Your browser isn't supported
It looks like you're using an old web browser. To get the most out of the site and to ensure guides display correctly, we suggest upgrading your browser now. Download the latest:

Welcome to the MSE Forums

We're home to a fantastic community of MoneySavers but anyone can post. Please exercise caution & report spam, illegal, offensive or libellous posts/messages: click "report" or email forumteam@. Skimlinks & other affiliated links are turned on

Search
  • FIRST POST
    • MSE Ben
    • By MSE Ben 15th Jun 17, 5:08 PM
    • 38Posts
    • 4Thanks
    MSE Ben
    MSE News: Atom launches 2% two year bond but you can beat if you guess Brexit impact
    • #1
    • 15th Jun 17, 5:08 PM
    MSE News: Atom launches 2% two year bond but you can beat if you guess Brexit impact 15th Jun 17 at 5:08 PM
    Savers have been given a boost after Atom Bank launched a market-leading two year account offering 2% ...
    Read the full story:
    ’ Atom launches 2% two year savings but you could beat if you guess Brexit impact '

    Click reply below to discuss. If you haven’t already, join the forum to reply. If you aren’t sure how it all works, read our New to Forum? Intro Guide.
Page 1
    • ricky_v
    • By ricky_v 15th Jun 17, 9:15 PM
    • 257 Posts
    • 130 Thanks
    ricky_v
    • #2
    • 15th Jun 17, 9:15 PM
    • #2
    • 15th Jun 17, 9:15 PM
    Quick sums tells me it's 2% NOT 3%, plus it does say on the website!

    What is the interest rate?

    Annual interest Rate effective from 14 June 2017 Gross AER1
    INTEREST RATE WITHOUT BONUS
    £10,000+ 1.01%
    INTEREST RATE WITH BONUS
    (INCLUDES A BONUS OF 2%)

    £10,000+ 2.04%

    https://familybuildingsociety.co.uk/Savings/Accounts/Brexit_Optimist_Bond.aspx?page-referral=brexit-bond
    Last edited by ricky_v; 15-06-2017 at 9:17 PM.
    • greenglide
    • By greenglide 15th Jun 17, 10:59 PM
    • 2,895 Posts
    • 1,867 Thanks
    greenglide
    • #3
    • 15th Jun 17, 10:59 PM
    • #3
    • 15th Jun 17, 10:59 PM
    What a stupid, stupid, childish offer.

    I don't that the value of the Euro is going to be significantly tied to the mess of brexit and the value of the pound against the Euro may not either.

    Madness.
    • eskbanker
    • By eskbanker 16th Jun 17, 12:30 AM
    • 5,787 Posts
    • 5,671 Thanks
    eskbanker
    • #4
    • 16th Jun 17, 12:30 AM
    • #4
    • 16th Jun 17, 12:30 AM
    Quick sums tells me it's 2% NOT 3%, plus it does say on the website!

    What is the interest rate?

    Annual interest Rate effective from 14 June 2017 Gross AER1
    INTEREST RATE WITHOUT BONUS
    £10,000+ 1.01%
    INTEREST RATE WITH BONUS
    (INCLUDES A BONUS OF 2%)

    £10,000+ 2.04%

    https://familybuildingsociety.co.uk/Savings/Accounts/Brexit_Optimist_Bond.aspx?page-referral=brexit-bond
    Originally posted by ricky_v
    Yes, MSE have seen a 1% interest rate and a 2% bonus and rather foolishly concluded that this makes 3%, thereby completely ignoring the fact that the 1% is an annual figure and the 2% is a one-off! Since the term is nearly two years, this inevitably means that the annualised return (used for standardised comparisons) is the 2.04% AER shown on the provider's website.

    Back to school for Ben Salisbury then for repeatedly comparing Family's 3% with Atom's 2% when it's not a meaningful like-for-like comparison:
    Atom Bank launched a market-leading two-year fixed account offering 2% - but if you've at least £10,000 to save and can correctly guess the impact of Brexit, you could get up to 3% with a new bond
    If you correctly guess whether the pound will buy more or fewer euros in two years' time, you'll get 3% interest over two years - a rate which beats the best buy. But if you're wrong you'll get just 1%, so it's a gamble - and savers may prefer the guaranteed 2% from Atom.
    If you put money into Atom and the successful version of the Family product, the returns on both will be circa 2% annualised (and around 4% for the two years), so not only is it completely misleading to have all the 2% versus 3% stuff but the headline is factually inaccurate....
    • bowlhead99
    • By bowlhead99 16th Jun 17, 6:18 AM
    • 6,873 Posts
    • 12,378 Thanks
    bowlhead99
    • #5
    • 16th Jun 17, 6:18 AM
    • #5
    • 16th Jun 17, 6:18 AM
    Also, his maths is flawed (making an unusual-looking result) in the section on "you can't game it".

    our analysis shows if you do you’ll only be guaranteed a combined return of around 1.45%.
    As ricky pointed out, the return for getting it right is 2.04%ish annualised, which is a combination of getting:

    a) 1% annualised on the initial deposit over the time period, and

    b) one-off 2% bonus on the initial capital after a year and ten-and-a-half months (14 June this year to maturity on 2 May 2019)

    This leaves you with 10,389 on a 10,000 deposit after a year and ten-and-a-half months which annualises to 2.04%

    So, if you are going to get tahat 2.04% annualised on half of your money (for calling it right) and 1.00% annualised on the other half of your money (for calling it wrong), then clearly you are going to get a blended result, half-way between the two, on the total sum. That's 1.52% annualised.

