Cash savings websites offer exclusive deals that pay four times the best rates on offer with banks and building societies.
They have become increasingly popular among starved savers battling rock-bottom rates.
But City watchdogs warned last week that firms are not being clear enough about exactly how these services work – and the risks involved.
Cash savings websites have become popular among starved savers. But City watchdogs warned that firms are not being clear enough about exactly how these services work
The Prudential Regulation Authority and the Financial Conduct Authority have said providers must ensure information on savings platforms is fair, clear and not misleading.
And banks and building societies should make certain that platforms they use to sell their savings accounts are registered to do business in this country. Experts say the warning is to protect savers from falling victim to future scams.
Cash savings websites work with selected banks and building societies. In February, insurance giant Aviva teamed up with platform Raisin UK to offer a savings service. Other well-established providers include Hargreaves Lansdown and Insignis.
The big advantage for savers is that you avoid what can be a laborious task of opening a new account each time you want to move your money to a new provider.
However, savers could find it takes longer than the typical seven days to get their money back, should the bank run into trouble.
When you make a deposit to a platform, the money is held in a ‘hub’ account. It remains there earning no interest until you select a savings account.
Rates on platforms change depending on how much money the providers want to attract. The big plus for branchless banks is that they can reach more savers.
Any money invested through the platform should be covered by both the savings provider, and the bank that provides the so-called ‘hub’. Under the Financial Services Compensation Scheme (FSCS), you will get back up to £85,000 should a bank go bust.
You get a separate limit per provider. But you must tot up the total amount you have invested in a bank direct and through the platform to ensure you do not go over the limit.
In the 12 months to March, savers added £126 billion to their easy-access accounts.
Yet big banks pay as little as 0.15 per cent on a one-year, fixed-rate bond, or 0.01 per cent on easy-access accounts.
You can earn 0.35 per cent on an easy-access account at Paragon Bank or 0.3 per cent at Coventry BS through Hargreaves Lansdown. There is also an exclusive, top 0.6 per cent one-year fixed-rate bond from Aldermore Bank.
Raisin UK has an exclusive 0.74 per cent two-year bond with Ahlibank, or 0.8 per cent with Sharia-compliant QIB.
All accounts are covered by the FSCS.
