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One-year bond pays 3.2%: Is your money safe with Union Bank of India?

Paloma Kubiak
Written By:
Paloma Kubiak

Interest rates continue to climb, and savers can now earn 3.2% AER with Union Bank of India (UK). But is your money safe and what do you need to know?

Union Bank of India (UK) has stormed to the top of the best buy tables – and by some way – with its one-year bond offering 3.2% AER on deposits between £5,000 and £340,000.

Based on the minimum £5,000 deposit, this would earn you £160 in interest for the year.

The next best in terms of interest comes in at 2.87% AER (OakNorth Bank) so savers may well be attracted to the higher paying rate.

But many may not have heard of the Union Bank of India (UK) and may therefore question whether their money is safe.

The first thing to point out is that the bank has been operating in the UK for the past eight years though it’s perhaps been under the radar until now. As such, while it may be relatively unknown to savers, it isn’t a new bank. It reported profits of $5.3m in the year to March 2022 and is also the fifth largest bank in India, owned by the government.

As part of its annual accounts to 31 March 2022, it stated it offers a simple range of products to customers covering retail, corporate, commercial banking, trade finance and treasury services. And one of its primary objectives is to “attract retail depositors by extending market competitive interest rates” so the leading rate appears to support this.

The second and most important point is that money is protected under the Financial Services Compensation Scheme so if it did go bust, savers would receive up to £85,000 of their money back.

It is also regulated by the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA).

James Blower, founder of The Savings Guru, recommends looking at three things when it comes to departing with your cash to little known brands:

  • Is the bank part of the FSCS scheme which protects savers deposits up to £85,000 per person?
  • Does the bank share its licence with any other bank e.g. Lloyds and Halifax are part of the same banking group so savers are only protected up to £85,000 per person with both those banks, not £85,000 with each. Union Bank of India (UK) doesn’t share a banking licence.
  • What are the customer reviews like for the bank?

Savings Guru also runs a banking directory to help savers with this information on most of the new banks which people are less familiar with.

Union Premier Bond

Savers wishing to open the one-year Union Premier Bond may see a ‘captcha’ pop up box appear first off. There are four steps to complete and your session will expire if inactive for 20 minutes.

You’ll need to have your passport or driver’s licence, plus have your National Insurance number to hand.

It asks about your tax status, particularly with reference to the US. Plus, the source of your funds eg savings, salary, investment, pension etc.

You then need to state how much you’ll save – remember the minimum is £5,000 while the maximum is £340,000. However, be mindful of the FSCS £85,000 limit, and that you can only make one deposit. The account doesn’t let you make further deposits.

This in itself can be problematic as UBIUK only accepts online transfers or CHAPS payments.

Blower, explains: “Most online banking providers have a payment limit of between £10,000 to £30,000 per day.  So, someone wanting to fund £85,000 will need to either go in to a branch or call telephone banking to get them to transfer or do it via CHAPS and pay the fee [around £25] where they can do it for free by faster payments.

“None of these are ideal and make it more difficult to sign up to. We’ve had savers contact us to say they’ve given up because they have found the process too difficult, while others have been put off by the online journey. It’s made them question whether their money is safe with them”

There’s no access to your cash during the one-year period. Customers can select if they want the funds to go back to the original account, to renew or are given the option to choose closer to the time by sending instructions 15 days before maturity.

Once the application has been successfully submitted, customers have 30 days to deposit funds or the account will be closed. Funds received after 30 days won’t be added and will be returned instead.

Editor’s view

I decided to set up an account to see what the application process was like having been told some savers found it difficult; they hadn’t passed the ID checks so were asked to self-certify or send in their documents; or were asked to input the long number from passports, including chevrons when using this as a form of ID.

I had also emailed the bank three times to no avail, and tweeted it, but had no response. I did manage to get through on the phone fairly quickly where a lady was able to answer my questions.

Overall, I thought the process was smooth, though I did have to do it twice as my previous session expired. I was a little nervous about adding my bank details as I wasn’t entirely sure if it would pull the funds immediately.

However, I received an email confirmation which stated I had 30 days to add funds from the nominated account which put my mind at ease.

The only thing I’m not so sure of is just how long this 3.2% rate will be available as the website has been updated this afternoon with a message to customers, which to me, suggests it may be reduced from tomorrow.

The banner read: “Please Note ** ‘Dear Valued Customer, we are currently reviewing Interest Rates offered on all our Deposit products. New rates will be applicable with effect from tomorrow 12/08/2022 @ 00.01 AM. We request you to kindly check and reconfirm the rates before submitting your application’.”

Blower adds he thinks the high rate is “actually a mistake by them”.

He says: “There is no need to price so far above existing competitors and I expect they will see high inflows, because the rates are so high compared to the rest of the market – particularly on one- and two-year deals which are the most popular terms.

“Therefore, I’d be surprised if they don’t pull back by the end of this week or start of next week. I can’t see the one-year rate being beaten this year so it will be attractive to many savers – but I expect it will be painful to get it for many.

“We’ve already had reports that the website couldn’t be accessed when they launched, and subsequently complaints from savers about how difficult the UK site is to navigate to find the rates, get the right link to apply and then how hard the application is to complete.”

Related: Should you open a fixed savings account as rates rise?

The fixed rate bonds with a cooling off period (great if a better deal comes along)

Warning as more people could pay tax on savings for the first time.