Saving Money

Posts about saving money from a 60-plus perspective, including cashback schemes, deals sites, discount offers, and so on.

February 22, 2020

Why I Am (Still) Not a Fan of Premium Bonds

Nick Saving Money, Investing events, reviews 2 Comments

In February 2017 I wrote this post about premium bonds explaining why I was withdrawing a large amount of the money I had invested in them.

To recap, at that time the interest rate paid on premium bonds (from which the monthly prize fund is calculated) had been cut eight months earlier in June 2016. This led me to sell the majority of my holding, as the amount I was earning in prizes had fallen considerably. The rate was cut again a few months later in May 2017, which led me to sell nearly all my remaining bonds. I now have just £5 left, to avoid closing my account completely.

So what has happened since then? The good news for bond owners was that from December 2017 the prize fund was raised by 0.25% to 1.40%. This improved the odds of an individual bond winning a prize in any monthly draw from 30,000 to 1 to 24,500 to 1 (although it still didn’t tempt me to reinvest).

The not-so-good news is that from May 2020 the rate is being cut by 0.1% to 1.3%. As a matter of interest, here is a table copied from the NS&I website showing the changes in prize rates and the odds of winning a prize over the last twelve years. The new rate from May 2020 isn’t shown on the table.

From May 2020 the chances of winning a prize with a single bond will be reduced to 26,000 to 1. Over 170,000 fewer prizes are set to be given out in May 2020 than in February as a result of this change, with less than half the number of £100 and £50 prizes expected to be awarded (source: MoneySavingExpert).

My Thoughts

A first glance you might think that an interest rate of 1.30% percent still isn’t so bad in these days of (very) low interest savings accounts. It’s much the same as the current top paying easy-access savings accounts. Premium bond prizes are tax-free and you can withdraw your capital any time if you need it within a few days. Your money is protected by the UK government and you have an outside chance of winning a life-changing sum. So what’s not to like?

Well, quite a lot in my opinion. Most importantly, although the interest rate is currently 1.40% (reducing to 1.30% in May) in practice most people won’t make this amount. The interest rate is a mean (average) figure and this is skewed by the two one-million pound prizes (which statistically you are highly unlikely to win – see below) and the small number of other other high-value prizes. For these big prizes to be paid out, a lot of people have to win nothing. The more bonds you have, the closer to the average your prize earnings are likely to be. But the reality is that most premium bond owners won’t earn the interest rate quoted (and they may make nothing at all).

A better measure of what you are likely to make over a year is the median average. The way to think about this is that if you lined up all premium bond-holders with a certain number of bonds (e.g. £50,000) in order from those earning the least in a year (probably nothing) to the most (a million pounds plus), the median is the person right in the middle of the line. Half of all holders will earn more than this person (or the same) and an equal number will earn less. The median in this context is therefore a measure of what you can expect to earn from your premium bonds in a year with ‘average luck’. The clever folks at MoneySavingExpert have built a Premium Bond probability calculator which uses this metric to indicate how much you are likely to win per year, with average luck, with any given holding.

With the £50,000 maximum, the calculator reveals that with average luck you will win just £500 of prizes a year, equivalent to an interest rate of just 1.0 percent (see screen capture below). And that is at the current (February 2020) interest rate. From May 2020 that figure will inevitably go down. Obviously you might have better than average luck, but (as stated above) around half of all bond-holders will have worse. You can read a much more detailed explanation about this on this page of the MSE website.

The calculator also reveals that with £5,000 in premium bonds you could expect to win £50 a year with average luck, and with £1,000 nothing at all. Only about one in three people with £1,000 worth of bonds will win a prize in any one year, so the median (‘average luck’) winnings are zero. Over a two-year period, however, about five out of nine holders of £1,000 will win at least one prize, so the median earnings over two years with £1,000 in bonds are £25 (the lowest and by far the most common prize). This does I guess demonstrate that the ‘average luck’ method used in the MSE calculator has its limitations as a way of estimating likely earnings (although it is still likely to be more accurate than applying the headline interest rate to your investment).

Clearly the longer you hold your bonds, the better are your chances of winning a larger prize, so over a period of years average annual earnings may edge up slightly. Even so, the large majority of bond-holders won’t ever earn the headline rate.

At one time the tax-free status of premium bond prizes would have been a significant attraction, but nowadays that doesn’t apply to nearly the same extent. All basic rate taxpayers now benefit from a Personal Savings Allowance of £1,000 worth of tax-free savings interest every year (higher rate taxpayers get £500 and top rate taxpayers nothing at all). In practice 95% of people now pay no tax on their savings interest. If you are in the 5% who do, premium bonds become a more attractive option. Even so, a typical return of 1% or less, even if it is tax free, isn’t going to set many pulses racing.

Finally, you do of course have a chance of winning a big prize, but it’s important to be realistic about what that chance is. Even with the maximum £50,000 holding, MoneySavingExpert calculate that your chances of winning the million pound top prize in any one year are 1 in 69,876. To put this into perspective, if you had held £50,000 in premium bonds since the year 68000 BC (assuming of course they existed then) with average luck at the current interest rate you could have expected to win the jackpot just once. I looked this up, and 68000 BC is the middle of the Stone Age!

I also highly recommend this premium bonds prize calculator from MoneyMarvel which works a bit differently from the MSE tool and some may find easier to use 🙂

My Recommendations

Overall, then, I cannot recommend premium bonds as a home for your savings, especially with the coming rate cut in May 2020.

I can understand why premium bonds are a popular investment, as they offer a bit of excitement every month checking whether you have won and how much. But the fact remains that overall, for most people, the total prize money received is likely to average little more than 1 percent a year at current rates. It may very well be less than this, especially after May 2020 when – as already mentioned – the number of lower value prizes (£25 to £100) will be cut substantially. I look forward to checking on the MSE calculator then to see how much a person with average luck might expect to make in a year.

If you are lucky enough to have £50,000 burning a hole in your pocket, my first advice would be to put enough into an easy-access savings account such as the Post Office Online Saver (currently paying 1.30% including a fixed 0.8% bonus for the first 12 months) to cover your outgoings for up to three months in the event of emergencies. After that, you could invest the balance in a low-cost tracker fund, or a portfolio of investment funds, or a robo-advisory platform like Nutmeg. You could perhaps put a proportion of the money into P2P lending or property crowdfunding as well. Over several years, for the great majority of people, this will outperform an equivalent premium bond portfolio many times over.

