Greedy eyes focus on pounds 20bn Tessa bonanza

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The Independent Online
Tour operators whose 1996 holiday brochures traditionally appear between Christmas and New Year, are greedily eyeing the pounds 20bn wall of money that will pour out of tax-exempt special savings accounts - Tessas - that mature in the next six months.

At least pounds 5bn will be tax-free interest which cannot be reinvested in a new Tessa, and tour operators are hoping the mainly middle-aged savers will splash out on a luxury cruise when their nest-eggs hatch.

Car dealers and department stores are also praying savers will treat themselves and spend some of the proceeds. Managers of unit trusts, investment trusts, personal equity plans, corporate bond PEPs, guaranteed income bonds and guaranteed stock market bonds are also hoping to tempt investors with maturing Tessas to look for higher rates of return than Tessas currently offer. About 2 million people hold Tessa accounts, most taken out in 1991 when interest rates as high as 13 per cent were on offer.

Most have variable rate accounts on which returns have now halved. Many will have saved the maximum of pounds 9,000 and will have around pounds 3,000 of tax- free interest at their disposal.

But banks and building societies that offer Tessa accounts will not give up without a fight. Yesterday alone three more providers announced terms to try to persuade account-holders to roll their savings over rather than withdraw them.

Halifax Building Society is guaranteeing a fixed rate of 7 per cent for the next five years for Tessa holders who have a maximum pounds 9,000 in a maturing Tessa and reinvest before the end of January. A variable rate alternative will be offered starting at 5.9 per cent.

Northern Rock is topping the Halifax offer with a starting rate of 8 per cent for a pounds 9,000 investment on its next generation of variable-rate Tessas.

Birminghan Midshires announced seven new Tessas, including an escalating rate Tessa starting at 6.25 per cent in the first year, rising to 9 per cent in year five.

Top Tessas - variable rate tax free accounts 1991-96

Top Tiddlers

Kent Reliance pounds 12,400

Dumfermline pounds 12,343

National Counties pounds 12,317

J Hodge Bank pounds 12,226

Melton Mowbray pounds 12,221

Top Building Societies

Bradford & Bingley HR pounds 12,093

Derbyshire pounds 12,058

Halifax pounds 12,050

Bristol & West Bonus pounds 12,019

Woolwich pounds 12,011

Top Banks

TSB pounds 11,094

Royal Bank of Scot pounds 11,870

Abbey National pounds 11,829

NatWest pounds 11,560

Lloyds pounds 11,533