Best Cash ISAs by MoneySavingExpert - unknown brands not protected by FSCS??

WillPS

We have no idea what rate of interest Tembo, Moneybox etc get. The rates they get might be wildly different from what we could ourselves get - I'd imagine they are since neither Barclays nor Bank of Scotland offer anything even approaching the base rate (ignoring the very limited Barclays Rainy Day Saver).

There are good reasons why a bank may choose to offer a better rate to an aggregator than they would customers of their own - not least the fact the support overhead is drastically lower.

masonic

WillPS said:

We have no idea what rate of interest Tembo, Moneybox etc get. The rates they get might be wildly different from what we could ourselves get - I'd imagine they are since neither Barclays nor Bank of Scotland offer anything even approaching the base rate (ignoring the very limited Barclays Rainy Day Saver).

There are good reasons why a bank may choose to offer a better rate to an aggregator than they would customers of their own - not least the fact the support overhead is drastically lower.

If you think Barclays or Bank of Scotland are paying Tembo a rate of interest that is sufficient to cover all its administrative expenses and still leave enough to pay out 4.8% to its savers, then I have a bridge I'd like to sell you

The one we do know about is Chip, who use Clearbank. Clearbank have previously stated they just deposit their money with the Bank of England for base rate and presumably Chip gets that minus some small margin. Chip started out by passing on pretty much all of that interest. Now, other than its limited time teaser rates it is passing on approx. base rate minus 1% for its normal savings accounts, but still passing on pretty much all of it for its new cash ISA product (due to ongoing competition with T212 and Moneybox). So most likely the ISA will follow the trajectory of its other products in becoming much less competitive, owing to the limited interest it can earn via this business model.

Aggregators will not secure a position at the top of the rate tables without making substantial losses - greater than those of traditional banks and building societies who can lend at higher rates to consumers and businesses, rather than depositing cash at major banks.

WillPS

masonic said:

WillPS said:

We have no idea what rate of interest Tembo, Moneybox etc get. The rates they get might be wildly different from what we could ourselves get - I'd imagine they are since neither Barclays nor Bank of Scotland offer anything even approaching the base rate (ignoring the very limited Barclays Rainy Day Saver).

There are good reasons why a bank may choose to offer a better rate to an aggregator than they would customers of their own - not least the fact the support overhead is drastically lower.

If you think Barclays or Bank of Scotland are paying Tembo a rate of interest that is sufficient to cover all its administrative expenses and still leave enough to pay out 4.8% to its savers, then I have a bridge I'd like to sell you

I never said they definitely are, and I agree it's almost certainly a loss-leader, but we don't know how wide that gap is. Given how often Tembo have fiddled with the rate in the account's short existence, it could well be that they have some arrangement where the interest they receive fluctuates and isn't predictable - again this is something a bank can offer an aggregator but not a personal customer directly.

masonic

WillPS said:

masonic said:

WillPS said:

We have no idea what rate of interest Tembo, Moneybox etc get. The rates they get might be wildly different from what we could ourselves get - I'd imagine they are since neither Barclays nor Bank of Scotland offer anything even approaching the base rate (ignoring the very limited Barclays Rainy Day Saver).

There are good reasons why a bank may choose to offer a better rate to an aggregator than they would customers of their own - not least the fact the support overhead is drastically lower.

If you think Barclays or Bank of Scotland are paying Tembo a rate of interest that is sufficient to cover all its administrative expenses and still leave enough to pay out 4.8% to its savers, then I have a bridge I'd like to sell you

I never said they definitely are, and I agree it's almost certainly a loss-leader, but we don't know how wide that gap is. Given how often Tembo have fiddled with the rate in the account's short existence, it could well be that they have some arrangement where the interest they receive fluctuates and isn't predictable - again this is something a bank can offer an aggregator but not a personal customer directly.

Unfortunately the most recent accounts they've posted cover the year to May 2023, and they've fiddled their accounting period so we won't see any further accounts until the end of this year. In those accounts, they earned interest on bank deposits of £367k and paid out £377k to savers, with expenses of £4.1m. That was during a period base rate shot up from 1% to 4.5%. So historically they have not taken any sort of cut of the interest and have shouldered heavy operating losses. It wouldn't surprise me if this continued, with them paying out slightly more than they receive. I really can't see Barclays or BoS paying out much more than the BoE base rate - otherwise they could get the money more cheaply from elsewhere. I suspect the rate fluctuations are a direct result of competition and are funded out of the investment capital bucket.

WillPS

I agree that it wouldn't make much sense for it to be above the base rate. That's still some way above the level Barclays and Bank of Scotland themselves offer to their customers tho, so the point remains.

masonic

WillPS said:

I agree that it wouldn't make much sense for it to be above the base rate. That's still some way above the level they themselves offer to their customers tho, so the point remains.

Base rate is 4.5%. They offer 4.8 to their customers.

WillPS

masonic said:

WillPS said:

I agree that it wouldn't make much sense for it to be above the base rate. That's still some way above the level they themselves offer to their customers tho, so the point remains.

Base rate is 4.5%. They offer 4.8 to their customers.

You seem to be arguing against the argument that they might not be making a loss, which isn't a claim I have ever made.

masonic

WillPS said:

masonic said:

WillPS said:

I agree that it wouldn't make much sense for it to be above the base rate. That's still some way above the level they themselves offer to their customers tho, so the point remains.

Base rate is 4.5%. They offer 4.8 to their customers.

You seem to be arguing against the argument that they might not be making a loss, which isn't a claim I have ever made.

I'm arguing that 4.8 is a bigger number than 4.5. So 4.5% (base rate) is not "still some way above the level they themselves offer to their customers". It is 0.3% below the rate they themselves offer to their customers. Which is a claim you did appear to be making.

WillPS

masonic said:

WillPS said:

masonic said:

WillPS said:

I agree that it wouldn't make much sense for it to be above the base rate. That's still some way above the level they themselves offer to their customers tho, so the point remains.

Base rate is 4.5%. They offer 4.8 to their customers.

You seem to be arguing against the argument that they might not be making a loss, which isn't a claim I have ever made.

I'm arguing that 4.8 is a bigger number than 4.5. So 4.5 is not "still some way above the level they themselves offer to their customers". It is 0.3% below the rate they themselves offer to their customers.

Sorry, to clarify by 'they' I meant Barclays and Bank of Scotland.

masonic

WillPS said:

masonic said:

WillPS said:

masonic said:

WillPS said:

I agree that it wouldn't make much sense for it to be above the base rate. That's still some way above the level they themselves offer to their customers tho, so the point remains.

Base rate is 4.5%. They offer 4.8 to their customers.

You seem to be arguing against the argument that they might not be making a loss, which isn't a claim I have ever made.

I'm arguing that 4.8 is a bigger number than 4.5. So 4.5 is not "still some way above the level they themselves offer to their customers". It is 0.3% below the rate they themselves offer to their customers.

Sorry, to clarify by 'they' I meant Barclays and Bank of Scotland.

Now I'm confused. You said it didn't make much sense for them to be paying Tembo more than base rate. So then, how could they be paying Tembo more than the 4.8% we know Tembo currently offer on their cash ISA?