As always, if you have any comments or questions about this post, please do leave them below.

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February 18, 2020

Booking a Holiday with Airbnb

Nick Saving Money, Everything Else reviews, property, travel 2 Comments

I recently booked my first ever break with Airbnb.

Of course, I’ve been aware of this person-to-person accommodation booking platform for some time, but till now I’ve avoided using it myself. In the back of my mind were stories I read years ago about people renting out sofas in their living room to make a bit of extra cash. At my age that prospect – the sofa in the living room, I mean – definitely didn’t hold any appeal!

Times change, though, and it’s important to keep up with them. In my case I wanted to book a short break in a part of North Wales that isn’t well served by hotels, the Lleyn Peninsula. Okay, I could have stayed at the Haven Holidays Park (formerly Butlins) in Pwllheli, but I was pretty sure that wouldn’t be my cup of Welsh tea either.

So after researching the relatively few hotels in the Abersoch area where I wanted to stay using Booking.com (affiliate link), I decided it might be time to give Airbnb a try. In recent years, as regular readers will know, I have become more accustomed to booking self-catering accommodation for short breaks, and have realised that in some ways I prefer this to staying in hotels.

In this blog post I thought I’d share my experience of registering with Airbnb and finding and booking accommodation. I hope this might inspire you to try it yourself if you haven’t yet taken the plunge with Airbnb.

Of course, you can also become an Airbnb host and make money that way. I haven’t tried this myself, but did cover the subject in another blog post titled Boost Your Income by Renting Out a Room.

Registering with Airbnb

Before you can make a booking with Airbnb, you have to be registered on the website. You can still browse without joining but (as I found out) if you find somewhere you like available on the dates you want, you will have to go back and register and then start the whole process again. This is a frustrating waste of time. It’s free to register and doesn’t take long, so if there is any chance you might want to book through the platform, my advice would be to do this first.

Registering with Airbnb is similar to registering on other booking websites. One thing to be aware of, though, is that as well as your personal details, as proof of ID they also ask you to upload a scan of an official document such as your passport or driving licence with your photo on it. Once you have done this, you have to wait for your ID to be approved. In my case this happened within 15 minutes and I received notification by email.

Once you’ve done all that, you can start searching for your perfect holiday retreat!

Searching Airbnb

Once you are logged in, you can start your search using the box on the Airbnb front page (see below).

As you can see, you have to enter where you wish to go and the dates you want to arrive and depart. You have to choose specific dates, even if (as I was) you are flexible about this. Once you have found somewhere you like, you will be able to see what other dates that accommodation is available. If you want to check all possible places in the area, though, you may need to do a few searches using different dates.

Anyway, once you have entered the relevant details and clicked on search, a new page will open showing you a map of the area in question. Here’s what I got when I searched just now for accommodation near Abersoch in early May (not actually when I am going).

As you may gather, each of the prices in a small oval represents an Airbnb place with availability on the dates in question. The price is the cost per night. Clicking on any of these will bring up brief info about the accommodation in question. If you like the look of this, clicking again will bring up a new page with photos and more. Here’s the top of the page for a cottage I like the sound of, though it would be too large for me alone.

Also on this page are full details about the accommodation and a reservation form – see below.

As you can see, for your money you are getting considerably more than a sofa in someone’s living room 😀 £110 a night seems very reasonable to me for a cottage that can accommodate a family of six.

As you may have noticed, there are some additional charges. Many Airbnb properties – though by no means all – charge a cleaning fee. In addition, you will always be charged a service fee. This goes to Airbnb, and is one way they make their money (they also charge a fee to the property owners).

If you scroll down you will see various other items, including visitor reviews and a calendar showing when the property is (and isn’t) available. Also towards the bottom of the screen you will find the cancellation terms. These are set by the hosts and vary considerably, so be sure to study them carefully. Often you will be able to cancel free of charge until a certain date. After that, you may have to pay the service charge and perhaps part or all of the booking fee as well.

Making Your Booking

If you want to proceed, clicking on Reserve will take you to a new page where you can confirm your booking and provide payment information. This is pretty standard, although one thing you don’t normally have to do on hotel booking sites is write a message of introduction to the property owners (your hosts).

Airbnb provide a ready-written message you can use by default. This is pretty bland, however. I think it’s best to take a few minutes to write something more personal about who you are, why you want to visit the area, and so on. This is especially important if you are new to Airbnb and don’t have any history on the site or reviews written about you (yep, Airbnb hosts review guests as well as vice versa). In theory a host can decline your booking if they don’t like the sound of you, so it’s good to reassure them that you are a normal human being and will treat their property with respect.

And that’s it, basically. When I made my booking it all went through smoothly and I received a thank-you message from the hosts within an hour. I haven’t been on the holiday yet, but will post a review on this blog after my return.

As always, if you have any comments or questions about this post, please do leave them below.

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RateSetter Invest £10 Get £20 Free Offer

January 25, 2020

Get a Free £20 From RateSetter When You Invest £10!

Nick Saving Money, Investing events, reviews, crowdfunding 0 Comments

PLEASE NOTE: This welcome offer has now changed. Details of the new ‘Invest £1,000, Get £100’ free welcome offer can be found in my fully updated RateSetter review.

I’ve mentioned P2P lending platform RateSetter before on Pounds and Sense – in my RateSetter review and also my recent post about changes in their account structure..

As I said then, Rate Setter is one of my favorite lower-risk P2P lending sites. It lets you save via a tax-efficient IFISA and/or an ordinary (taxable) Everyday account. Although their rates aren’t the highest (currently 3% to 4%) I like the fact that risk is spread across all loans on the platform, with a provision fund to cover any defaults.

In my previous articles I mentioned their welcome offer of a £100 bonus for anyone investing £1000 for a year or longer. This offer is now closed, though if you took advantage and are waiting for the £100 bonus to be credited twelve months on, that will (of course) still be honoured.

What RateSetter do have now is an enticing (and much lower cost) Invest £10, Get an Extra £20 offer.

New Welcome Offer

Currently if you are new to RateSetter you can get £20 added to your account for free just by signing up and depositing £10. Full terms of the offer are reproduced below, and you can also find them on the RateSetter website.

