Tied savings may mislead consumersSavings linked to average investments

24 July 2011

Tied savings

Great savings rates may shield a poor deal

New research from Which? shows that some banks and building societies are offering savings rates of up to 6% or 8% when you tie into an investment you might not really want.

Providers such as Santander, Ulster Bank and the Leeds Building Society have offered attractive one-year fixed-rate savings products tied to structured deposits and investment bonds.

To get access to the savings part of the deal you have to take out the investment element at the same time. 

To get the very best standalone savings deals, check out our Best Rate savings tables.

Investment element may not be the best bet

In the examples of investment products that we analysed, the products rarely produced the maximum returns advertised and tended to be fairly complex so that consumers wouldn't always understand what they were signing up to.

In the worst cases, the additional interest earned on the savings accounts can easily be wiped out by the loss of capital that will be sustained by investing in a poorly-performing investment bond. 

Our research also found that banks and building societies selling investments are handsomely rewarded with large commissions if you sign up to these deals.

Tied savings products reduce consumer mobility and choice

Paul Davies, savings analyst at Which? and author of this report, said: 'Savings products offering 6% or 8% will seem like an unbeatable deal but there could be a catch if they are tied to an investment.

'Which? analysis of the structured deposits featured in these packages suggests that returns are likely to be toward the lower end of the range advertised by product providers.

'Those signing up to these deals may have their eyes fixed firmly on the savings rate and 'sleepwalk' into the investment product. Consumers will need to ask themselves whether they would have taken out the particular investment if it hadn't been part of a combination product.'

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