NEW ICICI 5.85% Savings Product

Paul_Herring

To put this offer into perspective:
1) for a 6 month term,
2) for every £1000 you place into this account,
3) for a basic rate tax payer
4) assuming 5.45% and 5.65% rates respectively,
5) ignoring any interest lost when transferring from a non ICICI account.

using this product will give you 80p extra.

(£1000 x (5.65%-6.45%)) * 6/12 months) * (100-20% income tax)

Given the gimmicky nature of this account, I'll be sticking with IceSave.

tom188

The interest rate applicable to your HiSAVE Term Deposit shall be the rate applicable to HiSAVE Term Deposit on the date of your application.

My understanding is that as with other FRBs, Money Market Deposits etc they can alter the fixed rate at any time.

Paul_Herring

Madiba wrote:

Actually, does it say anywhere that it is a fixed rate?

If I'm reading their Indglish correctly, I do believe it's variable rate. Would someone who can be bothered like to clarify with them this phrase out of their email:

ICICI wrote:

[FONT=Arial, Helvetica, sans-serif][FONT=Arial, Helvetica, sans-serif]How is it different? [/FONT][/FONT] [FONT=Arial, Helvetica, sans-serif]The [FONT=Arial, Helvetica, sans-serif]HiSAVE[/FONT] Term Deposit is actually UNFIXED. [/FONT]

It's the word unfixed (opposite of fixed I guess) that makes it variable rate.

Graham_Devon

Paul_Herring wrote:

To put this offer into perspective:
1) for a 6 month term,
2) for every £1000 you place into this account,
3) for a basic rate tax payer
4) assuming 5.45% and 5.65% rates respectively,
5) ignoring any interest lost when transferring from a non ICICI account.

using this product will give you 80p extra.

(£1000 x (5.65%-6.45%)) * 6/12 months) * (100-20% income tax)

Given the gimmicky nature of this account, I'll be sticking with IceSave.

But put that 1k into 100 or 200k terms. Makes a big differene then.

This is not worth the hassle for the small saver. For the larger saver, I'd say it's worth it if you don't need the montly interest.

However, this is at today's rates. But what's to stop you pulling your money out? Nothing. You will still have recieved the 5.45% rate if base rates move up 0.50% or more and the product is no longer any good.

norm_diploom

This looked good initially, but i'm now confused. If I were to move my savings from Hisave to this new acct for 6 months, I would be getting 0.2% (gross) more on my savings. However, if Bank of England raise interest rates by 0.25% (as I expect them to do in February), and if ICICI pass on the full 0.25% for Hisave account, then I will be 0.05% worse off by leaving my money in the new 6 month account. Taking this a step further, if the Hisave acct rate does go up by 0.25% or more, then by moving all of my savings back to the Hisave account I'll get a retrospective rate of 5.45% (the rate when I moved savings to 6 month term account), and the new higher Hisave rate going forward. Equally, if rate on fixed term acct drops, I can still move my money back to Hisave and be guaranteed 5.45% retrospectively.

Have I got this right? If so, it seems pretty much like a no-lose scenario, provided the amount of extra interest gained is worth the hassle of course.

Can anyone add anything to Isswong's question on point 7 above? If only some of the money in the fixed term account was moved, would the remaining balance continue to attract the 5.65% rate? Is there a limit on number or amounts of withdrawals?

Thanks OP for a really useful thread!

lswwong

Graham_Devon wrote:

But put that 1k into 100 or 200k terms. Makes a big differene then.

Economies of scale and relative opportunity cost. Fair point.

Paul H's analysis is still helpful (& thanks - sorry something wrong with browser at work and unable to use thanks button)

On another point, I think when ICICI says "unfixed", they are referring to the fixed term nature and not interests. So although the product has a fixed term tenure, it is possible for the saver to break the fixed term and withdraw part-way subject to getting only 5.32% Gross interests for the amount withdrawn, thereby "unfixing" the term. Personally, I find this turn of phrase ambiguous. It is trying to be clever but comes across otherwise!

lswwong

norm_diploom wrote:

This looked good initially, but i'm now confused. If I were to move my savings from Hisave to this new acct for 6 months, I would be getting 0.2% (gross) more on my savings. However, if Bank of England raise interest rates by 0.25% (as I expect them to do in February), and if ICICI pass on the full 0.25% for Hisave account, then I will be 0.05% worse off by leaving my money in the new 6 month account. Taking this a step further, if the Hisave acct rate does go up by 0.25% or more, then by moving all of my savings back to the Hisave account I'll get a retrospective rate of 5.45% (the rate when I moved savings to 6 month term account), and the new higher Hisave rate going forward. Equally, if rate on fixed term acct drops, I can still move my money back to Hisave and be guaranteed 5.45% retrospectively.

Good post, norm. Thanks. This gets me thinking!

Afahmaep

daleuk wrote:

so would this be the highest paying fixed term rate atm?

No. If you mean for 6 months possibly but I've seen Anglo-Irish Bank offering a 1 Year Fixed Bond (minimum £500) for 5.85% Gross but the strange thing is their stepped rates go DOWN rather than UP for longer term deposits (2-4 years).
Look Here

http://www.angloirishbank.co.uk/personal/fixed-rate-bond-accounts.asp

Paul_Herring

Graham_Devon wrote:

But put that 1k into 100 or 200k terms. Makes a big differene then.

It was merely for illustration/perspective for those who have (say) 1's or 10's of K to mess with, before people start jumping just because "it's a higher rate."

To be honest, I think those who have 100K to mess with won't be keeping it in a savings account to begin with; I certainly wouldn't. (Stoozers excepted perhaps - assuming anyone's still managing to get large amounts to stooze with.)

However, this is at today's rates. But what's to stop you pulling your money out? Nothing. You will still have recieved the 5.45% rate if base rates move up 0.50% or more and the product is no longer any good.

In fact there is one very good thing to stop you moving (and indeed, maybe putting it in there to begin with.) Interest lost during transfer[1] And by my fag packet calculations below - if you're slighly pessamistic about the delays, unless your money already happens to be with ICICI - you'd actually lose out unless you're guaranteed to get more than 1 competative term with this. (i.e. the interest lost during transfer INTO this account is greater than the .2% gain you're getting with this account)


Anyone else reading this, please verify my calculations before basing any decision on them!


[1] £1000 * 5.65% * 8/365 days[2] * (100%-20% tax) = 99p

[2] Assumes 2 contigious lots of 3 days, with a weekend - concevably if your linked account has a decent interest rate (4%+) you could reduce this.

stevemcol

Thanks to all for the perpective (you know who you are, I've clicked your buttons).
In my case then, not worth moving from the standard ICICI Hisave.

Generally with ICICI, I'm happy I sat tight during the recent website faff. They now seem to be back to their previous excellent service (again, speaking only for my experience).