Family Building Society Brexit Bonds: are they worth going for?
New savings bonds offer a juicy bonus rate when you take a punt on what Brexit will mean for UK currency.
The impact of Brexit on our finances is still frustratingly unclear, but we’re not short of experts telling us what they think is going to happen.
Now you can throw your hat into the ring with a new range of fixed savings bonds that invite you to take a punt on what’s going to happen to the UK’s currency after we split from the EU.
Family Building Society has launched two ‘Brexit Bonds’, which pay a bonus to savers that correctly predict the strength of the pound after we leave the EU.
What you can get
There are two Family Building Society ‘Brexit Bonds’ that pay a guaranteed annual rate of 1.01% until 2 May 2019, but to bag the 2.04% bonus you need to make the right prediction.
The ‘Optimist’ bond will earn a 2.04% bonus if the pound strengthens against the euro between 28 March 2017 – the day before Article 50 was triggered, and 29 March 2019 – the deadline for the UK to leave the EU.
So, if the pound buys more than €1.1535 euros on 29 March 2019 you will earn a 1.01% rate in your first year, but 3.05% in your second year (1.01% interest plus 2.04% bonus).
The ‘Pessimist’ bond on the other hand will pay the 2% bonus in year two if the pound weakens against the euro between 28 March 2017 and 29 March 2019.
In other words, if the pound buys fewer than €1.1535 euros on 29 March 2019 you will get the 3.05% return in year two.
Those who guess wrong will simply get the 1.01% annual rate over the term of the bond.
The accounts require a hefty minimum £10,000 deposit and can be opened online, by post or in branch. The exchange rate used to determine who gets the bonus is the one published by the Bank of England every month.
Interest is accrued daily and paid annually on 30 April and on maturity. The 'winners' will get their bonus applied to their savings on 30 April 2019.
Is it worth taking the punt?
On a savings pot worth £10,000, 'winners' would achieve a return of nearly £389. But obviously many savers won't achieve that.
Those who make the wrong prediction will get a rate of just 1.01% over two years, which on a £10,000 pot amounts to a less impressive £189.
You won’t be able to switch sides during the fixed term and no partial withdrawals are allowed on the product, so you wouldn’t be able to move your money elsewhere if the tide starts to turn.
It’s also worth pointing out that no bonus is paid on either of the bonds if the rate remains unchanged. It's the equivalent to on a roulette table - only the house wins
Plus, Brexit isn’t the only situation that can impact the pound to euro exchange rate, so you are taking a much bigger risk than the name of this gimmicky product implies.
Better homes for your money
Al Rayan Bank is offering a two-year fixed-term savings deal with an ’anticipated profit rate’ of 2.02%.
As it’s a Sharia compliant the return is not guaranteed, but Al Rayan says it has achieved its target rate since the bank was founded in 2004.
If the rate were to change during the term Al Rayan would notify savers with the choice to end the agreement.
With a £10,000 pot the Al Rayan account would make you £408 over two years – more than if you were to guess correctly with the Brexit Bond.
Alternatively, you could choose to lock up your money for a shorter period so you have more flexibility if you think savings rates will improve sometime soon.
Atom Bank is offering a one-year fixed rate paying 1.70% on deposits from £50. With £10,000 you can earn £170 after a year.
To keep up to date with the best rates on offer check out: Where to earn most interest on your savings.
Don’t forget that right now the best rates on cash savings can be found in current accounts.
You can get 5% for 12 months with Nationwide’s FlexDirect, 3% on up to £3,000 with the Tesco Bank Current Account guaranteed until April 2019 and 3% on £1,500 with the TSB Classic Plus Account.
For more of the best deals take a look at: The best high-interest current accounts.
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