Avoid the 0.1% club

If you’ve got money in a savings account and haven’t checked the rate for a while, you could be in for a shock. Lots of accounts are paying 0.1% or less – potentially costing you hundreds or even thousands of pounds of lost interest..

With the Bank of England Base Rate at 0.5% you shouldn’t expect too much from your savings. But shopping around should net you 2.5% or more, significantly more than the 0.1% or less paid on a surprising number of savings accounts.

While banks and building societies often offer competitive rates on a select few accounts to tempt new customers, it’s almost a sure fire bet that the rate will gradually decline over time – or rather suddenly if there’s a temporary bonus attached. It’s a profitable move as experience suggests that many savers won’t bother moving elsewhere to a more competitive rate.

I’m stating the obvious, but check the interest on your savings regularly and if the rate’s uncompetitive then move! Don’t hesitate; switching accounts is straightforward, especially as many competitive accounts can now be opened online.

To find out more read our new Review Your Savings Accounts Action Plan.

Here’s a list of some offending savings accounts paying 0.1% or less gross a year. If you have money in one of these accounts then move it to a better rate elsewhere faster than you can say Jack Robinson. And even if your account isn’t listed below check the rate you’re getting – this list is just the tip of the iceberg...

Account	Interest (AER gross on lowest balance)
Barclays
e-savings account	0.10%
Cash ISA	0.10%
30 Day Savings Account	0.10%
Postal Savings	0.10%
Bonus Saver	0.05%
Easy Saver	0.10%
Cheltenham & Gloucester
Direct Transfer	0.05%
London Account	0.05%
90 Day Account	0.05%
Branch 10	0.05%
Direct 30	0.05%
Investment Account	0.05%
Halifax
Variable Rate Web Saver	0.10%
Variable Rate ISA Saver	0.10%
Premium Savings Direct	0.11%
Instant Saver	0.10%
Saver Reward	0.10%
Extra Income Saver	0.10%
Liquid Gold	0.05%
60 Day Gold	0.10%
HSBC
Flexible Saver	0.05%
Premier Savings	0.10%
Instant Access Savings	0.05%
Lloyds TSB
No Notice Saver	0.10%
Exclusive Saver	0.10%
Flexible Savings Account	0.10%
Gold Saver	0.10%
Instant Access Saver	0.10%
Online Saver	0.10%
Platinum Saver	0.10%
Standard Saver	0.10%
Select Saver	0.10%
Nationwide
e-Savings Plus	0.10%
CashBuilder	0.10%
Natwest
First Reserve	0.10%
Reward Reserve	0.10%
30 Day Bonus Reserve	0.10%
Savings Direct	0.10%
e-savings Plus	0.10%
Diamond Reserve	0.10%
Telephone Saver Plus	0.10%
Santander
Easy ISA	0.10%
Instant Access Saver	0.10%
Monthly Saver	0.10%
Instant Access ISA	0.10%
Super ISA 1	0.15%
ISA Saver	0.10%
Passbook Saver	0.10%
Direct Premium	0.10%
Everyday Saver	0.10%
TimeSaver	0.10%
Postal Notice Account	0.10%
Branch Saver	0.10%
Direct Notice	0.10%
Direct 60	0.10%
60 Day Plus	0.10%
Bonus 120	0.10%
Bonus Account	0.10%
All rates as at 29 April 2010

Read this article at http://www.candidmoney.com/articles/article100.aspx

HSBC 8% Regular Saver Account bad overall value

This attention grabbing account from HSBC promises to pay a staggering 8% gross annual interest on your savings. The rate is fixed for the one year duration of the account, but there are unsurprisingly catches.

Firstly, you'll need to have a HSBC Premier or Advance account to enjoy the 8% rate; other HSBC current account customers get a less benevolent 4%. And if you're not willing to open a HSBC bank account you can't apply for the regular saver account.