    He lays it out for us thus:
    Therefore you’d end up with £20,578 from doing both (assuming the pound-to-euro rate is not exactly the same) ...
    I agree you get £20578 on a £20k deposit at maturity, which after a year and ten-and-a-half months, equates to the approx 1.52% compound annualised rate.

    However he goes on:
    ...which is an effective return of around 1.44%, well below Atom’s guaranteed 2% over the same two-year term.
    I wondered why he could possibly get under 1.5% as the annualised return (i.e. 1.44% in the text above or 'around 1.45%' in the earlier headline) given half the money was making a little over 2% including bonus and the other half was making 1%. Clearly the rate would be at least 1.5% if we're blending roughly equal amounts of 2-and-a-bit and 1. It appears the reason he's getting the low return is that he's just taking the £20578 received after 22.5 months and pretending it was received after 24 months (i.e. on maturity you would just move it into a zero percent account for another month and a half).

    The two year deposit at Atom earning 2% isn't available for a period of only a year and ten-and-a-half months. It's available for locking your money up for two years. And nobody in their right mind would deposit cash in an interest-bearing account for a year and ten-and-a-half months at Family and then leave the matured sum in a non-interest-bearing account for one-and-a-half months to pad it out to the full two years and compare the returns with what they got on the two-year interest-bearing account at Atom. That would be silly, comparing apples to oranges.

    So the solution is not to directly compare the £20578 at Family with the £20808 you'd have from Atom, because Atom's was a longer term.

    To compare apples to apples you should just use annualised rates: the AER concept which all banks and building societies are told to publish, so that consumers know what they'll be getting as an annual equivalent when they deposit cash for a term which might not actually be exactly one year. That doesn't involve 'padding out' the return from a shorter time period with a 0% return for a few months. Just doing the maths to get back to an annualised rate.

    The conclusion that if you can wait 2 years it's better to invest with Atom than split your money between two Family products, is of course correct. Because one of the Family products is doing very marginally better than Atom (2.04% annualised instead of 2.00% annualised) and the other is doing a lot worse (1.00% instead of 2.00%). But the whole premise of trying to compare them is presumably only being done because MSE Dan mistakenly thought that the 'guess the result' account was 3% and he was trying to compare "3% and 1% blended together" vs a straight 2%.

    The result is just a mess. The figures he calculates to prove the correct answer of what to do, do not help anyone understand how the bonuses on the offered accounts work (which is what MSE editorials should do) or how the concept of comparing published AERs is helpful if you are comparing deposits of differing timescales or on accounts with complexities (which is what MSE promote elsewhere).

    not only is it completely misleading to have all the 2% versus 3% stuff but the headline is factually inaccurate....
    Originally posted by eskbanker
    Actually it is factually accurate to say you can beat 2% if you call it right and guess the right Family product to get into - because if you do that, you will get 2.04% annualised rate of return instead of 2% annualised rate of return.

    Obviously the idea you will beat it by a whole percent is way off. It's marginal. And your money matures sooner in the Family product so if you want to deposit for more than the year and ten-and-a-half months you will need to redeploy the money in May 2019 at a decent rate to ensure you're keeping up with or beating the account that's continuing to earn 2% at Atom.

    At that point it's quite possible that there might be loads of other accounts paying more than the 2% and you'll be really glad to have the money back out to redeploy quicker... or there might be none, because the future is uncertain and we don't know what state the interest rates and bank deposit markets will be in during 2019.

    Personally, a shorter lockup for a higher rate is very welcome in a low-interest environment, but given you'd also have to take the low 1% rate on some of your money to 'hedge your bets', it is a gimmick of a product. Like those accounts that give a better interest rate if your football team wins the league. You can usually beat them by depositing elsewhere and taking some of the interest down the bookies to do the gambling side of it.
    Last edited by bowlhead99; 16-06-2017 at 6:31 AM.
    • badger09
    • By badger09 16th Jun 17, 11:45 AM
    • 5,376 Posts
    • 4,614 Thanks
    badger09
    • #6
    • 16th Jun 17, 11:45 AM
    • #6
    • 16th Jun 17, 11:45 AM
    Time for MSE authors to run their articles through a select panel of forum members for a sense check before publishing?
    • eskbanker
    • By eskbanker 16th Jun 17, 12:11 PM
    • 5,787 Posts
    • 5,671 Thanks
    eskbanker
    • #7
    • 16th Jun 17, 12:11 PM
    • #7
    • 16th Jun 17, 12:11 PM
    Actually it is factually accurate to say you can beat 2% if you call it right and guess the right Family product to get into - because if you do that, you will get 2.04% annualised rate of return instead of 2% annualised rate of return.

