Avoid this “Brexit Bond”

Want to express your thoughts on Brexit via your savings account? The Family Building Society is offering a new fixed-rate “Brexit Bond” that allows you to take a punt on whether the pound will be weaker or stronger on the day we are due to leave the European Union. You choose the “Optimist Bond” if you think the pound will be stronger against the euro on 29 March 2019 than it is now, or the “Pessimist Bond” if you think the pound will be weaker. If your prediction is correct, you will get a 2% bonus on your savings interest; if you get it wrong you’ll get just 1% interest.

However, it’s worth reading the small print on this. While a 3% return on your savings over two years would be great, you won’t actually get this with the Brexit Bond. Either you’ll pick the wrong outcome and get a meagre 1% return, or you’ll pick the right one and still only get a 2.04% return over two years – the 2% bonus is only added at the end of the two years, so the lack of annual compounding brings the overall return down. If the exchange rate remains unchanged, no bonus is paid on either of the bonds.

It’s also important to note that you won’t be able to withdraw cash before the term is up. As the minimum investment on either Brexit Bond is a very high £10,000, you would have to be prepared to lock away a lot of cash for the next couple of years. Given that you can almost match the interest rate if you guess right by opting for the guaranteed 2% return on Atom Bank’s two-year fixed-rate account, it is extremely hard to see the attraction of this product.

As a country, we seem to love a gimmick when it comes to our savings. For over 50 years, National Savings and Investments’ Premium Bonds have been our favourite home for our savings – with more than £68bn invested. That is amazing when you consider that Premium Bonds pay no interest whatsoever. Unless you win a prize – and the chances of that are fairly slim – your money is shrinking in real terms as it fails to keep up with inflation. In the column on the right we look at the perks offered by a few accounts. Whether or not you choose to go with any of them, there’s no reason to bother with a Brexit Bond.

Three gimmick accounts that offer more for your money

There’s no shortage of savings accounts with special perks vying for your cash. Here are three of the more promising options.

• If you want the chance to win a big prize with your savings, then the Halifax Savers Prize Draw is a better option than Premium Bonds. Open a qualifying savings account (you must hold at least £5,000 in savings for the month prior to each draw) and you can register to be entered into the monthly prize draw to win up to £100,000. Halifax’s Regular Saver account counts as a qualifying account for the draw, and pays 2% for the first 12 months.

• The Family Building Society’s Windfall Bond also gives you the chance to win a decent-sized prize. It pays an interest rate of 0.25% on bonds that have to be bought in £10,000 blocks. Each bond is entered into a monthly prize draw to win up to £50,000. The interest rate is nothing special, but after 35 days you can cash in a bond with no notice or penalty. So if you need fast access to large amounts of cash and want the thrill of a prize draw you might consider it. But you could get a guaranteed rate of 1.25% from a standard easy-access account with Ulster Bank.

• The Virgin Money Regular E-Saver account pays 2.25% for the first year, though you can only save up to £250 per month. Every few months it hands out prizes to savers: you get ten entries into the draw for having an account and a further ten entries for every month where you make a deposit. However, better rates are available from HSBC and First Direct (though these require a current-account switch), or from Saffron Building Society if you live near a branch.

In the news this week…

• The controversial cap on care fees – the so-called “dementia tax” – is poorly understood, says Laura Suter in the Daily Telegraph. Any cap was “only ever intended to apply to defined costs of care”. Costs of accommodation and other living expenses weren’t included and, “equally importantly”, the care cap will only cover the amount a local authority is prepared to pay, which can be up to 25% lower than the fee charged.

So, if a council is only prepared to pay £550 a week, while the actual cost of care is £700, and the “hotel” element (accommodation and living expenses) is £250, it would take just 2.5 years of residency to hit the £72,000 cap that is due to be bought in in 2020, during which time the individual will have racked up a bill of £124,000. Even then, they may still also be liable for the difference between the council’s maximum payment and the actual cost.

• Holiday car hire can be expensive and worry-inducing, says Rupert Jones in The Guardian. The good news is that, provided you book early and resist the expensive extras – which includes everything from “super collision damage waiver” to child seats – you could be looking at as little as £196 for a week’s car hire in Florida. The key is to buy an independent annual policy to cover any accidents or scrapes (Insurance4carhire charges £39.99 a year for Europe) and mark “every blemish or scratch on the rental agreement” before you drive away. When you return the car, ask staff to inspect it. The car-hire firm will probably block a sizeable chunk on your credit card if you don’t buy their insurance, so make sure your card has enough credit. 

• The new government childcare-voucher scheme, has in many cases made things worse, reports Emma Simon in The Sunday Times. Those who have managed to sign up to the scheme (easier said than done) have complained of delays in paying childcare providers and problems accessing money they have paid into their online accounts, forcing them to find the equivalent cash to pay fees or face late payment fines. HMRC say they are “working hard” to make improvements and advise calling their dedicated helpline on 0300-123 4097.