Low interest rates on savings

[alex_]

Through work, I was listening to a presentation from some investments bankers. They were suggesting that bonds are beginning to "look attractive".

I don't really get bonds.. but my understanding is that as interest rates and inflation are both high now - the direction for both in the long term is now down - which should mean bonds rebound.

I can see bond funds have taken a massive hit this year.. e.g.

Vanguard Asset Management | Personal Investing in the UK

It’s possible this is why they are saying you should buy them - but I’ve got no idea !

 

[CH1]

It’s possible this is why they are saying you should buy them - but I’ve got no idea !

It's a shame that the Post Office gilts dealing service was stopped (maybe 10 years ago).
You used to be able to deal in small amounts (£260 upwards) simply sending off a cheque with a form in a pre-paid envelope.
Cashing in was just as easy. All virtually risk free.

Personally I don't feel happy investing through Vanguard, Hargreave Lansdown bonds.
They take their cut - even when they produce poor returns.

That said HL might be the only economical way of dealing with the dodgier end of the building society market eg

Coventry Building Society 12 1/8% Permanent Interest Bearing Shares Share Price

The latest Coventry Building Society share price. View recent trades and share price information for Coventry Building Society and other shares.

www.hl.co.uk

I've always been fascinated by Permanent Interest Bearing Shares of building societies and insurance companies (but never had the courage to buy)
7.58% running yield sounds good - but it's taxable.

Another issue is redemption (redemption at par would nearly halve a Coventry BS PIBS investment at current prices).
Another possibility is merger leading to change of terms: Co-op Bank (took over Britannia Building societiy PIBS) cut the coupon and then compulsorily redeemed the PIBS.
A similar thing happened with Bristol and West Building Society, which was taken over by Bank of Ireland.

 

[CH1]

Seems to me I may have to do a tax return and pay some tax on my state pension.
I was on SERPS and my current pension is £267.37 pw. - just above the threshold for tax I think. This is before the 10.1% uprise from April.

So here we go - maybe I owe HMRC £266 out of my state pension.
Of course I had some savings in NS&i nicely accruing at 0.01%. That has now gone up to 1.8% I believe.

There is a "starting rate" tax on savings believe if your income is less than £17,500 pa so it says on the HMRC website - but this is not light reading.

Looks like I may have to have a tax accountant to deal with a few hundred quid to recycle it back to HMG.
That is in addition to the £1,500 pa ish + 5% which will go on Council Tax
and the £2500/£3,000 on fuel costs.

"’tis impossible to be sure of any thing but Death and Taxes" (Christopher Bullock 1716)
Being 68 I'm aware of the death bit - and so are Manchester University who are incredibly keen to write me a will. Maybe they have a tax attorney?

Is there a thread dealing with such minutiae?

PS I have a further issue - and as yet unclaimed £4000 "pension pot" - which promised £180 pa a year ago.
That might be a bit higher now. Although maybe better get in quick - with the budget enthusiasm they're all talking about interest rates falling!

 

[strung out]

Seems to me I may have to do a tax return and pay some tax on my state pension.
I was on SERPS and my current pension is £267.37 pw. - just above the threshold for tax I think. This is before the 10.1% uprise from April.

So here we go - maybe I owe HMRC £266 out of my state pension.
Of course I had some savings in NS&i nicely accruing at 0.01%. That has now gone up to 1.8% I believe.

There is a "starting rate" tax on savings believe if your income is less than £17,500 pa so it says on the HMRC website - but this is not light reading.

Looks like I may have to have a tax accountant to deal with a few hundred quid to recycle it back to HMG.
That is in addition to the £1,500 pa ish + 5% which will go on Council Tax
and the £2500/£3,000 on fuel costs.

"’tis impossible to be sure of any thing but Death and Taxes" (Christopher Bullock 1716)
Being 68 I'm aware of the death bit - and so are Manchester University who are incredibly keen to write me a will. Maybe they have a tax attorney?

Is there a thread dealing with such minutiae?

PS I have a further issue - and as yet unclaimed £4000 "pension pot" - which promised £180 pa a year ago.
That might be a bit higher now. Although maybe better get in quick - with the budget enthusiasm they're all talking about interest rates falling!

You don't need to worry about paying tax on your NS&I savings interest as you're a basic rate tax payer. See the following, from here: Tax on savings interest

Personal Savings Allowance​

You may also get up to £1,000 of interest and not have to pay tax on it, depending on which Income Tax band you’re in. This is your Personal Savings Allowance.

