Account in Focus: Birmingham Midshires 5 Year Fixed Rate Bond – CLOSED

Who is offering the account?

Birmingham Midshires, who are part of the HBOS Group.

How is interest calculated?

Interest is fixed at 5.05% gross AER per annum.

Is interest accumulated to my savings?

Yes.

How long do I have to tie my savings up for?

5 years.

Can I get access to my savings?

Yes, subject to an interest penalty, which is dependent on the length of time the bond has to run until maturity:

1 year or less 90 days loss of interest
Up to 2 years 180 days loss of interest
Up to 3 years 270 days loss of interest
Up to 4 years 320 days loss of interest
Up to 5 years 365 days loss of interest

How do I manage my account?

He account is managed online, visit the Birmingham Midshires website:

Learn more about the account 

Apply for the account

How much can I save?

The minimum opening balance is just £1, the maximum is £10,000,000.

How is the interest taxed?

Interest will be paid net of 20% tax unless you are a non taxpayer and register to have the interest paid gross.

How are deposits protected?

The account is provided by the Birmingham Midshires. Deposits with the Birmingham Midshires are protected by the UK Financial Services Compensation Scheme (FSCS) to the level of £85,000 per person, per institution.

More details about the FSCS can be found at www.fscs.org.uk or by calling them on 0800 678 1100.

What are the advantages of this account?

  • The account has a low minimum balance
  • The interest rate is currently extremely competitive
  • The account can be managed over the internet, providing easy access to information for those with online access
  • You can access your savings during the period of the fixed rate, although a penalty will be payable
  • Non taxpayers can apply to have interest paid without the deduction of tax

What are the disadvantages?

  • A penalty will be charged on early withdrawal of funds
  • For tax payers the rate of interest is insufficient to cover inflation as measured by CPI (Consumer Prices Index)
  • The account requires you to tie your savings up for five years, if interest rates were to rise in that time you could be left in an account paying an uncompetitive rate of interest

The Investment Sense Verdict

As five year fixed rate bonds go this is attractive, it currently sits at the top of its best buy table.

However, beware the penalties, which increase the longer you hold the bond.

Also beware the fact that if you lock your savings up for five years you could be left in an uncompetitive account should interest rates rise as many people believe they will have to do. A two year fixed rate bond  can currently get you nearly 4% gross AER. Sure this is a lower rate, however you are only tying our money up for two years.

Should you wish to discuss this account, or other ways of getting a real, above inflation, return on your savings, speak to one of our team of advisers today. They can be contacted on 0115 933 8433, 0845 078 7774 or by sending an email to info@investmentsense.co.uk.