You can take advantage of this offer so long as you

have not previously registered with RateSetter;
register after 23rd January 2020; and
deposit a minimum of £10 through the RateSetter ISA or Everyday account within 56 calendar days of registering.

Your bonus will be credited to your Everyday Account and invested in RateSetter’s Access (instant access) product at the going rate (currently 3%) within 30 working days of qualifying. From here you can transfer it to your ISA account if you like or simply withdraw it.

My Thoughts

This is a great offer from RateSetter if you are wary about P2P investing and want to dip a toe without risking any significant money. It is also good if you only have very small amounts available to invest, or you just like the idea of getting your hands on a free twenty pounds! It will also give you a chance to see how the RateSetter P2P platform works for yourself.

Although the bonus is ‘only’ £20 as opposed to the £100 on offer before, you only have to invest £10 to get it rather than £1,000. In addition, your bonus will be credited within 30 working days of qualifying for it, rather than having to wait a full year as before.

Clearly, this is a generous promotional offer by RateSetter and I assume it won’t be available forever. If you want to take advantage, therefore, don’t wait too long. I will remove this information if/when I hear the offer is no longer valid.

As always, if you have any questions or comments about this post, please do leave them below.

Disclosure: This post includes my referral link. If you click through and make an investment for this offer, I will receive a bonus for introducing you. This has no effect on the terms or benefits you will receive. Please be aware also that I am not a qualified financial adviser and nothing in this post should be construed as individual financial advice. You should do your own ‘due diligence’ before making any investment, and take professional advice if at all unsure how best to proceed. All investments carry a risk of loss.

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January 16, 2020

Why I Switched My Santander 123 Account to 123 Lite

Nick Saving Money events, reviews 4 Comments

As you may have heard by now, the Spanish-owned bank Santander recently announced that they are cutting the interest paid on their popular 123 current account by a third.

From 5th May 2020 they are paying just 1% a year interest up to £20,000. That’s a big drop from the maximum 3% on offer when the account was launched (to great fanfare) in 2012. At that time the account topped the best-buy tables and many thousands of people (including me) switched to it as a result. As well as offering market-leading interest rates, they also paid cashback of up to 3% on a range of household bills if paid by direct debit from the account.

Since the heady days of 2012, though, Santander have steadily watered down the benefits of this account. They introduced a monthly fee that was originally £2 and then went up to £5. They also cut the interest rate in 2016 to 1.5%, and now – as mentioned above – to 1%. They are still charging £5 a month, though, which means you need to have an average balance of £6,000 in your account just to cover the fee (which works out as £60 a year).

Cashback is still on offer, but from being unlimited it has now been capped at £15 a month maximum. The 123 account currently pays 1% cashback on water bills, council tax and Santander mortgage payments, 2% on gas and electricity and Santander home insurance, and 3% on phone, broadband, mobile and TV packages. From 5th May onwards each of these three tiers will be capped at £5.

All this means that if you are one of the millions of customers who still have a Santander 123 account, you need to look carefully at whether it is still the best option for you.

Crunching the Numbers

Although Santander is no longer the clear market leader among current accounts, it may still be a good (and possibly the best) choice for some people. But you do need to look carefully at how you use the account and what alternatives are on offer. That’s what I did, and in the end I stayed with Santander, but switched my account to 123 Lite.

Here how I worked this out…

I started by looking at what I currently get from my Santander 123 account in terms of cashback and interest and setting this against the monthly charge. I have already cut down the amount of money I keep in my account due to the falling interest rates, so I now hold an average balance of around £1,800 in it. Here is a screengrab of the relevant section of my latest bank statement.

Adding this up, you can see that in January 2020 I received a total of £5.83 in cashback and £2.55 in interest. That’s a total of £8.38. Subtract the £5 monthly fee from this, and my net returns from the account are £3.38 a month or about £40 a year. On an average balance of £1,800, that works out as a return of about 2.25% – not great, but still better than most bank accounts currently (I am obviously counting cashback and interest together in this calculation – it’s all money, after all).

With the reduction in interest rates from 1.5 to 1%, though, that would have cut my monthly interest by a third to around £1.70. This would reduce my monthly ‘profit’ to £2.53, or about £30 a year. That works out as a rate of return on an average balance of £1,800 of about 1.7%. That’s obviously significantly worse than the previous 2.25%. Although again – taking into account the cashback as well as the interest – it still beats most ordinary current accounts.

The 123 Lite Alternative

With the potential rate of return on my 123 account falling to around 1.7%, I wanted to see if there were any better alternatives for me. Other things being equal, though, I didn’t want the hassle of switching to a different bank if the returns weren’t going be appreciably better for me.

So I looked into what alternative accounts Santander offer and learned about the Santander 123 Lite account. This doesn’t pay interest at all, but it offers the same cashback as a standard 123 account. And, very importantly, the monthly charge is only £1 instead of £5.

Looking at my potential returns with this account, I came up with the following: total cashback £5.83 minus £1.00 monthly charge = £4.83 a month net profit. Multiplying that by 12 gives a total annual return of £57.96. On an average £1,800 balance that works out as a notional interest rate of 3.22%, which was obviously a lot better than staying with a standard 123 account. So I decided to do that. Even at the current 1.5% interest rate which applies till 5th May 2020, I realized I would still be better off switching to 123 Lite, so there was no reason to delay.

As a matter of interest, if I reduce the average balance in my Santander account to £900 while still earning the same cashback, that will effectively double the rate of return I receive. Perversely, with the Santander Lite account, the lower the balance you can keep in it while still servicing your direct debits, the better the percentage return on your capital you will get 🙂

The other advantage of switching to a Santander 123 Lite account is that, as I discovered, it is a very simple process. I logged in to my account and selected the option to ‘upgrade’ my account. I had to answer a few simple questions and click to confirm my application. The next day I received an email confirming that I was now the proud owner of a Santander 123 Lite account. The account still has the same sort code and account number, the same PIN card number, and I can log in in exactly the same way. But at a stroke I have effectively doubled the returns I will be making from my account!

Other Alternatives

I strongly recommend that anyone with a Santander 123 account performs a similar calculation to the one I described above (bearing in mind there is now a cap of £5 a month on cashback in each of the three tiers). This will reveal if you would be better off switching to a 123 Lite account (and by how much per year). If you choose this option, switching is – I promise – a quick and painless process.