To work out your tax band, add all the interest you’ve received to your other income.

Income Tax band	Personal Savings Allowance
Basic rate	£1,000
Higher rate	£500
Additional rate	£0

 

[MrCurry]

It’s quite a hassle getting moneysupermarket to show you all accounts in their comparison, rather than just the ones they want you to open via them so there’s a commission paid to them. But here’s the latest.

The eye catching 5%+ one from Barclays comes with the proviso you can only save up to £5k, in fact they all limit the amount you can deposit - not sure why banks do that. Surely they want to get their hands on as much money as possible?

 

[Elpenor]

It’s quite a hassle getting moneysupermarket to show you all accounts in their comparison, rather than just the ones they want you to open via them so there’s a commission paid to them. But here’s the latest.

The eye catching 5%+ one from Barclays comes with the proviso you can only save up to £5k, in fact they all limit the amount you can deposit - not sure why banks do that. Surely they want to get their hands on as much money as possible?
View attachment 351954

Perhaps they’ve got a limited subscription number for that rate and so want to sign up as many new customers as possible for future cross selling?

 

[CH1]

It’s quite a hassle getting moneysupermarket to show you all accounts in their comparison, rather than just the ones they want you to open via them so there’s a commission paid to them. But here’s the latest.

The eye catching 5%+ one from Barclays comes with the proviso you can only save up to £5k, in fact they all limit the amount you can deposit - not sure why banks do that. Surely they want to get their hands on as much money as possible?
View attachment 351954

The Barclays account sounds hedged about with restrictions designed to get you to "relate" with them on a daily basis = and have a mobile phone and qpp.

• Only available to Barclays Blue Rewards members
• 5.12% AER/5.00% gross p.a.1.on balances up to £5,000
• 0.25% AER/gross p.a.1 on balances over £5,000
• Open your account, access and manage your savings using our app, Online Banking, by phone or in a branch2
• Open from £1 – if you want to save regularly you can set up a standing order
  regarding the rewards wallet
  How it works
  When you earn cash rewards, we’ll pay the money into your Rewards Wallet, which you can access and manage easily in Online Banking or the Barclays app.
  Once you’re a member, you’ll be able to open our Blue Rewards Saver and Rainy Day Saver accounts in Online Banking, our app, by phone or in a branch.

As Boy George once said "I'd rather have a cup of tea!"

 

[MrCurry]

Perhaps they’ve got a limited subscription number for that rate and so want to sign up as many new customers as possible for future cross selling?

Yeah, I guess so.

 

[nick]

They so don't want you to deposit £10m @ 5%

Or - considering the FSCS limits, up to £85k if you don't want to go down if/when Barclays does.

That and, as mentioned by others, it is a way of reducing the cost of getting some headline grabbing media and also ensuring lots of up-sell contact points with the customer base

 

[CH1]

They so don't want you to deposit £10m @ 5%

Or - considering the FSCS limits, up to £85k if you don't want to go down if/when Barclays does.

That and, as mentioned by others, it is a way of reducing the cost of getting some headline grabbing media and also ensuring lots of up-sell contact points with the customer base

These sort of accounts were very popular with banks 2000-2008 as a means of attracting current account customers.
Another approach was the Halifax reward account - you got £5 a month for having a current account with a minimum £1,000 per month going in.

BTW Jagjit Chadha of National Institute of Economic and Social Research was on Channel 4 tonight ans Sky at lunchtime predicting interest rates may have peaked - although he also said 3% interest rates were historically "more normal" and would lead to more efficient utilisation of capital.

Just though people might like to know!

 

[Part 2]

Any current advice now the rates have risen again?

I really need to sort this in the next few months.

 

[kabbes]

Same advice applies for long term investment: a diversified equity fund, like a worldwide index tracker, will almost certainly produce the best outcome over anything more than five years.

If you need more immediate access, though some intriguing possibilities have opened up. Wise (formally TransferWise) have started savings accounts in their ecosystem of interconnected accounts. These have underlying investments in short-term treasuries of the currency of the account. So currently, it is paying 3.11% for accounts in GBP. Since this is a bond fund, you own underlying assets as government bonds, so it’s actually much more secure than a bank account.

Not sure if this link works without an existing log in, but it describes it properly:

The clever new way to send money abroad

Banks sting you with hidden charges when you send money abroad. But that’s yesterday’s problem. Say hello to Wise, the clever new way to move your money.

wise.com

This is a general link, but the explanation isn’t as good:

Sitting on your Wise money? It’s time to get growing.

