Hinckley & Rugby Building Society loyalty bond beats the one year pensioner bond but only for existing members

31st March 2015 by Anna Bowes

Virgin Money has increased the interest rate on its Defined Access ISA/E-ISA and Defined Access Saver/E-Saver. The new interest rate is 1.41%, increased from 1.35% and existing account holders will benefit from the change, as well as those who open new accounts. The rate will drop to 0.75% if 4 or more withdrawals are made during the year and the lower rate will apply for the rest of that calendar year.

A surprise to see a provider increase an already competitive easy access rate, one which was top of the table following the withdrawal of Coventry Building Society’s account earlier in the week. Unfortunately, the ISA is less impressive with higher paying options from the likes of NS&I, the Post Office and Skipton Building Society (all 1.50%), without the withdrawal restrictions. The real positive news is that this change has been applied to existing account holders, who in the current climate need all the help they can get. Hopefully others will follow Virgin’s lead and make improvements to stimulate more competition in the market and get interest rates back up again, particularly amongst easy access accounts.

Virgin Money has also made improvements to some of its fixed rate ISAs. The 1 year fixed rate ISA is now paying 1.65% (previously 1.60%) and the 5 year fixed rate ISA is now 2.35% (previously 2.25%). Savers can choose between a branch/postal version and an online version and accounts can be opened with a minimum of £1. Transfers in of previous ISAs are accepted. Withdrawals are allowed from the ISAs, subject to a penalty of 60 days loss of interest for the 1 year ISA and 180 days loss of interest for the 5 year ISA.

So, Virgin seems to be providing most of the positive news this week and whilst these improvements are small, they are enough to make these accounts competitive. The 1 year fixed rate ISA joins Julian Hodge Bank at the top of the 1 year table, although with a much smaller opening balance requirement and the ability to make withdrawals subject to a penalty, this account is arguably more flexible. The 5 year fixed rate is competitive, sitting next in line after the State Bank of India (2.50%). Unfortunately it is perhaps a further indication of how underwhelming this ISA season is turning out to be, that we are heralding a change that is making a provider competitive rather than market leading.

Hinckley & Rugby Building Society has launched its 150th Anniversary Loyalty Bond paying 3%, fixed for 1 year. To open the account, you must have been a continuous member of the society since 30 November 2014. Accounts can be opened by post or in branch with a minimum of £500. The maximum investment is £5,000, although if opened in joint names, the maximum would be £10,000. Access to the funds is allowed on closure only, subject to 90 days’ loss of interest.

Is this the first challenge to the NS&I 65+ Bonds? The 1 year account is the first of its kind to actually beat the rate paid on the 1 year version of the 65+ Guaranteed Growth Bonds. However, only a select group of savers will be able to take advantage and even then only up to a relatively small maximum balance of £5,000 (£10,000 for joint accounts). Having said that, it is great to see loyalty rewarded by providers, saving top deals for existing customers rather than new customers and it could make a difference to the savings market if more providers did the same.

Charter Savings Bank has launched new notice accounts and made improvements to its 3 and 4 year fixed rate bonds. The new 30 day notice account is 1.40% and the new 60 day notice account is 1.55%. The 60 day notice account is particularly good as it matches the rate on two current best buys, which have longer notice periods of 90 and 95 days respectively.

The 3 year fixed rate bond is 2.20% (the previous version was 2%) and the 4 year bond is 2.35% (the previous version was 2.10%). Whilst the 3 year is not good enough to make the best buy tables, the 4 year makes it in.

The latest addition from the Challenger Banks has brought some much needed competition to the shorter term notice account market and fits nicely with the provider’s market leading 95 day notice account. When the provider launched, the longer term bonds were the weakest area of the provider’s range, so it is good to see improvements made, although hopefully even better rates will follow soon.

Skipton Building Society has launched new versions of its fixed rate accounts with the majority of rates increased for new accounts opened.

The fixed rate ISAs are now 1.55% for 1 year (the previous version was 1.45%), 1.75% for 2 years (previously 1.65%), 1.90% for 3 years (previously 1.80%) and 2.10% for 5 years (previously 1.90%). The 1 year is the most competitive, appearing in the best buy table. The 2 and 3 year ISAs sit just below the top 5 and the 5 year is some way off the pace.

Also launched were new Loyalty fixed rate ISAs for members of the society since 5th May 2014 paying 1.65% for 1 year, 1.85% for 2 years, 2% for 3 years and 2.20% for 5 years. The 1 year is equal to the market leading rate. The 2 year and 3 year ISAs are in the top 5 and the 5 year ISA doesn’t even make the top 5.

So whilst it is good to see improvements being made to ISAs in the lead up to the new tax year, the results are hardly earth shattering. In a similar move to other providers during this underwhelming ISA season, Skipton has simply done enough to make its fixed ISAs more competitive, rather than market leading.

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