    Obviously the idea you will beat it by a whole percent is way off. It's marginal. And your money matures sooner in the Family product so if you want to deposit for more than the year and ten-and-a-half months you will need to redeploy the money in May 2019 at a decent rate to ensure you're keeping up with or beating the account that's continuing to earn 2% at Atom.

    At that point it's quite possible that there might be loads of other accounts paying more than the 2% and you'll be really glad to have the money back out to redeploy quicker... or there might be none, because the future is uncertain and we don't know what state the interest rates and bank deposit markets will be in during 2019.
    Originally posted by bowlhead99
    Yes, you're right in the sense of annualised returns that are the standard method of comparison so 2.04% does clearly beat 2% - I suppose I was falling into the same trap of comparing apples with oranges in that you can't get a better return from Family than Atom in absolute £ terms because of the slightly shorter product term!

    It would undeniably be a bit of a cumbersome headline to say "Atom launches 2% two-year savings - but you could potentially and marginally beat that if you guess Brexit's currency impact and then move your money on maturity to another provider's product paying decent interest (if available) for the remaining few weeks of the term" though!
    • ricky_v
    • By ricky_v 16th Jun 17, 8:14 PM
    • 257 Posts
    • 130 Thanks
    ricky_v
    • #8
    • 16th Jun 17, 8:14 PM
    • #8
    • 16th Jun 17, 8:14 PM
    Glad I'm not being stupid, the first paragraph states;

    Savers have been given a boost after Atom Bank launched a market-leading two-year fixed account offering 2% – but if you've at least £10,000 to save and can correctly guess the impact of Brexit, you could get up to 3% with a new bond.
    As Atom's 2% is in AER, I instantly thought the 3% is also AER.

    If you correctly guess whether the pound will buy more or fewer euros in two years' time, you'll get a 3% interest bonus - we say a 3% interest bonus, but it effectively works out as 2.04% AER over two years. But if you're wrong, you'll get just 1%, so it's a gamble – and savers may prefer the guaranteed 2% from Atom.
    The bit in red I don't remember being there last night. Since my mortgage charges 2.08% APR I instantly loose interest (pun intended) in any savings rate below that, so I wouldn't have bothered going on the website.
    • bowlhead99
    • By bowlhead99 16th Jun 17, 9:29 PM
    • 6,873 Posts
    • 12,378 Thanks
    bowlhead99
    • #9
    • 16th Jun 17, 9:29 PM
    • #9
    • 16th Jun 17, 9:29 PM
    Yes, that bit seems to be new. It still reads like it's been written by someone who doesn't really understand it and doesn't have expertise in distilling financial concepts for readers.

    "...you'll get a 3% interest bonus"
    Ok, that implies you will get a "bonus" of 3% on top of your normal return.

    Which is way off the mark, considering you don't even get 3% total (assuming we are talking annual equivalent rates, which is the way the rate from Atom's new account is presented in the "Atom pays 2%, you could beat it" headline).

    "...well, we say a 3% bonus but it effectively works out as 2.04% AER over two years"
    What's that, the bonus you're talking about effectively works out as 2.04% AER? So that's a 2.04% AER bonus element on top of the normal basic rate for the period of the deposit. Ah, that must be why you've mentioned 3%, you don't mean 3% bonus you mean 3% total including this 2.04% bonus, right?


    Ah no. They mean that the 2.04% return is the grand total you will get, if you guess correctly on the gamble. Even if you guess correctly, the vaunted "3%" does not exist as something you can access by putting money in on one day and taking it out at the end of the term having achieved an annualised 3%. The most you can get is just a smidge over the annualised 2%.

    And by smidge, I mean 0.04%, one twenty-fifth of a percent. Eight pounds extra on top of the £400+ you'd get if you left £10k with them for two years at 2% AER. Not that you can leave it in the account for as long as two years because it closes at the end of April 2019
    • themanfromamarillo
    • By themanfromamarillo 25th Jun 17, 12:10 PM
    • 111 Posts
    • 49 Thanks
    themanfromamarillo
    I assume with the FCSC compensation guarantee and investment from BBVA, Atom is a secure place to put my money.

    Just a tad nervous with challenger banks
    • badger09
    • By badger09 27th Jun 17, 6:29 AM
    • 5,376 Posts
    • 4,614 Thanks
    badger09
    I assume with the FCSC compensation guarantee and investment from BBVA, Atom is a secure place to put my money.

    Just a tad nervous with challenger banks
    Originally posted by themanfromamarillo
    In view of FSCS cover, I'm no more nervous about putting my money in Atom, than in any other bank
Welcome to our new Forum!

Our aim is to save you money quickly and easily. We hope you like it!

Forum Team Contact us

Live Stats

1,284Posts Today

6,608Users online

Martin's Twitter