There are, of course, other alternatives, though. For example, HSBC have just introduced (or actually reintroduced) a one-off £175 bonus for anyone switching to their Advance current account. Note that to qualify for this you have to pay at least £1,750 into the account each month (or £10,500 every six months) and set up at least two direct debits or standing orders. More information about this can be found in this article from Which?

There are also still a few other current accounts that pay interest. An example is Nationwide’s FlexDirect account, which pays 5% interest on balances of £2,500 a year for the first 12 months (reducing to 1% a year after that). You have to pay in a minimum of £1,000 a month to qualify for this. Neither HSBC nor Nationwide offers cashback as well, so it is important to take that into account when deciding whether switching to them will be worth your while.

I hope you found this post of value if you have a Santander 123 account. I wish you every success in deciding how best to proceed. As ever, if you have any comments or questions, please do post them below..

UPDATE 5th MAY 2020 – I have just heard that Santander are cutting the interest rate on their 123 account AGAIN to 0.6% in August 2020. That makes the case for changing to a 123 Lite account – or switching away from Santander entirely – even more compelling.

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January 10, 2020

How to Save Money on Your Monthly Home Utilities

Nick Saving Money guest post 1 Comment

Today I am pleased to bring you a guest post from my colleague Will Pointing from GreatDealsMadeEasy.com.

In his article below, Will sets out his top tips for saving money on many of your home utilities.

Over to Will then…

Many people stay with their utility providers for years and years without changing, on the principle that ‘loyalty pays’.

Sadly, this only really applies with lifelong friends and the Cafe Nero loyalty app (where you get a free coffee after buying eight!). With yearly price rises on most home utilities, it’s a good idea to review them annually (at least) and save yourself £100s in the process.

As a general rule, new customers get the best deals. Below are some tips on how to uncover the golden deals that are right for you…

Broadband – prices increase to £152/year when you remain with them

A survey by Which? magazine found that 71% of respondents stayed with their ISP (Internet Service Provider) for over three years. Most providers offer the best deals on broadband for 12-18-month contracts, meaning after that period prices shoot up significantly.

Are you out of contract? Check out GreatDealsMadeEasy’s Broadband comparison page or other sites like uSwitch, MoneySavingExpert, MoneySuperMarket or CompareTheMarket. Look for the phrase ‘exclusive’ on a deal – this means this site has the best deal on the market.

Tips: Look for what is included in your deal and whether you really need it. Do you need all those TV channels when you have Netflix? Do you need calls included when you have a mobile phone?

Mobile phone – prices increases to £264/year when you stay with them

It so easy to forget when you have paid off your mobile handset (the companies rarely remind you if you have) and then stay on an inflated monthly rate for years. Phone companies create these fashionable adverts to try and convince you to get the latest phone, when actually buying a SIM-only deal until you really need a handset upgrade is the cheapest way. If you want a new SIM-only deal or a new handset, check out comparison sites like my one here.

Tips: Out of contract? Switch to a SIM-only deal. If not, ensure you are on the right tariff for you and you are not paying for unnecessary data (use free wifi when you can to save on using your data).

Water – average bill is £415 a year

Water UK estimate that the average water and sewerage bill is £415 a year or £34.58 a month. It is recommended to get a water meter installed, so the cost is as accurate as possible.

Tips: Water saving tips include having a shower not a bath, washing up manually, and putting a full load of clothes into the washing machine. Many modern machines also have an ‘Eco’ mode, which uses less water and electricity.

Heating and power – cost around £1,254 a year

Using comparison sites to evaluate different energy suppliers and tariffs is perhaps the simplest, most valuable money-saving action you can take. You can often save hundreds of pounds a year by doing this, especially if you haven’t switched for a while (or ever). Again, many customers continue on a high rate for years without asking the question, ‘Is this the best deal for me?’ I suggest using websites like Compare The Market, Money Saving Expert and Go Compare.

Tips: After getting the best possible deal, I recommend submitting regular meter readings to your supplier, so you are not overpaying. And turn off your lights as much as possible!

GreatDealsMadeEasy.com is the website to help you save money online the easy way. Whether you’re looking to cut back on your broadband bill, save on a holiday abroad or come up with a side hustle, Great Deals Made Easy will help you find useful tips and top deals. Expect great articles, interviews, reviews and advice. It’s written by digital marketing expert Will Pointing. Expect to find out how you can save money every month, the easy way!

Many thanks to Will for some great money-saving tips. Do check out his website at GreatDealsMadeEasy.com as well.

My own top tip would be to check out deals from cashback websites when changing utility suppliers. Sites such as Quidco and Top Cashback are especially worth a look when swapping energy companies. I talked about this recently in my blog post about How to Save Money with Cashback Sites.

On various occasions I have pocketed £70 or more in cashback when switching my gas and electricity providers. You can do this directly by signing up with an energy company via the cashback site (check first on a price comparison site that they are offering a competitive deal, obviously). Alternatively, many comparison services are also listed on cashback sites – so by clicking through to the comparison site and then switching via them, you can get cashback – and a good deal – this way.

And speaking of energy suppliers, you can also save money by getting a smart meter installed. These are currently being fitted free of charge by the energy companies. They help you monitor your energy usage and discover ways you can save money. In addition, a growing number of energy suppliers now reserve their best tariffs for people with smart meters. Check out my blog post Should You Get a Smart Meter Installed?

As always, if you have any comments or questions about this article, for me or for Will, please do post them below.

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January 1, 2020

Set Money Aside With Chip and Get a £10 Bonus!

Nick Saving Money reviews 0 Comments

PLEASE NOTE: This promotion is now closed.

Happy New Year to all Pounds and Sense readers!

I’m starting 2020 by highlighting a banking app called Chip. This is designed to help you put money aside painlessly for any purpose – from holidays to major purchases, or just for a ‘rainy day’ fund.

Chip is one of a growing range of apps that make use of so-called Open Banking. This allows third-party apps to access your bank details – so long as you provide the necessary authorization, of course – and perform certain transactions on your behalf.

Open banking is now becoming well established in the UK, and safeguards are in place to ensure that your security isn’t compromised. Even so, this is something you need to be aware of – and comfortable with – before signing up with Chip or similar apps.

How It Works

Chip is an iOS and Android app that moves money for you in an intelligent way.

