S&P targets maturing Tessa-holders

SAVE & PROSPER, the savings and investment arm of Robert Fleming, is offering a guaranteed fixed interest rate of 7.5 per cent tax-free to holders of Tessas who agree to roll over their existing holdings when their initial investments start to mature next year.

Significantly, S&P is also offering the 7.5 per cent rate immediately to holders of Tessas with other banks and building societies who agree to transfer to S&P and open new Tessas with S&P/ Robert Fleming when their existing Tessas mature. The offer is open to all Tessa-holders whose accounts mature in the first five months of next year and applies until their accounts mature.

Existing Tessa-holders have always been free to transfer without losing their tax-free privileges, provided they hold accounts for a total of five years. Back in 1991, most Tessa providers offered customers a variety of terminal bonuses and/ or transfer charges to try to discourage them from switching their accounts.

National Westminster, for example, offered a 1 per cent bonus on the first year's balance, payable on maturity, to customers who opened accounts before the end of March 1991. Halifax Building Society, which claims to be the biggest provider of Tessas, with 750,000 accounts, offered a maturity bonus starting at 1.5 per cent of the first year's balance, tapering down to 0.25 per cent of the fifth and final year's balance.

Nationwide Building Society offered an 0.5 per cent bonus to both lump- sum and regular savers, and levies a penalty of 90 days' gross interest for withdrawals.

As there are more than 4 million Tessa accounts containing an estimated pounds 24bn, however, and 98 per cent of all Tessa accounts were actually opened in the first six months of 1991 and mature in 1996, the potential market for transfers is huge.

Apart from competing offers, Tessas will face stiff competition from other instruments, notably tax-free PEPs and the new-fangled Corporate Bond PEPs, which did not exist when Tessas were launched in 1991. Although PEPS and Corporate Bond PEPS do not guarantee to protect capital in the way Tessas do, some Corporate Bond PEPS are offering tax-free yields of up to 9 per cent.

According to S&P market research, 43 per cent of Tessaholders are "definitely" intending to reinvest in new accounts, and 40 per cent will possibly do so, but 17 per cent said they would not reinvest, and 70 per cent said they would shop around for the best rate before re-investing.

Only 26 per cent said they were happy with a variable rate, reflecting the fact that interest rates have fallen with inflation from around 14 per cent in 1991 to about 6 per cent earlier this year. Variable rates have since recovered to 6.5-6.75 per cent, but 50 per cent of holders favour some kind of fixed rate for the future.

S&P's attempt to persuade holders to transfer could be the start of a campaign among all providers to retain existing holders with a fresh range of sweeteners or transfer penalties.

Apart from S&P, Barclays Bank has just announced a new two-year fixed rate of 7.4 per cent, which will apply to existing customers, new customers, and to transfers. After two years it will revert to a variable rate, and takers will be asked to give one month's written notice and accept the loss of 180 days' gross interest at the fixed rate if they withdraw or transfer accounts in the first two years.

News
people'It can last and it's terrifying'
News
people Emma Watson addresses celebrity nude photo leak
Arts and Entertainment
tv
News
Katie Hopkins appearing on 'This Morning' after she purposefully put on 4 stone.
peopleKatie Hopkins breaks down in tears over weight gain challenge
PROMOTED VIDEO
Life and Style
fashionModel of the moment shoots for first time with catwalk veteran
Sport
Alexis Sanchez, Radamel Falcao, Diego Costa and Mario Balotelli
footballRadamel Falcao and Diego Costa head record £835m influx
News
i100
Arts and Entertainment
Olivia Colman topped the list of the 30 most influential females in broadcasting
tv
Life and Style
techIf those brochure kitchens look a little too perfect to be true, well, that’s probably because they are
Arts and Entertainment
Danish director Lars von Trier
filmEnglish-language series with 'huge' international cast set for 2016
News
ebooksAn unforgettable anthology of contemporary reportage
Life and Style
tech
News
Kelly Brook
peopleA spokesperson said the support group was 'extremely disappointed'
Sport
Andy Murray celebrates a shot while playing Jo-Wilfried Tsonga
TennisWin sets up blockbuster US Open quarter-final against Djokovic
Arts and Entertainment
Hare’s a riddle: Kit Williams with the treasure linked to Masquerade
booksRiddling trilogy could net you $3m
Arts and Entertainment
Alex Kapranos of Franz Ferdinand performs live
music Pro-independence show to take place four days before vote
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Derivatives Risk Commodities Business Analyst /Market Risk

£600 - £800 per day: Harrington Starr: Derivatives Risk Commodities Business A...

Power & Gas Business Analyst / Subject Matter Expert - Contract

£600 - £800 per day: Harrington Starr: Power & Gas Business Analyst/Subject Ma...

Infrastructure Lead, (Trading, VCE, Converged, Hyper V)

£600 - £900 per day: Harrington Starr: Infrastructure Lead, (Trading infrastru...

Planning Manager (Training, Learning and Development) - London

£35000 - £38000 per annum + benefits: Ashdown Group: A highly successful, glob...

Day In a Page

'I’ll tell you what I would not serve - lamb and potatoes': US ambassador hits out at stodgy British food served at diplomatic dinners

'I’ll tell you what I would not serve - lamb and potatoes'

US ambassador hits out at stodgy British food
Radio Times female powerlist: A 'revolution' in TV gender roles

A 'revolution' in TV gender roles

Inside the Radio Times female powerlist
Endgame: James Frey's literary treasure hunt

James Frey's literary treasure hunt

Riddling trilogy could net you $3m
Fitbit: Because the tingle feels so good

Fitbit: Because the tingle feels so good

What David Sedaris learnt about the world from his fitness tracker
Saudis risk new Muslim division with proposal to move Mohamed’s tomb

Saudis risk new Muslim division with proposal to move Mohamed’s tomb

Second-holiest site in Islam attracts millions of pilgrims each year
Alexander Fury: The designer names to look for at fashion week this season

The big names to look for this fashion week

This week, designers begin to show their spring 2015 collections in New York
Will Self: 'I like Orwell's writing as much as the next talented mediocrity'

'I like Orwell's writing as much as the next talented mediocrity'

Will Self takes aim at Orwell's rules for writing plain English
Meet Afghanistan's middle-class paint-ballers

Meet Afghanistan's middle-class paint-ballers

Toy guns proving a popular diversion in a country flooded with the real thing
Al Pacino wows Venice

Al Pacino wows Venice

Ham among the brilliance as actor premieres two films at festival
Neil Lawson Baker interview: ‘I’ve gained so much from art. It’s only right to give something back’.

Neil Lawson Baker interview

‘I’ve gained so much from art. It’s only right to give something back’.
The other Mugabe who is lining up for the Zimbabwean presidency

The other Mugabe who is lining up for the Zimbabwean presidency

Wife of President Robert Mugabe appears to have her sights set on succeeding her husband
The model of a gadget launch: Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed

The model for a gadget launch

Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed
Alice Roberts: She's done pretty well, for a boffin without a beard

She's done pretty well, for a boffin without a beard

Alice Roberts talks about her new book on evolution - and why her early TV work drew flak from (mostly male) colleagues
Get well soon, Joan Rivers - an inspiration, whether she likes it or not

Get well soon, Joan Rivers

She is awful. But she's also wonderful, not in spite of but because of the fact she's forever saying appalling things, argues Ellen E Jones
Doctor Who Into the Dalek review: A classic sci-fi adventure with all the spectacle of a blockbuster

A fresh take on an old foe

Doctor Who Into the Dalek more than compensated for last week's nonsensical offering