Take a closer look at Tessa terms
Saturday 18 March 1995
When the original Tax Exempt Special Savings Accounts reach maturity in January 1996, savers will now be able to roll over the £9,000 invested into another account as a lump sum. Extra money accrued as interest on the investment over its five-year lifespan cannot, however, be included.
First launched in 1991, Tessas still represent good value with low risk for taxpayers. Provided money stays in the account for the full five years, interest is paid gross. Bristol & West (Asset)'s current rate of 7 per cent equates to 11.66 per cent on a taxable account for a higher-rate taxpayer and 9.33 per cent for a basic-rate payer.
Graham Hooper of Chase de Vere warns savers to keep a close check on their Tessa, to ensure they are getting best rates available.
"The difference between National & Provincial and Nationwide Tessa performance since 1991 is £1,000, a huge amount," he said. (See table).
Many savers are unaware they have the option to take advantage of better rates offered elsewhere without losing tax-free status. Switching money from one Tessa provider to another is straightforward.
Some schemes, however, have heavy exit penalties to deter these movements. Barclays Bank's fixed-rate Tessa charges three months loss of interest. Others ask for a £25 administration fee.
On the incentive side, Halifax and Woolwich building societies have tempting bonuses payable on the schemes' anniversaries, to maintain customer loyalty.
Hooper advises those considering a new Tessa to check for onerous exit conditions. Higher-rate schemes incur the heaviest charges.
New investors should also investigate the interest-rate history to date, from 1991. Consistently competitive rates are the best indicator of sturdy future performance.
Here Stroud & Swindon, Hinckley & Rugby, Bristol & West (Asset) and Dunfermline Building Societies all get an honourable mention.
TOP TEN TESSAS
Top 10 biggest building societies current value of Tessas to date
Society Value £*
National & Provincial 11,666.00
Cheltenham & Gloucester 11,276.00
The Leeds 11,240.05 (1)
Alliance & Leicester 11,225.82
Halifax 11,155.82 (2)
Bradford & Bingley 11,179.14 (3)
Bristol & West 11,018.08 (4)
* Value from 1/1/91to 31 March 1995, with max £3,000 deposit in first year, and max £1,800 yearly for following three years.
(1) 1.50% bonus on £3,000 earned in first year paid at end of year five
(2) A £337 bonus has also accrued however this amount is not available until maturity.
(3) Extra 1.00% per cent bonus on the balance accrued at the end of each year paid on maturity. Figure to date stands at £11,460.03.
(4) £500 Maturity bonus paid in year 5.
- 1 Jeremy Clarkson 'sees no problem' with his racist language on Top Gear, says BBC
- 2 'Alien thigh bone' on Mars: Excitement from alien hunters at 'evidence' of extraterrestrial life
- 4 London restaurant 34 creates champagne glass modelled on Kate Moss’ left breast
- 5 ALS ice bucket challenge co-founder Corey Griffin drowns, aged 27
'Alien thigh bone' on Mars: Excitement from alien hunters at 'evidence' of extraterrestrial life
Russell Brand opposes anti-Semitism after death threats: 'We must disavow all forms of prejudice that lead to exclusion and execution'
James Foley 'beheaded': Isis video shows militant with British accent 'execute US journalist' – as hunt begins for killer
ALS ice bucket challenge co-founder Corey Griffin drowns, aged 27
Microbial life found living on the exterior of the International Space Station, say reports
Richard Dawkins on babies with Down Syndrome: 'Abort it and try again – it would be immoral to bring it into the world'
Scottish independence: English people overwhelmingly want Scotland to stay in the UK
Isis threat: Cameron wants an alliance with Iran
Michael Brown shooting: Chaos erupts on the streets of Ferguson after autopsy shows teenager was shot six times – twice in the head
Disgusting, frustrating, but intriguing: how the country really feels about its politicians
Bin bag full of cats' heads discovered near Manchester's Curry Mile
iJobs Money & Business
£30000 - £40000 per annum + benefits+bonus+package: Harrington Starr: C#.NET ...
£20000 - £30000 per annum + benefits+bonus+package: Harrington Starr: Junior D...
£550 - £650 per day: Orgtel: Business Analyst - Traded Credit Risk - Investmen...
£55000 per annum: Harrington Starr: A financial software vendor at the forefro...