Every few days, Chip’s algorithm calculates what you can afford to stash away based on your spending habits. It then transfers that money automatically from your current account to your Chip account. In this way you put money aside regularly while barely being aware of it – so it builds up, and in due course you can spend it on things that really matter to you.

You can change the amounts the app takes at any time, and also pause the service if you wish. This means you don’t have to worry about Chip pushing you into the red (although you do have the option to let it do this if you wish). You always stay in control and are guided by the Chip ‘chatbot’ (see below) through every step.

Chip currently fully connects with Halifax, Lloyds, Nationwide, Barclays, First Direct, Santander, TSB, Metro Bank and Co-operative Bank. If you bank with Monzo, Starling, Revolut, NatWest, HSBC, RBS and N26 (and soon any bank in the UK), you can connect using just your bank card.

How to Get Started

Start by clicking through to my dedicated sign-up page and click on the Download Chip Today button, then follow the on-screen instructions. This page includes my unique referral code which is POUNDS10, so please don’t alter this or you won’t be eligible for the £10 bonus offer (see below).

Once you’ve downloaded the app to your mobile and signed up, you will begin a dialogue with the Chip chatbot to help you set up your account. This includes plenty of cheery repartee, stickers and emoticons. The app is obviously aimed especially at younger adults – who I guess like this sort of thing – but there is no reason older people can’t use it as well.

In any event, it’s relatively straightforward to connect the app to your bank (you will of course need to have your bank account details to hand). Once it’s set up, turn notifications on. This will allow the app to alert you when it wants to start saving for you.

There is an option to speak to a real person if you need to. You can also increase or decrease the level of saving, set savings goals, and even pause saving for up to 90 days.

Do You Get Interest?

The answer to this question – at present anyway – is no. The app is free and helps you set money aside painlessly, but Chip don’t pay interest on this. It is therefore sensible to withdraw money at intervals as it builds up and place it in an interest-paying savings account (assuming you don’t have any immediate requirement for it).

You can withdraw money from your Chip account any time without charge. Tap the ‘withdraw’ button on the app before 5pm on a working day and the money will be back in your current account the same day. If you ask to withdraw your money over the weekend, or after 5pm, it’ll be with you the next working day.

Note though that if you’ve just moved money into your Chip account (either manually or with an auto-save), it may take up to 48 hours for this money to be cleared for withdrawal.

Where Do Chip Keep Your Money?

The app puts money away in your Chip account, which is a new account you open when you sign up. You can access the money in this account at any time but it’s important to note that it is not a savings account and doesn’t have FSCS protection. Rather, your cash is stored as e-money.

Chip work in partnership with electronic-money specialists PFS (Prepaid Financial Services) to store your cash. PFS store the money with a major retail bank (currently Barclays) in a ring-fenced account, which means it’s never used for any trading activities. Chip also boasts 128-bit encryption to ensure your data is safe.

Welcome Bonus

Currently I am able to offer Pounds and Sense readers a special offer for trying Chip out. If you sign up now using my unique referral code of POUNDS10, you can get a £10 bonus credited to your account.

After just two auto-saves using the app, you will be eligible for the £10 bonus. This will usually happen within two weeks. The bonus will then be credited to your Chip account within 30 days.

The £10 Welcome Bonus is available from today (1st January 2020). I am not sure how long this offer will remain open, however. So if you don’t want to miss out, I highly recommend that you sign up as soon as possible.

Final Thoughts

If your new year’s resolution is to put a bit more aside – or you just need a little help and encouragement doing so – Chip is well worth a look.

I like the way it stashes money away automatically, so in all probability you won’t even notice it. You can set it to take as much or as little as you like, and you can also make one-off additional payments if you are feeling particularly flush. You can also withdraw some or all of your money back to your bank account at any time.

Admittedly Chip doesn’t (currently) pay interest, but it doesn’t impose any charges either. Even so, it is obviously sensible to move money from your Chip account to a savings account at intervals rather than letting it build up too much.

In my view Chip is likely to work best for people with a regular monthly (or weekly) income. If you receive income more irregularly – e.g. you’re self-employed – it might not work quite as well. Even so, Chip say that their algorithm can detect patterns in your income and expenditure and adjust your transfers accordingly.

In any event, there’s no reason not to try Chip yourself to see if it can help you put aside more and take advantage of the current £10 welcome bonus. Just click through this link for more information and to sign up.

As always, if you have any comments or questions about this post, please do leave them below.

Disclosure: I am an affiliate for Chip so if you click through any link in this article and sign up using my referral code, I will receive a modest commission. This will not affect the service or benefits you receive. Indeed, clicking through a referral link such as mine is the only way you can get your hands on the £10 Welcome Bonus!

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December 17, 2019

The Rising Cost of Christmas – And How to Lower It!

Nick Saving Money events, sponsored post, competitions 6 Comments

With Christmas almost upon us, I thought I’d take a look today at how the cost of Christmas has changed over the years. I’ll also be suggesting some things you can do to keep the cost of the festive season under control.

Of course, Christmas has always been relatively expensive, as it’s one time of year nearly all of us push the boat out, buying gifts for friends and family, and generally spending more on food and drink and entertainment.

But all the usual bills still have to be paid at this time, including gas and electricity. For those of us in the UK, our energy use rises during the cold winter months anyway. And that effect is magnified over Christmas, when we may have extra guests visiting (and perhaps staying) as well. This all adds to our bills, and hence the total cost of Christmas.

The Cost of Christmas Past

So how much is your energy actually costing you, and are you paying more than you did ten or twenty years ago?

Take a look at the interacfive house graphic below – kindly provided by my friends at Energyhelpline.com – to see how average energy bills (along with our tastes in home decor and TV viewing!) have changed between 1970 and today.

As you can see from the graphic, average energy bills have fluctuated over the years, with the 1980s in particular being surprisingly expensive. In recent years the trend has been broadly upwards again, though this has been countered to some extent by the arrival of more energy-efficient appliances, from LED bulbs to condensing boilers.

Nonetheless, Christmas today is a very expensive time for many people. One reason is – of course – inflation. The cost of everything has risen over the years, so it makes sense that Christmas is all the more pricey too. But inflation aside, for many people today Christmas is a much bigger (and costlier) affair than it used to be.

