Focus on: Fix your savings at 3.45% for one year
United National Bank's one-year fixed rate deposit account is now paying a new-and-improved return of 3.45% AER (Annual Equivalent Rate). But why is this news?
After all, a cursory glance at MoneySupermarket's savings comparison tables will reveal the product is not the market-leading account in the fixed rate bond arena - even over the same one-year term. But a closer look at the small print could still mean it's the best deal for your circumstances...
What's the deal?
The fixed rate on United National's one-year bond, which previously paid 3.30% AER, has now been upped to 3.45% AER. This is the Annual Equivalent Rate but if you choose to earn interest monthly, the rate will reduce to 3.40%.
To celebrate the opening of our new offices in Canterbury and Whitstable we are offering 50% off our standard selling fees on production of this voucher.
Terms: If you have instructed another agent on a sole agency and/or sale selling rights basis, the terms of those instructions must be considered to avoid possible liability to pay two commissions.
Contact: Whitstable 01227 208268
Valid until: Monday, September 30 2013
Bear in mind that either way, this interest is gross and will be taxed at your nominal rate. Interest is accrued daily and paid straight into the account at maturity.
The minimum deposit required to open the bond is £2,000 while the maximum you can invest is £500,000. However, even if you are lucky enough to be in this latter position, bear in mind that only the first £85,000 per person is protected under the Financial Services Compensation Scheme (FSCS).
You can choose to open the account either online, by post or in a branch. But, by any of these application means, early withdrawals are not permitted.
Any catches?
The main downside to this account is that you will have to relinquish access to your cash for a full 12 months from the date of its opening.
Only in exceptional circumstances will you be able to access the funds early and even then, this will be subject to a 2.00% interest penalty. However, this is typical of fixed rate bonds in general as they offer higher rates of return than easy access accounts.
What's the verdict?
In terms of rate alone, United National's one-year bond is not the best on the market. Cahoot's one-year bond, for example, pays a higher 3.60% AER (gross), but it requires a whacking deposit of £25,000 - a hurdle too high for many savers.
BM Savings also pays a higher rate of 3.51% on its one-year fixed rate bond, which can be opened for as little as £1. However, this account only accepts postal applications, which could also prove a deterrent for savers.
In light of these two restrictions, United National's bond, which allows online applications and requires a feasible deposit of £2,000, could well be the best deal for you if you are also looking for shorter-term bond.
To get higher returns that this you will have to consider tying up your money for longer. BM Savings offers a fixed rate of 3.90% AER on its two-year bond in return for £1, but again this is only open to postal applications.
Allied Irish Bank accepts postal and telephone applications on its two-year fixed rate bond, and pays a rate of 3.80% for a minimum investment of £1,000.
However, while you will secure extra returns with a two-year fixed rate bond, make sure you can afford to lock your cash away for that long. Getting your hands on it before the maturity date could be at best, expensive and at worst, impossible.
Top tip
If you have a lump sum that you are looking to invest into a fixed rate bond - whether it's for one or two years or even longer - make sure you have exhausted your ISA allowance first. ISAs are savings accounts on which you can earn the interest tax-free. For the current tax year (2012-2013) you can pay up to £5,640 into a cash ISA. And, if you want to fix in your rate for a year or longer, you can do this just as you would with a fixed rate bond.
You can see a list of the best fixed rate ISAs here.
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