Many of our clients will have a General Investment Account, Individual Savings Account or Pension Account on the popular wrap platform Ascentric.
This blog post describes some upcoming changes to the Cash Account within these various Ascentric tax wrappers.
Back in July 2012, the Bank of England launched their Funding for Lending Scheme.
This enabled banks to borrow money at cheaper than market rates with the aim of incentivising them to lend more freely in order to stimulate the economy.
The consequence of this Funding for Lending Scheme was that banks no longer needed to offer beneficial rates in order to attract deposits and it led to an overall decrease in the interest rates available to savers.
Since Funding for Lending was introduced, the number of banks offering preferential terms have become extremely limited, with a number of banks even refusing to accept client deposits or indeed charging for holding deposits.
As a result, Ascentric has been forced to reduce the interest rates it pays on its Cash Accounts.
These interest rates are tiered, so investors receive a different interest rate on each band of cash held on the platform.
With effect from 1st November 2013, the interest rates are being reduced to 0.05% for £0 to £49,999, 0.10% for £50,000 to £149,999, 0.15% for £150,000 to £249,999 and 0.4% for £250,000+.
The impact of the Funding for Lending Scheme also means that Ascentric will be reducing the number of institutions with which they place cash deposits.
As things stand, Ascentric place the money with a minimum of eight different banks, which gives clients the maximum degree of protection should a bank fail.
From 1st November, the number of deposit takers used to place client money in the Cash Account will be reduced to a minimum of four.
These banks will continue to be covered by the Financial Services Compensation Scheme (FSCS), providing clients with retail deposits protection of up to £85,000 per person per institution in the unlikely event of a bank failure.
If you have any questions about these changes, please do speak with your Financial Planner at Informed Choice.
