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Santander unveils ‘upfront interest’ savings bond

New Santander savings bond changes things around

Santander logo

The new Santander 3-year savings bond rewards customers by paying interest upfront. 

Santander has released a new 3-year fixed rate savings bond with the novel concept of paying its interest upfront.

The new account is available from the 2 November 2011 for savers wanting to deposit a minimum of £10,000 for a three-year fixed term.

The interest – 3.36% – will pay out roughly £1,042 on a £10,000 deposit or £807 after basic-rate tax. When Which? analysed the account, however, we found the offer to be poor value in comparison to our Best Buy Clydesdale/Yorkshire Bank offering 4.3% three year fixed-rate bond. This pays £1,346, or £1,040 after basic rate tax. Savers cannot withdraw their cash until 1 December 2014 under any circumstances.

To be eligible for the account, customers must already have, or open, a Santander current account into which the interest payment will be deposited. Santander is currently bottom of the Which? current account satisfaction tables with a rating of just 39%.

Not just for Christmas

Santander is promoting the account in the run-up to Christmas. Matt Hall, head of savings, at Santander, said: ‘The interest is paid upfront into a Santander current account within six weeks of account opening. For example, if you open the account by 20 November with a deposit of £12,000, you get £1,000 net interest, paid upfront, on 2 December.’

However, savers should think carefully according to Which? Money analyst Nicolas Frankcom: ‘While the rate doesn’t compete with out Best Buys, the prospect of cash upfront may appeal to many savers, particularly with so many fixed rate accounts due to mature this year. 

‘However, savers putting in £10,000 will be missing out on a few hundred pounds after tax, and Santander consistently comes bottom of our satisfaction tables.’

More on this…

  • Which? Best Rate savings accounts – access the very best savings accounts in the market
  • Which? Best Rate cash Isas – your options if you want to use your tax-free savings allowance
  • Are my savings safe? – advice on the protection afforded to your savings
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