Earn 8.42% and help charities

Reaper

I was reading about this today in the newspaper and have been checking out their web site. It isn't without catches and isn't suitable for everyone so pay attention at the back!

In short by saving with a charity bank they will pay you a small sum of interest topped up by generous tax relief. The money is lent to charities.

Catches:
1) You must save for 5 years (although you can withdraw 25% in year 4, 50% in year 5)
2) You must be a tax payer to get the tax benefits
3) You will need to include it on your tax return each year
4) Minimum £1000, no maximum

The charity will pay you 2% gross (or less if you want them to keep some of it). You can also claim another 5% tax relief for the amount you have saved every year. This is equivilent to a savings account paying 6.4% for a basic rate tax payer, or 8.33% for a higher rate tax payer.

Sounds interesting to me, what do the rest of you think?

Here is a link to their CITR account. If you go for it make sure you read the Q&A PDF you will find there first.

EDIT: It's even better than I thought. That 6.4% figure is only the tax relief. Add on another 2.02% AER for the interest and I make that equivilent to an account paying 8.42% for a basic rate tax payer!

lswwong

That's really interesting! Good find.

I am now busy checking out their website. For those of you who want a bit more info about their regulators and relevant regulatory stuff, here is an extract from their website:

"What is Charity Bank?
Charity Bank is the first not-for-profit bank in the UK. It is the only organisation of its kind to be authorised and regulated by both the Financial Services Authority (FSA) and the Charity Commission. It is the only bank that solely funds charitable projects. It is a member of the Financial Services Compensation Scheme so your money is protected in the same way as in any other bank.

The bank has a simple structure. It has a range of savings accounts for individuals and organisations. All the money deposited in these accounts is used to provide charities and other not-for-profit organisations with loans and related support and advice. Any surplus funds are channelled back into the bank or charity more widely, to fund further charitable work.

Charity Bank developed out of Investors in Society, a fund launched in 1996 by the Charities Aid Foundation (CAF) with £500,000 of Trustees' funds. In April 2002 Investors in Society was absorbed into Charity Bank, having funded successfully projects with a total project value of at least £50 million.
Charity Bank is a member of a number of umbrella organisations, including the British Bankers' Association (BBA) and the Community Development Finance Association (CDFA). "

isasmurf

I think Martin is shortly to publish an article on this. At least that's what he said when I posted this a couple of weeks ago.

There a couple of other threads on this as well.
http://forums.moneysavingexpert.com/showthread.html?t=29134
http://forums.moneysavingexpert.com/showthread.html?t=19393

MSE_Martin

The full article will be on the site tomorrow

Reaper

Sorry, I didn't notice the previous posts.

Good news about the article tomorrow, I look forward to reading it.

deemy2004

Another tip is ----

Invest before the end of the tax year and you get the first years tax back in April ! I.e. you get the most of the interest without having to wait a year (on doing SA)