Christmas in the 1960s wasn’t the long drawn out holiday we know now. As many readers of this blog will remember, most people only celebrated on the day itself, with Christmas Eve used for buying any gifts or food needed (unheard of today) and Boxing Day spent visiting family. With only two TV channels to choose from – BBC and ITV – everyone watched the same things, so there was no squabbling between Doctor Who and Die Hard!

The 1970s wasn’t much better on the TV channel front (the Christmas movie was a big highlight in the days before streaming and rentals) – though it did see a big surge in how much we spend on presents, with toys like Action Man and Evel Knievel making their debut during this period.

The 1980s saw an even bigger increase in the amount the UK would spend over the season, though you were more likely to sip a Babycham or eggnog in the days before you could get decent wine inexpensively. Wham’s ‘Last Christmas’ was the biggest festive hit. And the whole family would probably sit down together to watch Noel Edmonds on Christmas morning (hard to imagine in today’s multichannel, multimedia world).

The commercialization of Christmas took a new leap in the ‘90s, with toys like the Tamagotchi, Furby and Game Boy being huge sellers across the decade. Christmas TV might include Mr Bean, The Muppets Christmas Carol or even The Simpsons. It was also probably the last decade where the Christmas Number One was truly important – the Spice Girls dominating with three in a row.

Since then, the cost of Christmas has gone on increasing, as we spend ever more on gifts, decorations and events. And Christmas itself has spread ever wider as well, with festivities beginning weeks before the big day and continuing on into early January.

How to Keep Costs Down at Christmas

With the cost of Christmas (for many at least) having climbed alarmingly, here are some tips and suggestions for keeping your costs – and especially energy bills – down at this time.

Have your boiler serviced regularly, to ensure it is operating at peak efficiency.
If you have an old boiler that keeps breaking down, the time may have come to replace it. The Energy Saving Trust say that you could save up to up to 40 percent on your gas bill by installing a new ‘A’ rated condensing boiler with a programmer, room thermostat and thermostatic radiator controls.
If your radiators aren’t heating up properly at the top, you may need to bleed them to release air in the pipes. Depending on the radiator, you may need a special key to do this or a flat-bladed screwdriver.
Turn down your thermostat by one degree - this can reduce your heating bill by 10%.
Replace old light-bulbs with new energy-saving bulbs. The latest LED bulbs are just as bright as old incandescent bulbs and use a tenth of the energy. They last longer too.
Exclude draughts with heavy curtains and draught excluders by doors.
Turn off heaters in rooms you aren’t using and close the doors.
Don’t leave electrical appliances on standby.
Wash clothes at 30 degrees (or lower) and avoid using tumble driers whenever possible.
Get a smart meter installed if you haven’t already. The energy companies are fitting these free. They can help you see when and where you are spending money on energy and identify ways you could save money as a result.
If you’re an older person and/or on a low income, you may be able to get a discount of £140 on your winter energy bills through the Warm Home Discount scheme. The scheme for 2019/20 is currently open for applications, and most larger energy suppliers are offering it. But be aware that they only have a limited quota of discounts to give out, so you need to apply asap before applications close. My blog post about the Warm Home Discount scheme has more information about this.
Most older people who receive the state pension should get a Winter Fuel Payment from £100 to £300 in cash, based on their age and circumstances. Those in receipt of Pension Credit and some others on low incomes may also be eligible for a Cold Weather Payment of £25 if the average temperature in their area is at or below zero for seven days consecutively during the winter months.
Last but not least, the energy market is more competitive than ever these days, meaning you should be able to find a better deal pretty easily by shopping around. Energy Helpline can help you save up to £461 on your annual bills. Simply enter details of your current supplier on their website and they will handle the entire switching process for you. It’s that easy!

Christmas Prize Quiz

Here’s one more way you may be able to save some money this Christmas. Energy Helpline are currently running a Christmas-themed prize quiz on their website. Just click through here and scroll down to the quiz, where you can put your Christmas knowledge to the test! One lucky person will win a £100 M&S voucher. But don’t delay, as the winner will be drawn on Monday 23rd December 2019.

As always, if you have any comments or questions about this article, please do post them below.

Disclosure: this post is sponsored by Energy Helpline, an independent price comparison website.

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November 29, 2019

Is a Friendly Society a Good Home for Your Savings?

Nick Saving Money, Investing reviews, sponsored post 7 Comments

If you’re looking for a home for your savings (or some of them), a friendly society might not be the first thought that occurs to you. Nonetheless, it may well be worth considering.

Friendly societies are one of a number of UK institutions called ‘mutuals’. These were originally set up by groups of people for a common financial or social purpose. Before modern insurance and the welfare state, friendly societies provided financial and social services to individuals, often according to their religious, political, or trade affiliations.

Friendly societies today typically provide a range of savings and insurance services. Along with other mutuals, they are regulated by the Financial Conduct Authority (FCA).

Why Save With a Friendly Society?

One big attraction of friendly societies is that they are owned by the members themselves. This means any profits generated go to members (directly or indirectly) rather than shareholders, as is the case with banks.

A good example is Shepherds Friendly, which offers a range of savings, investments and insurance products. These include a highly rated Stocks and Shares ISA. There is a minimum investment in this of £30 a month or a minimum lump sum of £100.

The Shepherds Friendly Stocks and Shares ISA is an actively managed fund and rated medium to low risk. The fund invests in a mixture of UK and overseas company shares, property, government and company bonds, and cash deposits. Most of the fund is normally invested in stocks and shares for greatest growth potential, but at times of economic turbulence some may be switched to safer investments such as bonds and deposits.

Investors in the Shepherds Friendly ‘With Profits’ Stocks and Shares ISA receive an annual bonus based on how the fund has performed in the year in question. Shepherds Friendly say that this has worked out at 3% for the last five financial years after all management fees and costs are deducted. Members may also receive a final bonus when they exit their investment. Note that annual and final bonuses depend entirely on how well the fund has performed, and are not guaranteed.

As with all ISAs, any profits are free of income tax and capital gains tax. Everyone has an annual ISA allowance, which is currently a generous £20,000 a year. This may be divided as you wish among a Stocks and Shares ISA, a Cash ISA and an Innovative Finance ISA (IFISA). However, you may only invest in one ISA of each type per financial year.

A major attraction of the Shepherds Friendly ISA is that it is covered under the Financial Services Compensation Scheme (FSCS) up to £85,000 per person. That means if the society were to collapse in a worst-case scenario, your capital would be protected and returned to you by the FSCS.

