Rates are up, but now we need equity for Isa savers: if NS&I led the way, rivals would line up, says JEFF PRESTRIDGE
Savings rates are up – and not before time. Hip hip hooray, I hear you say. A bit of good news to counter galloping inflation (9.4% and heading towards 11%) and the drop in the stock markets.
The leader is NS&I, the government-backed savings organization. On Thursday, it announced huge increases on its most popular accounts – rate hikes that will benefit some 1.3 million savers.
This means NS&I is now paying 2.2% interest on its Junior Isa, 1.2% on Direct Saver and Income Bonds, and 0.9% on Direct Isa. The previous rates were 1.5%, 0.5% and 0.35%.
The next step: Sad to see NS&I continue to discriminate against its Isa cash savers
I will make three observations about NS&I’s largesse. First, as its boss Ian Ackerley is keen to point out, the increases don’t mean the thrift giant necessarily has to be the first port of call for savers. There are a number of building societies that offer better rates on certain accounts.
For example, on Junior Isas, Coventry, Dudley, Earl Shilton, Family, Loughborough, Monmouthshire and Skipton all pay more interest. Shopping should therefore remain on the agenda.
Secondly, while government support of NS&I means that savers’ deposits are protected beyond the £85,000 limit that applies to savings with banks and building societies, it does not mean that savers must now stack all their money.
As regular readers of Personal Finance know, NS&I’s standards of customer service are as high as a ferry trip across the Bay of Biscay on a windy afternoon.
These higher savings rates will undoubtedly strain its ability to cope with an influx of new business. I hope Mr. Ackerley has contingency plans in place to cope.
Finally, it is sad to see NS&I continue to discriminate against its Isa cash savers by offering them lower interest rates (0.9%) than those offered to savers in its equivalent non-Isa account (Direct Isa, 1.2 %).
Yes, it’s not the only savings institution to do this – for example, the Nationwide Building Society pays 1.5% interest on its Triple Access Online Saver account, but only 1.35% on the Isa version .
But NS&I should lead the way when it comes to fairness. I’m sure if it did, the rivals would line up. Over to you, Mr. Ackerley.
Kudos to HSBC
As for savings rates, kudos to HSBC bank for doubling the rate on its “flexible saver” account – from 0.1 to 0.2%.
As one commenter, who will remain anonymous, told me last week: “Damn, HSBC doubled the interest rate on Flexible Saver. “It’s still c**p though.”
The market for prepaid funeral plans will be regulated
The market for prepaid funeral plans will come under the scrutiny of the Financial Conduct Authority (FCA) from Friday when it takes over regulation of the industry.
Hopefully, this will mean an end to the scandals that have tarnished the reputation of the industry in recent months, although the FCA’s poor reputation for protecting consumer interests does not bode well.
The FCA was widely criticized by a select executive committee last week for failing to stop unscrupulous financiers from robbing steelworkers of their savings.
Regardless of the FCA’s effectiveness in realizing the plans of the funeral market – helping to create an industry that consumers can implicitly trust – it is essential that those who have been disappointed with their supplier are not forgotten.
Some 46,000 customers of failing provider Safe Hands Plans are still waiting to hear if someone will step in and help deliver (at some point in the future) the funeral they purchased in good faith from this rogue company.
It looks like Dignity and Coop are gearing up to do just that, though the final decision rests with the directors of Safe Hands (an announcement is imminent). Regardless of the company chosen, Safe Hands customers will need to accumulate more money. Some will not be able to afford it.
James Daley, of campaign group Fairer Finance, believes Safe Hands customers deserve better. He is right. The government should step into the breach.
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