Secondly, you can only save up to £250 per month (the minimum is £25), meaning a maximum balance of £3,000 over the year. Save the maximum amount at 8% and you'll earn total interest of about £129 before tax, equal to £103 for basic rate and £77 for higher rate taxpayers.

Thirdly, you're not allowed to make withdrawals and if you close the account before the end of the one year term you'll only receive interest at the rate paid on the HSBC Flexible Saver account, currently just 0.05%!

If you already have a HSBC Premier or Advance account then this account is worth taking advantage of, provided you can save £250 (or close to that) a month for a year. You won't make a fortune, but could pocket up to £103 in total, after tax, for the sake of filling in an application form. Although I would strongly suggest you consider whether having a Premier or Advance account is actually worthwhile.

If you have one of the other HSBC bank accounts that qualifies for the 4% regular saver rate then it's worth considering, but with some shopping around you can currently earn around 3% on your savings in a tax-free cash individual savings account (ISA) - probably a better long term option for many.

But for the majority of us who don't currently have a HSBC bank account, is it worth opening a Premier or Advance account to access the 8% regular saver account?

To open a HSBC Premier account you need to be earning at least £100,000 a year or have at least £50,000 of savings and investments with HSBC, plus pay your salary into the account. In return for this the main ‘benefit' seems to be access to HSBC investment advice, i.e. HSBC will simply try to make more money out of you by selling investment products. The included travel insurance is probably a little more worthwhile, but you can buy similar policies for around £70 a year.

The HSBC Advance account will cost you £12.95 per month (£6 for 1st three months) in return for "£500 of benefits and services a year" (e.g. travel insurance & breakdown cover). My quick estimate puts the true value of the benefits (assuming you shop around) at about £125 a year - poor value for money given you'll be charged £155 a year.

So in both cases the answer is no, don't bother.

This account is a marketing gimmick that will only genuinely benefit a few. If you don't already bank with HSBC this account gives little reason to start now.

Read the full review at http://www.candidmoney.com/candidreviews/review29.aspx

The man from the Pru

Of all the scary stories about the economy, and there is no shortage to choose from, the one that caught my eye was about the CEO of The Prudential feeling it necessary to reassure the City that the shares would continue to be listed in London..

Around the same time there was speculation that the mighty Pru might well pack their bags and leave UK policy holders in the embrace of a Resolution or a Pearl.

It is not difficult to see why a UK Life assurer does not believe that it is in the best interests of shareholders to commit fresh capital to the home market, with its duff economy and preposterously bureaucratic regulation. But the Pru, goddamit, is a British institution like Wimbledon or the Tower of London. If they really are thinking of pottering off to the growth markets of Asia and leaving the rest of us to get on with it, someone in Westminster should be getting a message.

Moving on, I was rotten about service in one of my recent notes. So I ought to say how pleased I am that Hargreaves Lansdown are not only trying to get our money out of Santander, but are keeping us informed that Santander appear reluctant to part with it. HL made a mistake with us once. They were all over it like a rash as soon as they realised, and it was sorted in hours, not days or weeks. It can be done.

Read this article at http://www.candidmoney.com/articles/article99.aspx

Schroder Global Alpha Plus now reviewed

On the face of it this new fund launch from Schroders looks quite appealing. The managers can invest more or less as they wish with the aim of holding around 30 of their highest conviction stocks. And their focus will be on companies that can benefit from climate change, ageing populations and the growing significance of emerging economies.

This all sounds sensible, so what issues should you consider?

Probably the most important is the potential risk. Focussing on just 30 companies will likely result in higher volatility than the Index, meaning more sleepless nights if you’re a nervous investor. For example the Schroder UK Alpha Plus fund, which also invests in around 30 stocks, has been about 1.3 times more volatile than the FTSE All Share Index over the last 3 years.

