Bank on Post Office even after National Savings tie-up ends

WHEN government agency National Savings & Investments ended a 150-year relationship with the Post Office earlier this month there were fears that the future of a vital financial services outlet was under threat.

The Post Office has long been a key component in the UK’s financial services network. It has 11,800 branches – more than all of the UK’s high street banks combined – and 99 per cent of the UK population lives within three miles of a branch.

Most of its products are offered through a partnership with Bank of Ireland, and those products will be unaffected. But the departure of the NS&I brand from our Post Offices, announced at the beginning of November, was a blow for the network and its millions of customers.

The relationship dates back to 1861, with the formation of the Post Office Savings Bank, from which NS&I broke off in 1969. NS&I’s investment and easy access savings accounts will be taken off Post Office shelves on 28 November, leaving premium bonds as the only NS&I product available in branches.

More than 2.5 million people with NS&I savings or investment products will be affected. About 55 per cent of NS&I savings and investment customers who have paid in or withdrawn money over the past year did so through the Post Office.

Jane Platt, chief executive of NS&I, said the end of its relationship with the Post Office came only after the latter had developed its own range of savings products.

“We believe their expert knowledge of NS&I’s savings and investments will help our customers transfer to dealing with NS&I directly and we will work with our colleagues at the Post Office to support our customers through the changes.”

Paul Davies, analyst at consumer group Which?, said: “NS&I is using the modernisation programme to cut costs by 10 per cent, and this is good news for taxpayers. Some customers will miss going into the Post Office to manage their accounts, but most people are happy to deal with their accounts by post, phone or online these days.”

So what financial services and products does the Post Office currently provide?

While NS&I was its best known association, partnerships with several high street banking groups mean that some eight in ten debit card holders can now access their money at the Post Office.

Royal Bank of Scotland became the latest bank to open up accounts to Post Offices in September, when it announced that both personal and business customers would be able to take out money and make balance enquiries at Post Office branches as of the end of that month. It claimed some 19 million RBS, NatWest and Ulster Bank debit card users could benefit from the free arrangement.

Current account customers of Clydesdale, Bank of Scotland, Lloyds TSB, Nationwide, Co-operative Bank and Barclays can all take cash out in Post Offices, although HSBC and Santander customers cannot, with the exception of former Alliance & Leicester account holders.

There are also plans for a link-up with credit unions, under a funding deal announced by the government that would allow credit union customers to access their accounts, savings and other services through Post Offices.

And while the NS&I news came as a disappointment to many people, the Post Office still has a comprehensive range of financial products and services, from savings and loans to mortgages and insurance. Here’s a rundown of what is on offer, aside from NS&I products:

Savings

This is an area of strength for the Post Office, even after the end of the NS&I tie-up. Andrew Hagger, head of communications at Moneynet.co.uk, said: “The Post Office has been very competitive in the savings market during the last couple of years, particularly strong in the fixed rate area – it won the Moneynet award for best fixed rate bond provider for 2011.”

Its inflation-linked bonds have gathered the most column inches of late, due partly to the withdrawal of the popular NS&I index-linked certificates following heavy demand.

The Post Office product pays the retail prices index (RPI) measure of inflation plus 1 per cent gross over five years or 0.25 per cent on top of RPI over three years. Other Post Office savings products regularly appear in the “best buy” tables. With a rate of 3.01 per cent, its online easy access saver compares well with the country’s best deal, the 3.15 per cent account from the Coventry. The Post Office instant access cash Isa pays 2.25 per cent, among the better deals but well short of the best on the market, the 3.05 per cent rate from AA Savings.

The fixed rate cash Isas pay 3.1, 3.6 and 3.7 per cent over one, two and three years respectively, while the taxable fixed rate bonds pay 3.25, 3.75 and 3.76 respectively over the same periods.

The Post Office also launched its junior Isa product on Monday, two weeks after the launch of the government’s replacement for child trust funds.

Credit cards

The Post Office credit card is currently among the more attractive on the market, with 16.9 per cent interest charged and a 0 per cent balance transfer period of 14 months. There is no charge on purchases for the first three months and there is no foreign loading on overseas purchases.

Loans

A price war is under way in the personal loans market, with the likes of M&S Money, Sainsbury’s and the Post Office keeping banks and building societies out of the top of the best-buy charts. Borrowers taking a £5,000 loan from the Post Office over three years would currently get a repayment rate of 8.4 per cent, working out at £156.91 a month. The rate for a £7,500 loan over five years is 7.4 per cent, making monthly repayments of £149.

Mortgages

The Post Office also boasts a wide range of mortgage products, both fixed and tracker, and is never too far away from the best buys, according to Hagger.

Customers can borrow up to 90 per cent loan-to-value over fixed terms of two, three or five years, with an arrangement fee of £995. The 90 per cent loan over two-years – the most popular term – comes with an interest repayment rate of 4.59 per cent, while the Post Office charges 3.4 per cent over the same period for borrowers putting down deposits of 25 per cent.

Insurance

Home, car, pet, travel and life insurance are all available through the Post Office and in most cases in remains among the most competitive players in the market. The various options are too numerous to list here; for more information, visit www.postoffice.co.uk/insurance