As more of you hold money in Wise, we’re bringing you the benefit of interest rates, so you get more out of your money. Following the launch of stocks last...

wise.com

 

[platinumsage]

Same advice applies for long term investment: a diversified equity fund, like a worldwide index tracker, will almost certainly produce the best outcome over anything more than five years.

If you need more immediate access, though some intriguing possibilities have opened up. Wise (formally TransferWise) have started savings accounts in their ecosystem of interconnected accounts. These have underlying investments in short-term treasuries of the currency of the account. So currently, it is paying 3.11% for accounts in GBP. Since this is a bond fund, you own underlying assets as government bonds, so it’s actually much more secure than a bank account.

Not sure if this link works without an existing log in, but it describes it properly:

The clever new way to send money abroad

Banks sting you with hidden charges when you send money abroad. But that’s yesterday’s problem. Say hello to Wise, the clever new way to move your money.

wise.com

This is a general link, but the explanation isn’t as good:

Sitting on your Wise money? It’s time to get growing.

As more of you hold money in Wise, we’re bringing you the benefit of interest rates, so you get more out of your money. Following the launch of stocks last...

wise.com

You can get 3%+ in several instant access savings accounts, which have FSCS protection.

That Wise product doesn't have FSCS protection - you're relying on them safeguarding sufficient customer funds in a variety of government bonds and cash accounts across multiple countries. I don't see any advantage, and it certainly isn't "much more secure than a bank account".

Wise is a startup run by a tax-dodging Estonian bloke. I don't think anyone on here needs to trust them with their life savings.

 

[Part 2]

4% is available on bonds with NS&I locked in for 12 months. I think I'd be okay with 2 years if possible.

Maybe I should look into the index tracker thing and try to understand it better.

 

[Artaxerxes]

It’s quite a hassle getting moneysupermarket to show you all accounts in their comparison, rather than just the ones they want you to open via them so there’s a commission paid to them. But here’s the latest.

The eye catching 5%+ one from Barclays comes with the proviso you can only save up to £5k, in fact they all limit the amount you can deposit - not sure why banks do that. Surely they want to get their hands on as much money as possible?
View attachment 351954

The cap is something that put me off actually opening a saving account when I had a huge chunk of money in my accounts. I know it shouldn’t but I just couldn’t be fucked especially given the low levels.

They want you to put in specific products if you’ve got money saved, i.e ones they can charge for or dick about on the stock market with

 

[kabbes]

You can get 3%+ in several instant access savings accounts, which have FSCS protection.

That Wise product doesn't have FSCS protection - you're relying on them safeguarding sufficient customer funds in a variety of government bonds and cash accounts across multiple countries. I don't see any advantage, and it certainly isn't "much more secure than a bank account".

Wise is a startup run by a tax-dodging Estonian bloke. I don't think anyone on here needs to trust them with their life savings.

The Wise product is invested in a Blackrock fund. You aren’t trusting Wise itself with any assets.

I wouldn’t recommend it for large investment sums because, like I said, long term investments shouldn’t be in cash funds at all.

 

[alex_]

The Wise product is invested in a Blackrock fund. You aren’t trusting Wise itself with any assets.

I wouldn’t recommend it for large investment sums because, like I said, long term investments shouldn’t be in cash funds at all.

If wise run off with if you are fucked, if Lloyds run off with it the government pay out.

 

[platinumsage]

The Wise product is invested in a Blackrock fund. You aren’t trusting Wise itself with any assets.

I wouldn’t recommend it for large investment sums because, like I said, long term investments shouldn’t be in cash funds at all.

Of course you’re trusting Wise. Would you give me cash to invest in Blackrock products for you, or don’t you trust me?

 

[kabbes]

Of course you’re trusting Wise. Would you give me cash to invest in Blackrock products for you, or don’t you trust me?

Don’t know. Are you regulated by the FCA?

 

[kabbes]

If wise run off with if you are fucked, if Lloyds run off with it the government pay out.

How are wise going to “run off with it”? They don’t have it. Blackrock have it.

 

[CH1]

WISE is authorised by FCA for money transfers not taking deposits. If you look at the FCA site its a bit cagey on WISE:

Wise Payments Limited​

Reference number: 900507

Address information
6th Floor
TEA Building
56 Shoreditch High Street
London
E1 6JJE 1 6 J J
UNITED KINGDOM​

Phone​

+44 2036950999

Payment services / electronic money status​

Authorised Electronic Money Institution
Since 07/06/2018
A firm that we have given permission to issue electronic money (e-money) and provide payment services.

