Get 20pc income boost from top one-year bonds
MONTHLY income seekers coming to the end of one-year bonds can boost their rate — as long as they abandon the big banks.
New banks, along with a handful of building societies including Yorkshire, Leeds and Skipton, have edged up rates in the past few weeks.
The top one-year fixed-rate bond from online Paragon Bank pays monthly income at 1.74 pc a year. The top deal a year ago was 1.45 pc, meaning rates are a fifth higher. But the big banks — which pay just 0.6 pc at best fixed for two years — have not reacted. They are unlikely to for the foreseeable future.
The good news doesn’t stretch to savers coming to the end of a two-year deal, however. They may end up with less income and will pay the price of the Bank of England base rate drop to 0.25 pc a year ago. The top two-year deal is 2.03 pc with Paragon Bank. Two years ago it was 2.23 pc.
The Bank of England kept the base rate of 0.25 pc this month but announced its Term Funding Scheme will end next February. The scheme and its predecessor, Funding For Lending, let banks borrow from the Bank of England at rock-bottom rates for the past five years.
When it goes, big banks may look to savers for money and up By Sylvia Morris rates. However, the Bank of England monetary policy committee says any rise will be at ‘a gradual pace and to a limited extent’.
New banks are also eligible for the scheme, but need savers, too, to help expand their business.
Not all banks are willing to take on the administration of paying interest every month rather than just once a year.
Those that do include Paragon Bank, Ford Money, Vanquis Bank, Charter Savings Bank, Aldermore and Kent Reliance. They jostle to offer the best deals, but you need to be quick as they don’t stay around for long.
If you want to stick to the High Street, last week Skipton BS came out with a twoyear deal at 1.29 pc, while Yorkshire BS pays 1.19 pc for a year or 1.29 pc for two.
On fixed-rate cash Isas, rates are lower and choice is more limited, but check Paragon Bank, Shawbrook Bank, Ford Money, Virgin Money and Yorkshire BS. Paragon and Ford Money pay a top 1.19 pc for one year, or in the High Street, Yorkshire BS pays 1.11 pc. BM Savings launched an account last week at 1.49 pc for two years. On taxable easy- access accounts, rates are variable. Shawbrook Bank Easy Access 10 pays 1.19 pc, Paragon Bank Limited Edition Easy Access 3 1.14 pc and Ford Money 1.11 pc. Ford Money pledges to pay the same to new and existing savers. If it puts its rate up, you’ll automatically benefit. The top High Street deal is Yorkshire BS Single Access Saver at 1 .09pc. But it restricts the number of times you can take capital out in the year. Kent Reliance Easy Access pays 1 pc and Coventry BS Access Saver 4 pays 0.85 pc without any restrictions on withdrawals. The accounts are also available by post. National Savings & Investments’ popular Income Bonds — available online, by phone or post, with easy access to your money — pay 0.75 pc.