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The real rate of return from ‘high-interest’ accounts

Banks are currently offering accounts, where, in return for a monthly saving of £250, there is supposedly a yield of 8 per cent.

What the banks conveniently fail to point out clearly is that this rate only applies to the first month’s contribution. The rate applicable to the second contribution is, of course, 11/12ths of 8 per cent, namely 7.33 per cent, uniformly reducing to 1/12th of 8 per cent (0.67 per cent) in respect of the final contribution.

An account of this type would therefore produce £3,130 at the end of the 12-month period, which represents a real rate of 4.33 per cent.

Won’t it be wonderful for primary advisers when the RDR may have driven from the industry large numbers of firms of IFAs, who can currently point out to their clients the reality of something that at first sight appears so attractive?

Glynn Downton
Professional Investment
Management Services,
Maidstone, Kent


Black hole in advice universe universe

Money Marketing editor John Lappin predicts a scenario in which IFAs – the dying stars of the financial advice cosmos – collapse under the weight of the RDR, leaving huge numbers of clients with nowhere to goThe FSA believes that if IFA numbers fall, due to the effects of the retail distribution review, they can […]

AIC introduces VCT sector classification system

The Association of Investment Companies is introducing a classification system for venture capital trusts which will create six new sub-sectors.These sectors expand on the current specialist and generalist categories and also distinguish between VCTs according to the three year investment requirement rule.The AIC says this should enable investors and advisers to differentiate more easily between […]


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