The Windfall Bond, which offers an exciting opportunity to get an additional return from savings in the era of low interest rates, has been created by the mould-breaking Family Building Society.
It is aimed at the many savers who, faced with low rates, are looking for the possibility of more meaningful returns without taking any extra risks with their capital. The possibility of winning £50,000 in a monthly prize draw brings the chance of significant returns a step closer. The bond also earns a rate of interest, currently 0.5 per cent gross AER, which is linked to the Bank of England bank rate.
Each month everyone who invests in a bond will be entered into a draw for 10 prizes of £1,000, two prizes of £10,000 and one prize of £50,000.
Research by the Family Building Society has shown that savers have an appetite for innovative products which make saving more interesting. This is particularly relevant in the current era of low interest rates where the chance of winning a prize at odds of 64 to one over the course of 12 monthly draws can be very appealing.
Family Building Society Chief Executive, Mark Bogard, said: “Part of our mission at the Society is to try to meet a wide range of financial requirements for people with different circumstances and attitudes.
“We know that certain family costs such as a wedding, a university education or a deposit for a first home for children require lump sums, so we want to offer a possibility of meeting them. We believe it will be fully appreciated as part of some savers’ portfolios. Research through the YouGov Omnibus* in October 2014 showed that given a windfall of £10,000 people’s priorities were taking a holiday (38%), paying off debts (34%) and home improvement (27%). When the sum moved up to £50,000 other goals came into focus with one in four (24%) putting the money towards property purchase and over a third (35%) using it to fund their retirement plans.
People are also pretty realistic about what they will get back from a savings account. When asked what they expected to get back from saving £10,000 for a year in a ‘standard’ savings account (although 27% didn’t know) almost 6 out of 10 (58%) expected £200 or less.
“We showed how innovative we are with our groundbreaking Family Mortgage and we believe the Windfall Bond will be welcomed by savers faced with fairly awful rates as it offers them the practical alternative of a secure investment and the chance to win a cash prize.
“We are also bringing the Windfall Bond to the market at 0.5 % gross AER which our research shows is the mid-point across most of the market, currently.”
The Windfall Bond is available online and through the post. Bonds are set at £10,000 each and may be withdrawn by giving 35 days’ notice. Each bond is given one entry in the prize draw. The interest rate payable is variable and linked to the Bank of England bank rate. When the Bank of England rate changes, the bond rate will be changed accordingly, from the first day of the following month.
Key Windfall Bond product details:
- Variable interest rate linked to the Bank of England bank rate;
- Account requires a deposit of exactly £10,000;
- No additions or partial withdrawals;
- 35 days’ notice required for closure;
- Once given, notice of closure cannot be revoked;
- Each qualifying account is entitled to one entry in relevant prize draw;
- Minimum age at account opening is 18;
- Interest paid annually on the 1st August
- AER stands for Annual Equivalent Rate and illustrates what the annual rate would be if interest was compounded.