanwhile in a more positive move, Saga replaced its best buy Telephone Saver paying 1.50% with an Internet Saver paying a higher rate of 1.55%, although the account is only available to customers over 50 years old.

So in effect, Saga replaced BM Savings at the top of the easy access table. This does also highlight the importance of knowing which providers are part of the same group and therefore share a Financial Services Compensation Scheme (FSCS) licence. BM Savings and Saga along with Halifax, Bank of Scotland, AA, Intelligent Finance, Aviva and St James Place all share a licence. Therefore only a total of up to £85,000 in cash based savings held with all of the above brands would be protected should the bank fail. 

Julian Hodge Bank has increased the rates on the 1, 2, 3 and 4 year Fixed Rate Cash ISAs and Capital Millennium Bonds. The 1 year now pays 1.75% (previously 1.65%) and has entered at the top of the best buy table, replacing the Post Office (1.70%). The 2 year now pays 2% (was 1.80%), while the 3 year offers 2.10% (was 1.90%) and the 4 year pays 2.25% (was 2.00%).

Paragon Bank has launched two new accounts, a 3 Year Fixed Rate Bond paying 2.50% and a 120 Notice Account paying 1.60%. The 3 year bond is now the highest paying 3 year bond on the market that offers a monthly interest option.

Shawbrook Bank has launched a new version of its 120 Day Notice Account today at 3pm. The new version pays 1.75% gross/AER, an increase of 0.15% from the previous one. Accounts can be opened with a minimum of £1,000 and withdrawals are subject to 120 days’ notice only, you cannot access the funds earlier by paying a penalty.

This change appears to be a reaction to Paragon Bank releasing a 120 day account earlier today paying 1.60%, that joined Shawbrook at the top of the notice account best buy tables.

Aldermore has increased the rate on its 2 Year Fixed Rate Account from 2% to 2.25%. Another welcome increase, this account now sits just below the market leading rate from Punjab National Bank (2.30%) and offers the top rate for those looking for a monthly income from their bond over a two year period.

Virgin Money has made a number of changes to its savings range. The easy access account paying 1.30% has been replaced with a new version paying 1.21% and the easy access ISA paying 1.40% has been replaced by one paying 1.31%.

The fixed rate bonds and fixed rate ISAs have also been changed. The 1 year bond and ISA has been increased from 1.50% to 1.65% and a new 5 year bond and ISA have been released paying 2.50%. The 3 year fixed rate bond and fixed rate ISA have been reduced from 2.25% to 2.15% and the 2 year versions paying 2.10% have been withdrawn from sale with no replacement products.

So these changes can definitely be described as a mixed bag. The best news seems to be for those looking for a fixed rate return on their ISA balances, with improvements made to the 1 year version and market leading 3 and 5 year rates on offer.

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