The Bank of England latest figures show there's just over £300 billion in bank accounts that pay no interest at all. Even more money is being held in accounts which pay a paltry 1% or less. But there is a new way of improving the rates by 400% or more.
Savings accounts are paying the highest rates for well over a decade, yet all too many people are failing to take advantage as they don’t switch to better paying accounts – often simply because they don’t have the time or understandably have better things to do with their money, than constantly change bank accounts in an attempt to find the best rates.
Q: So what is this new way of beating the banks?
Cash Savings Platforms are like savings supermarkets, where savers have a single log in and then pick and choose which products they want to buy.
The appeal is their simplicity. You can switch money like they do in the films, with a few clicks rather than having to apply to open a new bank account each time and provide the endless documentation and details of your mother's maiden aunt's birthday and other fascinating personal details. With these platforms, the idea is that you fill in your details once and then decide where you want to save and can move money to the best accounts whenever new things happen in the market, with the minimum of fuss.
Q: What sort of rates do they offer?
Generally they are paying over 4% on the range of accounts they offer. That's not the best rates out there but it is astoundingly better than the regular accounts being offered by most banks.
The very best rates can be achieved by scouring the whole market and opening the account or accounts, with the best rates. But life is more than filling out forms and looking at the Best Buy tables and for those who don't like keeping an eye on the best accounts available, a Cash Savings Platform might provide a fantastic practical solution to getting a much better return on youyrsavings - and improving your interest rate by 3 or 4 times what you may be getting now.
Q: What's The Catch?
Good question. The catch is that some platforms charge a fee. Others which don't charge an explicit fee, make their money from fees that their partner banks pay them. This may mean that the accounts available on the platform pays less than the rate you can earn if you went directly to the bank yourself.
So if you are really active and have the time and energy to do the transfers yourself, then you can probably make more if you save outside of a platform. But in reality, most people actually do nothing so saving through a platform can actually make you a lot more than doing what you are probably doing now - which for most if us, is not much.
But that is the price you pay for them doing all the admin for you.
It's really disappointing that you can't see the rates they offer on individual accounts without applying - that makes it impossible, at least to me, to see how much the platform is taking in fees. Of course they need to be paid for their service - that's only fair, but not making it clear and easy to understand what they take, is fairly typical of the financial services industry and very disappointing.
Nonetheless, I still think this is a service that has the potential to offer real value to millions of savers.
Q: What are the Cash Savings Platforms available?
Here are some that I found which I think are worth investigating:
Aviva Save - No platform fee and 7 providers
Hargreaves Lansdown - No platform fee and over 20 providers
Raisin - No platform fee and 40 providers
Flagstone - Has 60 providers and marginally better top rate account last time I looked. But it also had a minimum deposit of £10,000
Savings Champion - A minimum deposit of over £50,000. They deserve credit for being very uofront about their charges - as they charge a platform fee of between 0.1% - 0.25%, depending on how much you deposit with them. But again it is not possible to see if the rates they ofefr on various accounts match the ones you can get if you go directly to the bank. Presumably this might become clearer if you go through the application process and are accepted.
Q: What Protection Do They Offer?
The Financial Services Compensation Scheme protects your money up to £85,000. Using a platfiorm enables you to easily spread your money over a number of providers, so that you can ensure no single provider has that on deposit.
Be aware that if you hold cash outside the platform with a provider that you are also hold money with on the platform, both accounts will form part of the maximum £85,000 protected limit.
I can't find any information on what would happen if the Cash Savings Platform went bust. I assume that as long as the money is with an FSCS protected bank, it shouldn't make any difference. It is a shame this information isn't made clearer by the platforms, but it would be a good question to answer if anyone from the industry wants to get in touch (see below)
Q: How Much Can You Beat Even The Platforms By Going Direct?
Lets start wiith what an ordinary current account pays. Well it is likely to be 0% - and what's more the banks - I'm thinking of NatWest, which I just tried to check, make it impossible for me to tell what rates they offer.
You should put any real savings in a savings account which pay much higher rates. You should be looking at over 4%.
Atom bank pays 4.85% which falls to 3.85% if you make any withdrawals in a month. There is no minimum deposit and need to make a reguklar payment. The Reward savings account can be opened within minutes, they claim. There are no details about a maxumum deposit that I can see - so it looks like you can pay in as much as you like.
If you are looking for a name you might recognise more First Direct pays a fantastic sounding 7% fixed for 12 months on savings of up to £3,600. You can't make any withdrawals of your money during the 12 months,but if you need to, you can access your money before then, but you’ll have to close the account. You also need to be a 1st Account holder to get access to their Regular Saver Account. Again their product information is not as complete as I would like it to be, but it looks like you can put in a maximum of £300 a month. So you would set-up a regukar standing order from your First Direct 1st Account into the savings account.
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