Hargreaves Lansdown launches cash savings hub: how good is it?
As part of its free ‘Active Savings’ offering, it’s partnered with seven banks to give customers a ‘one-stop-shop’ solution to take the hassle out of “chasing the best rates”.
Essentially, by opening the account via Hargreaves Lansdown, customers will be able to pick and choose which fixed-term products they want to deposit their money into, and will be updated about the rates on offer. However, financial advice on which is the best option isn’t offered.
Currently, there are 18 different fixed-term savings options, ranging from three months to three years and the providers include: Aldermore, Coventry Building Society (no active offers), Close Brothers, ICICI Bank, Metro Bank, Shawbrook Bank and United Trust Bank.
Hargreaves Lansdown, winner of the YourMoney.com Awards’ Best Direct Lifetime Stocks and Shares ISA provider, confirmed Active Savings is not held within existing investment ISAs or SIPPs. It’s separate and can be managed alongside existing products. But the platform added that new customers can just open an Active Savings account without having to hold investments with it.
Mark Dampier, head of investment research at Hargreaves Lansdown, said: “It’s no secret that it’s hard work to earn a consistently good rate on your cash savings. The majority of us leave cash in the same accounts for years, earning next to nothing in interest.
“Our clients told us most of them don’t have time to chase the best rates – they just want consistently good returns, more choice and cash savings which are easy to manage alongside their investments and pensions.”
How does Active Savings work?
The minimum amount you can deposit is £1,000, though the maximum varies by the provider.
Customers will need to open an Active Savings Account online and the money will be deposited into a cash hub. It’s important to note that you have to choose the savings product within three working days of adding money to the cash hub, otherwise it will be returned to your Fund & Share Account (if you have one), or to your debit card or nominated account. Any money in the cash hub will earn 0% interest.
Interest payments, and the proceeds from maturing fixed-term products are paid back into the cash hub. You can make withdrawals to your nominated bank account from there or choose new products.
It’s important to note that as these are fixed-term products, it’s unlikely you’ll be able to access cash earlier than maturity (some may allow withdrawals due to death or financial hardship).
Customers aren’t charged for using the service. Instead, the banks and building societies pay Hargreaves Lansdown up to 0.25% of balances held each year. This means the rates offered via Hargreaves and those offered directly from the providers may differ, it said.
Interest is paid gross, without any tax deductions but if you go over your Personal Savings Allowance, you’re responsible for paying any tax due.
How good is this offering?
There are other services for cash-rich but time-poor savers wanting to earn the maximum interest on their money. As an example, Savings Champion runs a Cash Advice Service, charging a one-off 0.15% plus VAT (min £500). As part of the service, it looks at the very best rates available across the whole of the market, not just limited to fixed-term savings. Customers are assisted in searching for suitable products and in completing paperwork.
Others include Raisin UK which lists a small number of providers, and Octopus which blends the rates for you, as money is applied in order of the best rates.
Hargreaves Lansdown only has a limited number of providers for customers to choose from but as it’s free, it can be a good starting point for savers.
However, as it states that rates can differ between those it offers and those offered directly by the bank or building society, savers should take the time to compare rates offered directly, as well as elsewhere. It may involve more leg work, but could be rewarding, particularly with higher cash amounts.
Anna Bowes, co-founder of Savings Champion, said: “Evolution of these savings platforms is exciting and hopefully as they continue to evolve, this will reduce the inertia that savers suffer from, making it easier for people to switch.”