The likelihood that the fund management team will succeed in beating the Index is also important (else you might as well buy a tracker fund). The two lead managers, Virginie Maisonneuve and Jonathan Armitage, have run the Schroder ISF Global Equity Alpha offshore fund since launch in February 2006, beating the MSCI World Index overall to date. However, while solid, their performance has not been exceptional; the fund has under-performed the Index in two of the four years since launch.

Given the concentrated nature of the new Global Alpha Plus fund, the managers’ investment strategy and stock selection will be paramount. The climate change theme hasn’t worked especially well so far for Schroders on its fund of the same name, which has generally underperformed the MSCI World Index since launch in 2007, although the long term strategy s plausible. The large healthcare companies that should benefit from ageing populations have also tended to lag the markets in recent years, although again the longer term argument seems convincing. Factoring the growth of emerging markets into investment decisions also sounds a good idea, although in practice this is one that most global fund managers already adopt to some extent.

The annual management charge is 1.50% and the estimated total expense ratio (i.e. impact of all annual charges) is 1.75%, although this may fall over time as the fund grows. The initial charge is a hefty 5.25% but most discount brokers should reduce this to zero.

On balance I’m positive about this fund, but find it hard to be especially so. The idea sounds good on paper but the managers’ existing track record of running a global fund hardly blows me away. It would be helpful if Schroders published the impact on performance of the 30 largest holdings in the existing offshore global fund, as this might give a clue to whether the managers’ highest conviction ideas have been good or bad for overall performance.

I doubt the fund will flop but I’m not yet sufficiently convinced about the managers' skills to invest my own money. Plus the potential risks mean this fund may be inappropriate as a core portfolio holding for global exposure.

The fund launches in May.

Read the full review at http://www.candidmoney.com/candidreviews/review28.aspx

Buy Insynergy Absolute China?

Question
Thank you for a very useful website.

I've recently reduced my holdings in China funds, but expect to restore them in due course. One of the funds I might then consider is "Insynergy Absolute China". The iii website categorises this as "Offshore UK Authorised".

Are there are any pros and cons I should be aware of before I put any ISA money into such a category of fund?Answer
The Insynergy Absolute China fund is an open ended investment company (oeic) domiciled in Dublin. From a UK investor tax point of view the fund will be treated in the same way as one domiciled in the UK. The fund (according to its prospectus) intends to be a ‘reporting fund’ for UK tax purposes, which means that gains will be subject to capital gains tax and income, although not distributed, must be declared with any income tax owed being paid.

However, whether you’ll benefit from any investor protection seems the subject of some confusion. The fund’s prospectus suggests that it’s not covered by the Financial Services Compensation Scheme. And on calling both Insynergy and State Street (the custodian/administrator) neither could tell me whether the fund was covered by an equivalent Irish compensation scheme. Insynergy’s press office is now helping to find out and I’ll update this page when I get a definite answer.

As for the fund itself I haven’t looked into it in any detail but the manager, Michael Lai, has performed well running the GAM Star China Equity fund that he’s managed since July 2007. Just beware that the fund has a fairly hefty uncapped performance fee of 20% of returns above 3 month LIBOR (i.e. cash) – this means that at the time of writing you should expect to pay a fifth of any annual returns above 0.66% in fees as well as the standard annual charge of 1.25%.

Insynergy Investment Management was set up by Spike Hughes, a former Hargreaves Lansdown director and boasts ‘dragon’ entrepreneur James Caan as its chairman - not sure whether this is a good or bad thing!

Read this Q and A at http://www.candidmoney.com/questions/question189.aspx

Should I be told about pension changes?

Question
Is there an obligation on employers to consult / notify in advance changes they make to final salary pension schemes? Having been with my employer for over 20 years and now 61, I find that the early retirement penalty in 2010 is double the clawback of 2009. This means taking early retirement now pays me a lower pension than last year ! No communication from the employer -only a " these are now the terms" from the pension administrator. Can this be actioned without notice/consultation? It seems that a selected few were tipped off and got out quick!

