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Product Matters

The launch of HSBC’s new deposit account is the latest of some recent headline-grabbing regular savings accounts following on the heels of Halifax & Abbey.

The advantages are that it offers savers who are prepared to tie up their savings for one year a rate that is currently the best on the market (8 per cent gross/ AER). You can change the amount that you save during the term.

On the negative side, however, like the rest of these accounts, the high rate is only for 12 months. Thereafter, HSBC transfers you to a (rather uncompetitive) standard savings acc-ount. The account is also inflexible because you are locked in for a 12-month period, with no access to your savings and new investors will have to open a bank account with HSBC into which their income must be paid. The maximum savings limit is relatively low at 250 a month but unsurprising given the high rate being offered.

HSBC is clearly positioning the rate as direct competition to the Halifax regular saver account that currently only pays 7.07 per cent gross/AER but it is worth noting that 8 per cent gross is equivalent to 6.4 per cent for lowerand basic-rate taxpayers and 4.8 per cent for higher-rate taxpayers.

Research seems to indicate that people are generally unwilling to review their bank accounts on a regular basis, which indicates that HSBC is hoping to attract and retain a reasonable percentage of new clients to whom it can cross-market other services.

This is a great rate that will appeal to existing HSBC customers and those who do not want to touch their savings for at least a year.

Adam Carruthers is investment manager at Origen

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