Trading namesThis firm currently trades under 2 trading names.​

How are customers protected?​

Protections and supportUnderstand the protections you have when dealing with this firm, and how to make a complaint.​

Customer protections and the Register
The Register tells you the activities the FCA has given this firm permission to carry out. The Register can only give you general information about the help from other organisations if something goes wrong when dealing with this firm. The Register does not detail the activities that the firm undertakes that do not require FCA approval.

The Financial Ombudsman Service and the Financial Services Compensation Scheme (FSCS) are the main organisations who may be able to help if something goes wrong when dealing with this firm. The Financial Ombudsman Service may be able to resolve your complaint against this firm if the firm fails to deal with it properly. The FSCS may be able to provide compensation if this firm goes out of business owing you money.
The protection provided by the Financial Ombudsman Service and FSCS depends on the activity a firm is carrying out. There are also other conditions, such as needing to bring a complaint or claim within a set time period, that affect any protection you may have. The final decision to consider any specific complaint or claim is determined by the Financial Ombudsman Service or the FSCS. You should always check which activities are covered by these organisations before doing business with this firm.

The Financial Ombudsman Service may be able to consider a complaint about this firm​

If this firm fails to deal with your complaint properly, you can ask the Financial Ombudsman Service to help. But it may not be able to consider complaints about all the firm’s activities. The Financial Ombudsman Service has the final decision as to whether or not it will consider a specific complaint.

You can complain to the Financial Ombudsman Service about most regulated activities and some unregulated activities. The Financial Ombudsman Service’s websiteopens in a new window has information about the type of activities you can complain about.

The Financial Services Compensation Scheme will not be able to consider a claim against this firm if it fails​

The firm may be required to safeguard funds it receives from, or on behalf of, customers when providing payment services or issuing electronic money​

If the firm becomes insolvent, you should contact the liquidator or administrator of the firm, who will be responsible for distributing any funds to customers.

 

[CH1]

4% is available on bonds with NS&I locked in for 12 months. I think I'd be okay with 2 years if possible.

Maybe I should look into the index tracker thing and try to understand it better.

Thanks for that - I saw 3.9% but only 1 year available. Should probably go for one even so.

I renewed by Halifax Isa in October for 1 year at 3.35 I think 2 year was 3.6% at the time.
Now 2 year is 2.8% at the Halifax - so even though bank base rate continues to rise the Halifax is dropping rayes from a post Truss panic level.

Actually Nationwide is the best deal on the high street right now. 4% for 2 years and 3.75% for 1 year bonds.
I suppose I could try them - but me and Nationwide are on mutual ignore. I've had two run-ins with them in the last 25 years. They think I have bad credit (computer says no) because I live where I do - but I can tell them their Brixton branch office looks like shit!

 

[kabbes]

WISE is authorised by FCA for money transfers not taking deposits. If you look at the FCA site its a bit cagey on WISE:

Wise Payments Limited​

Reference number: 900507

Address information​

6th Floor​

TEA Building​

56 Shoreditch High Street​

London​

E1 6JJE 1 6 J J​

UNITED KINGDOM​

Phone​

+44 2036950999

Payment services / electronic money status​

Authorised Electronic Money Institution
Since 07/06/2018
A firm that we have given permission to issue electronic money (e-money) and provide payment services.

Trading namesThis firm currently trades under 2 trading names.​

How are customers protected?​

Protections and supportUnderstand the protections you have when dealing with this firm, and how to make a complaint.​

Customer protections and the Register
The Register tells you the activities the FCA has given this firm permission to carry out. The Register can only give you general information about the help from other organisations if something goes wrong when dealing with this firm. The Register does not detail the activities that the firm undertakes that do not require FCA approval.

The Financial Ombudsman Service and the Financial Services Compensation Scheme (FSCS) are the main organisations who may be able to help if something goes wrong when dealing with this firm. The Financial Ombudsman Service may be able to resolve your complaint against this firm if the firm fails to deal with it properly. The FSCS may be able to provide compensation if this firm goes out of business owing you money.
The protection provided by the Financial Ombudsman Service and FSCS depends on the activity a firm is carrying out. There are also other conditions, such as needing to bring a complaint or claim within a set time period, that affect any protection you may have. The final decision to consider any specific complaint or claim is determined by the Financial Ombudsman Service or the FSCS. You should always check which activities are covered by these organisations before doing business with this firm.

