Accounts crediting interest only on closure

BeachNut

Anyone know who is currently offering accounts that only credit interest on closure of the account. I don't mean fixed term bonds that credit interest on maturity. Thanks.

opinions4u

I don't know of anybody offering such an account - ever.

Have you had one before?

Why do you want one?

ChiefGrasscutter

Probably because they want to move their tax liability on any interest due forward to a future date when their overall income is lower, so they won't have to pay higher rate tax on their savings income each year.

opinions4u

ChiefGrasscutter wrote: »

Probably because they want to move their tax liability on any interest due forward to a future date when their overall income is lower, so they won't have to pay higher rate tax on their savings income each year.

It is the most likely reason.

In which case options will be limited if term deposits are ruled out.

s20544

I also have this requirement (to defer tax payment until a future time when I am a lower rate tax payer).

There are very few options for this.

NS&I index linked savings certificates - but not available at this time

Punjab National Bank (FSCS registered) - They give a number of different options for payment of interest. Their 1-5 yr bonds can be closed early without penalty and interest payments can be limited to maturity or closure by selecting their 'Reinvestment Plan' for the payment of interest.

Yorkshire Bank and Co-op Fixed Term Deposits - Allow interest payment only on maturity but unable to close early (as previously mentioned).

Offshore accounts - Payment of interest only on closure has often been an option for these type of accounts. Unfortunately the interest rates offered are not normally leading best buys.

I plan to open a fixed savings account with Punjab as they have flexible easy access terms without penalty, good interest rates, FSCS guarantee and can limit interest payments until maturity (5 yrs) or early closure.

If you hear of a similar of better account which offers this facility please do share.

Thanks

S

k12479

s20544 wrote: »

Their 1-5 yr bonds can be closed early without penalty...

Are you sure about this? A quick glance at the Punjab National Bank website shows this: "can be permitted to be withdrawn at discretion of the Bank. There is no penalty for such withdrawal...". A lot of banks allow fixed terms to be broken but only for a good reason.

s20544

I also read that same line in the Ts&Cs and was doubtful. .... but, I have been in contact with someone who has such an account (MSE member 'jayship') and I have also spoken to staff at the London and Birmingham branch. All have independently confirmed that this account type can be closed early before maturity. I was told that if closed early the funds would earn the interest applicable to the number of months/years the funds were held. e.g. If you had a 5yr fixed term account thay you closed after 18 months you would earn closer to 3% pa rather than the 4.5%pa applicable to the full 5yrs . . . but this is still competitive.

I think that this flexibility for fixed rate savings may be typcial of Indian banks. Bank of Baroda seems to apply the same system.

I have asked Punjab National Bank to confirm the flexible access in writing to me before I open the account. They have said they will. I will let you know how I get on!

s20544

As promised Punjab National Bank wrote to me by letter to confirm the early closure conditions for their 4.5% 5yr fixed rate account. The letter confirmed that there were no penalties to pay and no notice period. The 'negatives' they mentioned are that

1. if closing early you only get interest for the each completed year,i.e. best to close on or close to an anniversary of opening. ... as mentioned in a previous post

2. the rate of interest is lower (but still competitive) if deposit held for less than 5yrs. They would apply the interest rates applicable to their 1, 2, 3 or 4 year fixed accounts if early closure is made.

Despite delivering on their promsie I have chosen not to place my money with PNB because they did not seem very professional e.g. letter was sent on colour photocopied (non-original) headed paper, no current marketing material or current Ts&Cs were sent.

Instead I put my money with M&S 3.75% 3yr fixed rate savings which have only £100 penalty for early closure. 3.75% applies even if you close the account after only 1 month . . . unlike PNB.

opinions4u

2. the rate of interest is lower (but still competitive) if deposit held for less than 5yrs. They would apply the interest rates applicable to their 1, 2, 3 or 4 year fixed accounts if early closure is made.

So there is, effectively, a penalty.