Bonus Fund

A further benefit of saving with a friendly society is that because of their special status they can offer additional tax-free savings over and above the ISA limit. In the case of Shepherds Friendly, you can save from £10 a month to £25 a month tax-free in their Tax Exempt Bonus Fund. This is also an alternative option if you have already invested in another Stocks and Shares ISA in the current tax year and are therefore excluded from the Shepherds Friendly ISA.

Voucher Offer

Shepherds Friendly are currently offering investors in their Stocks and Shares ISA a Love2Shop voucher worth up to £50 once you’ve made your first deposit. I’ve copied the actual amount you would receive for Stocks and Shares ISA investments below from the Shepherds Friendly website:

Many of the other financial products sold by Shepherds Friendly include a Love2Shop voucher as well – see this Terms & Conditions page on their website for more info.

Closing Thoughts

If you are looking for a home for some of your savings, Shepherds Friendly offers an interesting option. The society has over 100,000 members, so it is also one that is very popular.

The potential returns from the Shepherds Friendly Stocks and Shares ISA are higher than those currently on offer from banks, though not as high as the potential returns from P2P lending and property crowdfunding (among others). But those investment opportunities do of course tend to be riskier, and your money may not be as easy to access in an emergency. They are also not generally covered by the FSCS guarantee.

As with all stock-market-based investments, there are still risks involved, and past performance is no guarantee of what will happen in the future. Shepherds Friendly is at the lower-risk end of the spectrum, but you should still regard it as a medium to long-term investment (five years at least). With the Shepherds Friendly Stocks and Shares ISA, however, you can at least access some or all of your money at any time if you need it. As stated above, this is not the case with many P2P/property crowdfunding platforms.

As always, if you have any comments or questions about this post, please do leave them below. I’d also be interested to hear from anyone who has invested with a friendly society – be it Shepherds Friendly or another one – what your experience has been and whether you would recommend this method of saving to others.

Disclosure: This is a sponsored post on behalf of Shepherds Friendly. If you click through one of the links in it and make an investment, I may receive a commission. Please note that I am not a qualified financial adviser and nothing in this article should be construed as individual financial advice. You should always do your own ‘due diligence’ before investing, and take professional advice if in any doubt how best to proceed.

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November 18, 2019

Save Money With Cashback Sites

Nick Saving Money 2 Comments

If you ever buy anything online, you can almost certainly save some money by signing up with cashback sites.

In this post I’ll be discussing the top two UK cashback websites, Quidco and Top Cashback, both of which I have belonged to for some years and can vouch for.

You might also like to check out My Money Pocket, a new UK cashback website I reviewed here recently.

The idea behind cashback sites is that they are free to join (although premium membership may be available at a small cost) and provide links to a range of online retailers. When a member clicks through one of these links and buys something (or performs some other action) the cashback site receives a commission from the retailer. Rather than keep all this for themselves, the sites return some or all of the commission they get to the member in question.

So if, for example, you need home insurance, you could click through to a broker’s website from the cashback site. If you then buy a policy from that broker, some or all of the commission paid to the cashback website is credited to your account. You can then withdraw it to your bank account, PayPal or even as vouchers for your favourite merchant.

As mentioned, I have been a member of the two sites mentioned above for several years now, and have made hundreds of pounds from both. Via Quidco, for example, I made £110 when I clicked through their link to the Nutmeg financial services website and opened an investment account with them. Although described as cashback, really this was more like a bonus, as the money I invested with Nutmeg does of course remain mine and I can get it back at any time. My Nutmeg investment has actually risen in value by over £2,600 since I invested, so this has clearly been a worthwhile investment in more ways than one! You can read my full review of Nutmeg here, incidentally.

With Top Cashback I recently pocketed a more modest £40 cashback by switching my gas/electricity provider using a comparison service listed on the website (the cashback came from the comparison service rather than the energy provider). I shall be saving around £500 a year by switching provider, so again the cashback feels more like a bonus than the return of any money I have spent.

You don’t always have to spend money to benefit from cashback sites either. Both Quidco and Top Cashback list offers where you can get money simply asking for a quote or some other action. On Quidco you can earn 50p just by signing up for free with SearchLotto and making 25 internet searches (which also gets you a free National Lottery entry). And on Top Cashback you can get £7.35 if you order and activate a new SIM card from Giffgaff.

You can also make money by introducing friends and family to these sites. Offers change from time to time, but typically you are paid between £5 to £10 when someone joins via your link and earns cashback themselves. The links in this post are referral links, of course.

As you can tell, I’m a big fan of cashback websites. I highly recommend signing up with both Quidco and Top Cashback, as they compete feverishly with each other to offer the best deals.

My money blogging colleague Will Pointing from GreatDealsMadeEasy.com is a fan of Airtime Rewards, a different type of cashback app. He says: ‘I use the Airtime Rewards app as it automatically lets high street retailers pay towards your smartphone bill (in the form of cashback) when you buy items. It is very similar to Top CashBack and Quidco, but you don’t need to manually select the retailers – it is all done automatically (you can also get two separate cashback amounts for a single transaction, essentially getting double cashback). All you have to do is download the app, register your card and then buy as you normally would. For example, if you bought some eye-drops at Boots for £4, you would get 5% back, so 20p. Once you get to £10 in cashback funds, you can select to pay this towards your phone bill – so free money!’

Do Cashback Sites have any Drawbacks?

Not drawbacks exactly, but there are certain things to be aware of.

For starters, you only get paid by the cashback site when they receive payment from the merchant concerned. Sometimes this happens within a week or two but other times it can take a lot longer.

Also, the system depends on your visit to the merchant being tracked by the software, and this doesn’t always work as it should. This happened to me recently when I made a groceries purchase from Asda. It didn’t track for some reason, so I had to open a claim via Top Cashback. Eventually I did get my money, but it took over three months.

So one thing to remember is not to rely on your cashback arriving quickly (or indeed at all). You should only make a purchase via a cashback site if you genuinely want- or preferably need – the item in question and believe it is good value. The cashback then will be a welcome bonus when it arrives.