The Financial Ombudsman Service may be able to consider a complaint about this firm​

If this firm fails to deal with your complaint properly, you can ask the Financial Ombudsman Service to help. But it may not be able to consider complaints about all the firm’s activities. The Financial Ombudsman Service has the final decision as to whether or not it will consider a specific complaint.

You can complain to the Financial Ombudsman Service about most regulated activities and some unregulated activities. The Financial Ombudsman Service’s websiteopens in a new window has information about the type of activities you can complain about.

The Financial Services Compensation Scheme will not be able to consider a claim against this firm if it fails​

The firm may be required to safeguard funds it receives from, or on behalf of, customers when providing payment services or issuing electronic money​

If the firm becomes insolvent, you should contact the liquidator or administrator of the firm, who will be responsible for distributing any funds to customers.

This is a money transfer. They transfer the money to the fund manager, who actually holds it. There is no deposit with Wise, except during the transfer process.

There are good discussions to be had about whether or not this kind of short-term cash fund is a good idea or not, and whether any additional few basis points justifies the hassle. And if we’re talking anything more than a fraction of the FSCS total, there are surely better options. I really don’t think that security per se is the issue here, though.

 

[platinumsage]

This is a money transfer. They transfer the money to the fund manager, who actually holds it. There is no deposit with Wise, except during the transfer process.

There are good discussions to be had about whether or not this kind of short-term cash fund is a good idea or not, and whether any additional few basis points justifies the hassle. And if we’re talking anything more than a fraction of the FSCS total, there are surely better options. I really don’t think that security per se is the issue here, though.

If you want a non-guaranteed short term cash fund why not just buy a money market or bond fund directly or through an FSCS-protected platform? That way you'll avoid Wise's fee and the risk they might not play their middle-man role diligently.

 

[alex_]

Wise have amazing prices for money transfer though

 

[kabbes]

Wise have amazing prices for money transfer though

That’s the only reason I know about this at all — I use them for currency transfers and they’re pushing this interest-earning account at me. Sure, I have no need of a short-term money market account through Wise, because I can access the same fund in other ways. Others may not be the same, though.

 

[metalguru]

I miss Peer2Peer from 2015 - 2019. I was making at least 5-6% a year through Ratesetter and Zopa - and the principle of it sounded great - enabling borrowing at a lower rate for people who needed it.

2020 was a bit scary at times - but to their credit, Ratesetter and Zola did manage to pay out everyone's balances.

I subsequently invested with Vanguard, and that is at last returning to profitability for me after a depressing 2022 (can't believe it's mainly due to the FTSE of all things). But if only I hadn't put so much in their 60 equity:40 bonds life fund as a 'safe option' , I'd be doing a lot better.

 

[kabbes]

Peer 2 peer really was just accepting junk debt at non-junk rates

I’m not even talking about the rating of the peer counterparty. I mean the intermediary themselves. You were totally dependent on their ongoing solvency, but they were just some tiny two-bit company.

 

[bimble]

I subsequently invested with Vanguard, and that is at last returning to profitability for me

oh yeah so it is! (just logged in to look at my vaguard and its all back to a cheery green "+4.7% since inception". Which is great obvs, and makes me feel a bit smug about how i didn't get upset during the time it was a big red minus for however long that was, but also what a mad world, if i'd needed that money during the red time i'd have lost the gamble, i'm fine because i can hang out in the casino sipping drinks.

 

[Hollis]

I miss Peer2Peer from 2015 - 2019. I was making at least 5-6% a year through Ratesetter and Zopa - and the principle of it sounded great - enabling borrowing at a lower rate for people who needed it.

2020 was a bit scary at times - but to their credit, Ratesetter and Zola did manage to pay out everyone's balances.

I subsequently invested with Vanguard, and that is at last returning to profitability for me after a depressing 2022 (can't believe it's mainly due to the FTSE of all things). But if only I hadn't put so much in their 60 equity:40 bonds life fund as a 'safe option' , I'd be doing a lot better.

I've just extracted my last remaining money from Lending Works. God knows why I ever went near these companies - the FOMO I guess. It's quite scary the number of ways you can lose money by following the flavour of the month - copper, energy, bitcoin., even thematic investing seems to be more dubious than the hype..

I succumbed to growth stocks at what turned out to be completely the wrong time, and will probably leave them there to hopefully recover. The more i do with this stuff, the more I think global index trackers or ETFs are probably the sanest thing to do.. I don't really get bonds unless you want funds short term - but even that's been blown out the water the last 6 months.

(ETA: actually might have done okay with copper.. )