Building society fixed interest bonds-don’t get trapped

soros

Just a word of caution to those that don’t read the small print on fixed interest bonds from building societies.

I have noticed that by default, some building societies are trying to trap savers who have a fixed interest bond with them. So much for customer loyalty.

If you do not contact the building society shortly before your fixed rate bond is due to mature, the small print says that your money will be automatically invested into another bond. This is by default whether you want that or not. What if you are ill, or you are away on holiday and simply forget? In that case they have trapped you, and prevented you from moving your money to a society with a better rate of interest.

Be aware of the Skipton building society who operate this practice.

opinions4u

1) They tell you this when you open the account.

2) They tell you this when they issue you with a maturity letter more than 2 weeks prior to the product rolling over in to a new term deposit.

Linky to Skipton web site

We will contact you at least 14 days prior to the maturity date of your bond to explain the options open to you, these will include:

• Continue your investment in a new 1 Year Fixed Rate Bond‡ (the 'do nothing' option);
• Continue your investment in an alternative bond;
• Transfer to an easy access account
• Add extra funds to the above three options;
• Withdraw your funds (in full or in part).

Gromitt

Most banks operate like this and have done for years. It's nothing new. They send you a letter to let you know when your account near the end of the term to allow you time to decide what to do.

You normally have 14 - 28 days before the cash in the account is automatically reinvested.

calypso_rhapsody

You are right, this is a potential pitfall. Equally you can find your money being transferred to an instant access account with miserable interest. Not sure which is worse - the moral is that you need to take control!

I note (on my spreadsheet) for any fixed bond taken out: the maturity date, the interest payment arrangements (for tax return purposes - some pay only at maturity, others on specific dates) and the maturity options. Then if i am going away i always look ahead to see if there is something maturing while i am away. Then i contact the institution involved and if they can't offer a sensible reinvestment i instruct them to transfer the funds to a reasonable instant access account for me to sort out on my return.

Of course if you are ill this will not work - though if you die at least your executor can withdraw from a fixed product.

nilrem_2

soros wrote: »

Just a word of caution to those that don’t read the small print on fixed interest bonds from building societies.

I have noticed that by default, some building societies are trying to trap savers who have a fixed interest bond with them. So much for customer loyalty.

If you do not contact the building society shortly before your fixed rate bond is due to mature, the small print says that your money will be automatically invested into another bond. This is by default whether you want that or not. What if you are ill, or you are away on holiday and simply forget? In that case they have trapped you, and prevented you from moving your money to a society with a better rate of interest.

But what would you like them to do? They don't know that you are on holiday or ill and if you forget does not apply because they send you a letter in advance advising you of their actions and giving you a choice.

If they let the bond mature and then transferred it to an easy access account paying rubbish interest a lot of us would be unhappy especially if we were away for some time.

TBH I feel that as long as they write to the customer in advance with a choice that is fair, there will be a few people who may be inconvenienced but it is up to the customer to be aware of their savings and generally I believe most people are happy with what the institutions do on maturity of fixed rate accounts.

jrawle

While I agree that people should be in control of their savings, and that the building societies are doing nothing wrong, I still think it is slightly sharp practice, clearly designed to catch some people out. Why can't they ask what you want to do on maturity at the start of the term? It should be possible to say you want the money to be paid out into a certain account at the end of the term, and not re-invested under any circumstances. Some people may invest for a certain period becasue they know they will need the money at that point for something specific.

Halifax at least used to ask what you wanted to do on maturity when signing up for a fixed-rate websaver (I haven't opened one since they dropped the websaver brand).

It's a matter of fact that, even if the bond was market-leading, in 1/2/5 years' time on maturity the similar product from the same provider will be rather mediocre.

dunstonh

Why can't they ask what you want to do on maturity at the start of the term?

Because they cannot have the money just sitting there doing nothing. For everyone person that complains it rolled over, there would be another saying they didnt roll it over and left it paying little or no interest. Damned if they do, damned if they dont.

I dont buy the "small print" may say it will roll over excuse. Yes it will be in the T&C but it will also be in normal print on a the maturity letter clearly stating what needs to be done next and what will happen if no action taken. Not hidden away. Only the lazy who dont read their post will miss it. Most people do rollover so they are going with the majority option.

Stripeysocks_2

Northern Rock contacted me a few days before bond matured then transferred my matured bond funds into an easy access account with 0.08% interest. I'd have appreciated a phone call - now I've withdrawn my money. Think of how much advertising cost them, yet they treat customers so badly. Staff in branches are very pleasant though.

VT82

And there's your 'QED' on the 'banks can't win' hypothesis.

nilrem_2

Stripeysocks wrote: »

Northern Rock contacted me a few days before bond matured then transferred my matured bond funds into an easy access account with 0.08% interest. I'd have appreciated a phone call - now I've withdrawn my money. Think of how much advertising cost them, yet they treat customers so badly. Staff in branches are very pleasant though.

That has not been my experience with Northern Rock either recently or in the last 20 years that I have had accounts with them.

Whenever a fixed account has been near maturity (either a normal fixed account or ISA) they have written to me well in advance offering a choice of re-investing or withdrawing the cash together with the form to advise them, they usually do announce that if they do not hear from you they will place the funds in an easy access account.

I feel this is a fair and responsible way to operate, all the customer needs to do is read their mail and reply as required, what more can they do?

cv65user

thx for the heads up , ill be stickying my new castle bond in my diary for withdrawal seeing as theyve had it for 5 years lol

ref https://forums.moneysavingexpert.com/discussion/1785113