Could this be a way to help taxpayers and relieve the burden on public sector pensions costs?Answer
An employer’s obligations with respect to final salary pension schemes are set out in the Occupational and Personal Pension Schemes (Consultation by Employers and Miscellaneous Amendment) Regulations 2006 and I’m afraid reading the regulations is as tedious as the title suggests.

In a nutshell an employer must consult employees for at last 60 days when they propose to:

• Increase the normal scheme retirement age.


• Close the scheme to new members.


• Stop existing members from accumulating future benefits.


• Stop contributing into the scheme.


• Require members to make contributions when not previously required.


• Increase the amount members are required to contribute into the scheme.

However, the regulations specifically exclude a need to consult when the proposed change “has no lasting effect on a person's rights to be admitted to a scheme or on the benefits that may be provided under it”. I suspect this probably applies to changes in early retirement penalties as the impact is not lasting if you instead work until the normal retirement age – although the rules are ambiguous.

I suggest asking the scheme administrator why you weren’t consulted and see what they say.

If some members were ‘tipped off’ then this is a potentially serious issue. When an employer makes announcements regarding the pension scheme it should be to all members (if it affects them) and not just a select few. Again, you might want to pursue this with the scheme administrator and if their answer is unsatisfactory you could take your complaint to the Pension Ombudsman.

The Government obviously has the power to reduce future public service pension benefits and let’s face it; such changes are probably inevitable over the next 5-10 years given the Government’s financial deficit. However, they would have to consult affected public sector employees and it will probably turn ugly with strikes etc, so the changes probably won't happen without some all round pain.

Read this Q and A at http://www.candidmoney.com/questions/question191.aspx

Deadly debts

The Government published a summary of its finances for the 2009/10 tax year this week. As expected, it makes grim reading, with borrowing equivalent to £34,000 per household..

Taxes and other revenues brought in £469.2 billion, a fall of 5% on the previous year.

Overall expenditures and investment were £631.1 billion, an increase of 7.5% on the previous year.

In other words, the Government spent £161.9 billion more than it earned. Add in local government and public corporation and the final deficit for the year comes out at £152.8 billion, equal to nearly £5,900 per household.

Worse still, this pushes the Government’s overall debt to £890 billion, equal to around £34,000 per household. And the final straw is that Government projections predict overall debt will rise to £1,406 billion by 2014/15, equal to £54,000 per household, which incidentally is about the same as the current level of personal debt per household including mortgages.

Now debt is not necessarily a bad thing provided you can afford the interest payments. But the Government can’t. The interest bill for 2009/10 was £30.9 billion, a cost of nearly £1,200 per household and it’s estimated to rise to around £70 billion a year by 2014/15, equivalent to £2,700 per household. To put £70 billion into context, it’s about half the total amount the Government currently raises in income tax each year.

So it’s quite clear, whoever gets into power at the forthcoming election will basically be up the creek without a paddle as far as finances are concerned. Spending will need to be slashed and/or taxes raised significantly to stop the deficit from soaring and sending interest payments further out of control. Neither will be comfortable given we’re still on the cusp of recession.

Greek finances have also been in the news again this week as its Prime Minister formally requested the previously arranged €40-45 billion bail-out loan from the EU and IMF (at a 5% interest rate). Greece has a deficit of around €300 billion, which may not sound so bad compared to our £890 billion. But Greece’s GDP (gross domestic product – basically total annual spending within a country’s economy) is far lower than the UK’s too, so that Greece’s debt is estimated at 116% of its GDP. This compares to 62% in the UK, i.e. Greece can far less afford to get out of its financial hole than we can.

Unsurprisingly, investors are demanding an increasingly high risk premium for holding Greek debt – the yield on 10 year Greek bonds is around 8.7%, about 5.7% higher than equivalent German bonds.

The debt story is going to drag on and on, meanwhile it will be interesting to see how stockmarkets cope. They’ve been surprisingly resilient of late.

Read this article at http://www.candidmoney.com/articles/article97.aspx