A new one-year bond from the mutual society Re-give has caught the attention, paying 5% interest. But your money may not be safe...
Mutual society Re-Give is offering savers 5% interest on a one-year bond, but the words ‘caveat emptor’ should ring loud.
The company says it’s a global and ethical financial institution and operates under the tagline ‘Re-Give – FSA Registered Mutual Society.’
Security warning
Although it features the FSA and HMRC logos on its homepage, it is only registered with the FSA; it’s not authorised by it. Meanwhile its approval from HMRC relates to the Enterprise Investment Scheme – a tax-relief scheme to help small, high-risk companies raise finance.
Anyone choosing to open this bond couldn’t seek redress from the Financial Ombudsman Service or the Financial Services Compensation Scheme if you had cause for complaint or if the mutual went under and took your money with it.
Despite this fact, Re-Give tells customers visiting its website that it can ‘feel secure’ and ‘save with confidence’ knowing that all savings bonds are protected by...Re-Give itself.
[SPOTLIGHT]I can’t imagine many savers would feel overly secure and confident knowing that money is guaranteed solely by the very company trying to sell the account.
How it compares
The minimum investment is £100 – but worryingly there is no maximum. Compare that to a normal, market-leading one-year bond from Coventry Building Society, which has an interest rate of 3.65% and an upper investment limit of £250,000.
Cahoot’s one-year bond pays 3.6% for deposits between £25,000 and £2 million.
Re-Give’s deal is paying far more interest than other leading one-year bonds, with fewer restrictions, which might ring a few alarm bells. The mutual says it can do this because it has lower operational costs.
Investment risk
All investments come with some degree of risk but cash savings bonds are normally relatively safe.
Re-Give’s savings bond looks more like an investment without explicitly saying so and it doesn’t belong to any kind of official deposit protection scheme. The company does say in the terms and conditions that it’s not an FSCS member but doesn’t say exactly how money is protected under its own system.
If I want to take on risk and broaden my investments I’d rather do so with a company that’s clearer about the products it is selling and what the risks are. Regulated banks and building societies that are members of the FSCS guarantee up to £85,000 worth of savings per person, per institution.
Make sure any returns you get on cash savings arise from sound judgement rather than luck and if you’re buying a bond make sure you know whether it’s a cash savings bond or a type of investment.
Find the best savings account for your needs with our comparison tool, where you can also look for one, two, three and five-year cash bonds.
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