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Savings platforms are arguably becoming the best place for savers, both in terms of managing their cash and maximising their returns.
These platforms allow savers to sign up and manage accounts with different banks in one place. It means they can switch money between providers and get the best rates with less admin.
What’s more, not only are many platforms free to use, but some are offering cash giveaways to new joiners.
Savers signing up for the first time to Hargreaves Lansdown’s platform, Active Savings,* can now earn up to £100 as a cash bonus.
Forget piggy banks: Platforms enable savers to manage all their savings under one roof.
The amount of cashback savers will receive will depend on how much they put in. For example, those putting £10,000 in will secure £20, whilst those putting in £80,000 will secure £100.
To benefit, savers will need to open an account by 30 November and deposit at least £10,000 into any of its savings deals within 60 days.
Meanwhile, Raisin UK, another free savings platform, is currently offering a £30 welcome bonus to This is Money readers who open a new Raisin Account via this link* or any link originating from our website.
It offers savers the chance to boost their savings by £30 when they open and fund an account on its marketplace with a minimum of £10,000.
What makes these sign-up offers even more enticing is the fact that both platforms currently offer a range of market leading rates, and in some cases, they actually beat the market.
For example, Active Savings is offering a one-year fix paying 4.6 per cent.* That’s 0.1 percentage points more than the best rates available on the open market.
Hargreaves Lansdown’s platform is offering tiered cashback to new joiners until the end of next month
Someone stashing £10,000 in the account will essentially secure a 4.8 per cent return, including the cash bonus. That’s a £480 return on investment after one year.
Someone signing up and depositing £10k in this account would effectively be earning a 5.1 per cent return, with the bonus included. That would equate to a £1,045 return on investment after two years.
Raisin UK are currently offering a 95-day notice account paying 2.52 per cent.* Someone depositing £10k in this account via Raisin for the first time would effectively boost their rate to 2.82 per cent.
That’s a £285 return after one year with the ability add and withdraw funds – albeit with a 95 day notice period required.
This falls short of just one other deal on the open market. Family Building Society is currently paying 3 per cent on a 90-day notice account, though it requires a minimum of £20,000 to open the account.
Going online: Although savings platforms do not have every account on the market, they tend to offer some of best deals around
Raisin is also offering a three-year* and five-year deal* paying 5 per cent and 5.1 per cent respectively, which is the market leading rate in both categories, albeit savers can also go direct to Gatehouse Bank to benefit.
Savers can also benefit from a range of shorter fixed deals which are not available when going direct to the provider.
For example, Aldermore Bank is offering a nine-month fixed rate deal paying 3.62 per cent via Hargreaves Lansdown’s platform.
Are people using savings platforms?
About 6 per cent of people use an online savings platform, according to a recent survey commissioned by Hargreaves Lansdown.
However, it could well be much less. The Savings Guru estimates that cash held in savings platforms currently represents less than 1 per cent of the entire market.
There’s currently £5.3billion of cash in Hargreaves Lansdown’s savings platform.
That may sound like a lot, but it is negligible when compared to the £267billion stashed away in current accounts earning no interest at all, and the £461billion dwindling in easy-access deals paying less than 0.5 per cent, according to recent Paragon Bank analysis.
A spokesperson for the Savings Guru said: ‘I think some of the reasons why savings platforms are less well known is that the bigger ones don’t always compete for the same customers.
‘When you have strong competition, this can lift the whole market. For example, look at price comparison sites. They competed heavily to promote themselves against each other and this lifted the whole market.
‘Now, most consumers go to comparison sites for their insurance quotes. We haven’t seen the same yet in savings marketplaces.’
Another reason, according to the Savings Guru spokesperson, is that platforms are as of yet reluctant to publish how much money they are managing on behalf of savers.
He adds: ‘Savers will be much more reassured to use them if they knew that some already had £5billion+-plus on them and hundreds of thousands of customers.
‘Hargreaves Lansdown Active Savings is the only one that publishes regular figures – but that’s only buried in their annual report, rather than celebrated.
‘We believe that there is now between £15billion – £20billion on savings platforms in the UK – which is bigger than Metro Bank – but savers are unlikely to be aware of this.’
Control from your smartphone: Raisin’s online platform allow savers to have all their accounts under one roof, with no need to juggle multiple logins
At present there is much to like about both Raisin and Active Savings. Market leading rates and sign-up offers should be a recipe to tempt anyone.
However, savings platforms arguably also simplify the process for savers by helping them keep track of their accounts more easily and move money faster.
They might not always offer the very best rates on the market, but they allow customers to manage multiple accounts in one place.
It means that through a single online account, savers can open multiple savings accounts with numerous different banks as and when they require without the usual form filling and admin.
Tom Higham of Hargreaves Lansdown, says: ‘Online savings platforms bring a number of different banks together, so in terms of Active Savings, for example, there are 14 partner banks – including internet-only banks like Aldemore but also building societies like Coventry Building Society.
The idea is that once you have moved your money onto the platform, you can switch between banks very easily – without having to go through the usual rigmarole – and keep an eye on it all in one place
‘The idea is that once you have moved your money onto the platform, you can switch between banks very easily – without having to go through the usual rigmarole of opening a bank account – and keep an eye on it all in one place.
‘It also means it’s easier to hold separate savings pots for different reasons without losing track of them – so you might have an emergency savings fund in easy access, and fix some for a year for a new kitchen.
With rates moving quickly and the top of the best buy savings tables switching almost daily, savings platforms can make life easier for savers, according to Higham.
He adds: ‘Clients can put different amounts into different length fixed terms, as well easy access, to give them more flexibility.
‘And when their fixed term ends, they can jump back into a new rate with a different bank in a few clicks.
‘All people need to do is get their account set up and they’ll have a choice of different rates to choose from.
‘We also keep them updated about the latest rates so they can save time chasing around.’
Divide and conquer: Platforms allow savers to add cash, move it between banking providers, and withdraw it online. All with one login
For those with large amounts of savings another key advantage of using a savings platform is in spreading the FSCS protection that is given to each individual banking licence.
The Financial Services Compensation Scheme (FSCS) is the UK’s deposit guarantee scheme, which offers protection up to £85,000 per person or £170,000 in the case of joint accounts with each eligible bank or building society they sign up with.
By allowing savers access to more than one provider, savings platforms enable them to spread the FSCS protection across their multiple holdings.
For example, were they to save with six different banks that are all covered by the FSCS on the platform, they would be protected up to £85,000 in each account – notwithstanding any additional funds they might hold with the bank separately outside of the platform.
However, the sector of the savings market is expected to grow as new entrants enter the market over the coming months, according to the Savings Guru.
‘We expect someone with a strong brand name that operates in financial services, like John Lewis, to enter the market.
‘We also believe that Aviva Save will ultimately get its act together and go on to be a force whereas it’s been complete flop so far.
‘Of the incumbents, Hargreaves Lansdown is growing strongly but there’s such huge potential there for it to be a gateway to power everything else that firm does that it will supercharge with the right backing.
‘Flagstone has had significant investment to grow further and is expanding internationally and Raisin is showing signs it can be a force here, as it is in Europe.
‘We expect savings platforms to move from accounting for less than 1 per cent of the market to more than 5 per cent in the next three years.’
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