For Readers Outside the UK

Finally, if you live outside the UK, there are cashback websites in many other countries as well (for example, Top Cashback now has a US operation, Top Cashback USA). Just do a Google search for “cashback website” plus your country’s name and see what results come up. Or check out this article on the MakeUseOf website which lists a number of such sites serving the US. Read the comments section below the MakeUseOf article for a range of international cashback sites as well.

As ever, if you have any comments or queries about Quidco and Top Cashback or cashback sites more generally, please do post them below.

Save

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October 15, 2019

Ratesetter Rings the Changes

Nick Saving Money, Investing reviews, crowdfunding 2 Comments

Updated 30th March 2020

I have mentioned P2P lending platform Ratesetter a few times on Pounds and Sense – most notably in my Ratesetter review.

Ratesetter is one of my favorite lower-risk P2P lending sites. It lets you save via a tax-efficient IFISA and/or an ordinary (taxable) Everyday account.

Although their rates aren’t the highest – currently 3% to 4% – I like the fact that risk is spread across all loans on the platform, with a provision fund to cover any defaults. This means that if someone you have lent money to via the platform defaults, it shouldn’t affect your returns. It also means that – unlike some other P2P lending platforms – there is no need to diversify your lending across the platform in order to control risk.

The Changes

Originally you could invest in Ratesetter in a choice of three different products: Rolling Market, One Year and Five Year.

The Rolling Market was the closest to an ordinary savings account, letting you withdraw some or all of your money any time without penalty. With the 1-year and 5-year products you could still request withdrawals before the full term of the loan, but in those cases a percentage charge was applied. This was 0.3% with the 1-year product and 1.5% with the 5-year product.

Under the new system, loans are spread across all three types of product. What was called the Rolling Market is now an Access account. As before, you can withdraw money from this at any time without penalty. There is just a ‘fair usage’ clause, which prevents investors from lending new money for 14 days after a withdrawal.

Instead of the 1-year and 5-year products, there are now the Plus and the Max. The Plus product pays more interest, but if you want to withdraw you have to pay a ‘release fee’ of 30 days’ worth of interest based on Going Rate at the time of release. And with the Max product, which pays more still, you are charged a release fee comprising 90 days of interest, again based on Going Rate at the time of release.

The Going Rate is the current interest rate for loans in the three product categories. Previously this was set by the market, based on supply and demand. That meant it could fluctuate, sometimes considerably, from day to day and even hour to hour. The interest rate you received could therefore vary a lot.according to when you invested (and when any returns were reinvested).

Under the new system, interest rates are set by Ratesetter themselves. This makes Ratesetter feel more like an ordinary savings provider. Currently the Going Rates are as follows:

Access: 3.0%

Plus: 3.5%

Max 4.0%

If you are already a Ratesetter investor, you may therefore want to reassess the type of product in which your money is held.

If – like me and many others – you put your money into a Rolling Market (now Access) product, you may want to think about transferring some to a Plus or Max account to take advantage of the higher interest rates. There is no greater risk in these accounts, and the only downside is that you will lose 30 or 90 days’ interest if you withdraw early. Doing this is likely to deliver better overall returns, so long as you remain in for at least six months in the case of a Plus account and a year in the case of a Max account. (These are only very approximate figures, as the interest rates paid can change.)

If you want to do this, you can’t (unfortunately) transfer money directly from one type of product to another. Rather – and I have confirmed this with Ratesetter – you will need to start by withdrawing your money from the product it is in currently (e.g. Access) so it goes into your holding account. You can then invest from your holding account into the new product (e.g. Max) that you want. Bear in mind though the 14-day rule mentioned above.

My Thoughts

Overall, I like these changes to Ratesetter. The new Going Rates are admittedly a little lower than the previous market rates. However, I think the greater stability and certainty over the interest rate you will be getting more than make up for this. I also like the new, simpler terms for withdrawing money from your account. I will continue to invest in Ratesetter and regard it as one of the safer (if less exciting) components of my portfolio.

As I’ve noted before on Pounds and Sense, P2P lending does not enjoy the same level of protection as bank and building society savings, which are covered (up to £85,000) by the Financial Services Compensation Scheme (FSCS). Nonetheless, the rates on offer at Ratesetter are significantly better than those from most banks and building societies. And the existence of a substantial across-the-board provision fund with a strong record of protecting investors from losses clearly offers reassurance.

It’s also reassuring that with all three products you can access your money if needed at any time, even though in the case of Plus and Max you will be charged a release fee for this. Obviously, you shouldn’t therefore put money into the Plus or Max products if you think there is any likelihood you will need it back within a month or two.

Clearly, no-one should put all their spare cash into Ratesetter (or any other P2P lending platform). Nonetheless, it is certainly worth considering as part of a diversified portfolio. Not only are the rates of return higher than those offered by banks and building societies, they are relatively unaffected by ups and downs in the stock market. P2P lending isn’t a way of hedging your equity-based investments directly, but it does definitely help spread the risk.

If you would like more information about Ratesetter, please see my original Ratesetter review (which I will be fully updating soon).

Welcome Offer

Currently if you are new to RateSetter you can get £100 added to your account for free just by signing up and depositing £1,000. Full terms of the offer are reproduced below, and you can also find them on the RateSetter website.

You can take advantage of this offer so long as you

have not previously registered with RateSetter;
register after 27th March 2020; and
deposit a minimum of £1,000 through the RateSetter ISA or Everyday account and this is matched within 56 calendar days of opening an account.

My Thoughts: This is a great offer from RateSetter if you are new to the platform. If you invest £1,000 and keep it there for a year, then including the £100 welcome bonus you will get a total return of between 13 and 14 percent for the first year (depending on whether you opt to invest your money in the Access, Plus or Max product). As a matter of interest, this is the same welcome offer I took advantage of when I signed up with RateSetter two years ago, and my bonus £100 was credited without any issues (or prompting from me) twelve months later.

Obviously if you need your £1,000 at any time, you can withdraw it (normally within 24 hours). This will though mean you don’t receive the £100 welcome bonus at the end of the first year.

If you have any comments or questions about this post, as always, please do leave them below.

Disclosure: As stated above, this post includes my referral link. If you click through and make an investment, I will receive a bonus for introducing you. This has no effect on the terms or benefits you will receive. Please be aware also that I am not a qualified financial adviser and nothing in this post should be construed as individual financial advice. You should do your own ‘due diligence’ before making any investment, and take professional advice if at all unsure how best to proceed.

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