Best Business Savings Roundup November 2013
Cash that is not currently required as capital for the day-to-day running of your business will usually generate more interest in a business savings account than in a business current account. If you haven’t yet opened an account, or you’ve found that your current provider is no longer competitive, it’s worth shopping around for the best possible rates. We’ve put together a selection of some of this month’s best business savings accounts to help you choose the right option for you.*
Latest easy access account deals
If you’re likely to need access to your capital at short notice, an easy access business savings account, such as Cater Allen’s Asset 30 account, could be worth considering. This account offers a rate of 0.65% AER/gross and pays monthly interest, with a minimum opening balance of £5,000. Withdrawals can be made at any time, as long as you give 30 days’ notice. Alternatively, Bank of Cyprus UK offers a one year bond requiring a minimum deposit of £10,000 and paying 1.80% AER/gross. You can withdraw up to 30% of the value of your initial deposit during the fixed term provided that you give 35 days’ notice in writing. A maximum of two withdrawals are permitted.
Latest fixed rate bond deals
If you’re prepared to lock your business capital away for longer, you may be able to get a slightly higher rate of interest. Cater Allen offers a variety of Small to Medium Enterprise Fixed Term plans ranging from one to three years in duration, which are available to businesses with a turnover of under £2.5m. Rates on offer range from 1.30% AER/Gross for the one year bond through to 1.90% AER/Gross for the 2 year bond and 1.95% AER/Gross for the 3 year bond. The minimum deposit is £50,000 and no additional deposits or withdrawals are permitted. Interest on all three plans is paid on maturity.
AER – Stands for the Annual Equivalent Rate and illustrates what the interest rate would be if interest was paid and compounded once each year. (As every advertisement for a savings product which quotes an interest rate will contain an AER, you will be able to compare more easily what return you can expect from your savings over time)
Alternatives to fixed rate bonds
If you are prepared to tie up your business capital for a set period, you might want to consider an alternative product to a fixed rate bond, known as a structured deposit plan. This type of plan typically lasts for a three to six year term, and could potentially offer higher returns than a traditional fixed rate bond. Structured deposit plans offer returns that are linked to the performance of an Index such as the FTSE 100. Your capital is not put at risk, but any returns are not guaranteed as they are dependent on market performance.
The Investec Target Income Deposit Plan offers a potential annual income of 5.15% provided that the FTSE 100 finished above 90% of its starting value. Growth in the Index is measured by comparing the Final Index Level to the Initial Index Level. If, at maturity, the Final Index Level is equal to or lower than 90% of the Initial Index Level you will not receive a return, but your original capital will be repaid. This is a six year plan that is designed to be held for the full term.
The 6 Year Growth Deposit Bond from Legal & General offers a potential return of 150% x any FTSE 100 growth, capped at 35%. The minimum for this plan is £500 and it is capital protected – however, returns are not guaranteed and you may only receive a return of your original capital. Click here to compare more alternatives to fixed rate bonds for business customers >>
Structured deposit plans are capital protected. There is a risk that the company backing the plan or any company associated with the plan may be unable to repay your initial investment and any returns stated. In this event you may be entitled to compensation from the Financial Services Compensation Scheme (FSCS), depending on your individual circumstances. In addition, you may not get back the full amount of your initial investment if the plan is not held for the full term. The returns from structured deposits are not guaranteed. The past performance of the FTSE 100 Index and any companies listed on the FTSE 100 Index is not a guide to future performance.
No news, feature or comment should be seen as a personal recommendation to invest. If you are at all unsure of the suitability of this type of investment, both in respect of its objectives and its risk profile, you should seek independent financial advice.
* Data accurate as of 04/11/2013.
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