Savings rate of 5.10% AER (fixed for 1year) £75000+

derrick

Has anyone any views on this? Citibank UK Premier Saver Account
It has a 1% bonus for 1 year and the rate,at this moment is fixed at 5.10% AER for 12 months (inc the bonus), no restrictions on withdrawing or deposits, the minimum deposit is £2000. which gives a rate of 2.10% AER, this would/could be used to open the account before transferring a larger amount,

Kazza242

This account looks ok, but only for the first year. After the 12 months is up, when the 1% bonus has expired this account won't look so attractive. It'll be paying just 4.10% gross - assuming BOE base rate doesn't change by then.

Also, to qualify for the 5.10% savers need to deposit £75K or more, which is a lot of money to be holding with one bank.

Savers should note: If a bank or building society goes out of business, the FSA compensation scheme pays the first £2,000 in full of the total amount you have in accounts with the bank or building society and 90% of the next £33,000. This means a maximum compensation of £31,700.

FSA Compensation Scheme

charlieboycat

Their website blurb is misleading and https://www.moneyfacts.co.uk is wrong - its the 1% bonus that is fixed, not the 5.1% AER. See the small print:

The AER is 5.10% for the entire balance if the amount is £75,000 or more. The AER for balances below £75,000 is 2.10%. The AER stands for the Annual Equivalent Rate and is a notional rate that illustrates the contractual interest rate as if paid and compounded on an annual basis. The gross rate is 4.98% for the entire balance if the amount is £75,000 or more. The gross rate for balances below £75,000 is 2.08%. The gross rate is inclusive of a 1% bonus rate, which is valid on the account for the first 12 months following account opening. This rate is the contractual rate of interest payable before the deduction of income tax at the rate specified by law. The net rate is 3.98% for the entire balance if the amount deposited is £75,000 or more. The net rate for balances below £75,000 is 1.66%. This is the rate of interest which would be payable after allowing for the deduction of income tax at the specified rate. Interest rates are variable but correct at time of going to print. Interest is calculated daily, on a 365-day basis and is compounded and applied to the account monthly

YorkshireBoy

charlieboycat wrote:

Their website blurb is misleading...

I'm not so sure. This looks like a "fixed" product to me...

"A rate that's fixed for 12 months

Unlike many other accounts, where an attractive rate is just used as a hook that then changes after a short period of time, your interest rate is guaranteed for a full year. It includes a 1% fixed bonus for the first 12 months, meaning you always know where you stand and what you can expect to earn in interest."

I think this statement...

"Interest rates are variable but correct at time of going to print."

...just covers them in case the offer is over-subscribed, or there are changes to base rates etc, and they have to introduce an "issue 2".

derrick

I was told over the phone that the interest rate,including bonus, is fixed for 1 year,i.e if opened today that would be the 5,1%, as I said in my OP

graemecarter

Kazza242 wrote:

This account looks ok, but only for the first year. After the 12 months is up, when the 1% bonus has expired this account won't look so attractive. It'll be paying just 4.10% gross - assuming BOE base rate doesn't change by then.

Also, to qualify for the 5.10% savers need to deposit £75K or more, which is a lot of money to be holding with one bank.

Savers should note: If a bank or building society goes out of business, the FSA compensation scheme pays the first £2,000 in full of the total amount you have in accounts with the bank or building society and 90% of the next £33,000. This means a maximum compensation of £31,700.

FSA Compensation Scheme

Citibank is the largest financial institution in the world and will NOT go bust.

charlieboycat

derrick wrote:

I was told over the phone that the interest rate,including bonus, is fixed for 1 year,i.e if opened today that would be the 5,1%, as I said in my OP

Well, they ought to know. But I have to say it isn't how I would interpret their small print.

YorkshireBoy wrote:

"Interest rates are variable but correct at time of going to print." ...just covers them in case the offer is over-subscribed, or there are changes to base rates etc, and they have to introduce an "issue 2".

Perhaps. Or maybe the "variable" sentence is an erroneous hangover from wherever someone did a cut-and-paste job when putting the small-print web page together.

Kazza242

graemecarter wrote:

Citibank is the largest financial institution in the world and will NOT go bust.

I know that they are huge and it is highly unlikely that they would ever go bust, but unfortunately it does sometimes happen to even the biggest institutions. This is why on this site, it is often pointed out that one should try to ensure that they do not have more than £33,000 with one institution, in case they go bust. Where business is concerned you never know what could happen, sometimes an event can occur, which creates negative implications for the company concerned e.g. the September 11th attacks in the US, lead to a lot of airline companies going bust. Who would of forseen that happening?

There are a lot of people using this forum who are not aware of the FSA compensation scheme for deposits or the maximum claims they will allow. This is why I mentioned it in my post - not because I think Citibank will go bust, but because I think it is a valuable piece of information that is worth knowing.

MiserlyMartin

Yes very sensible to be aware of this. The chances of a bank going bust is so small but anything can happen. It all depends on your attitude to risk. I also feel that putting more than £33,000 into one institution is unwise.

We have a lot of uncertainties coming up over the rest of this decade, for example it is unknown when, what and how bird flu will effect the world economy. I feel it is wise to be as protected as possible, just to be safe.

Stonk

graemecarter wrote:

Citibank is the largest financial institution in the world and will NOT go bust.

And Enron was the largest energy company in the world ...

They've only got to get involved in one financial scandal too many, and they're having their fair share of scandals. Jeez, while I worked at Citigroup they coughed up 5.5 BILLION dollars to settle a lawsuit - without even admitting any responsibility! Just to "reduce uncertainty"! I don't fancy their position much if they ever get into a scandal where they were forced to admit something.