Savers who want to donate to the Poppy Appeal but haven’t yet done so can help make a difference with their deposits, but the returns for doing so have plummeted in recent years.
Britain’s second-largest building society Coventry has launched the latest version of its Poppy Bond, which sees 0.15 per cent of all money saved into it donated to the Royal British Legion at the end of the year.
Both regular and tax-free versions of the fixed-rate bonds are available and require savers to tie up their money until 2023.
However, the interest rate it pays, 0.85 per cent, is the lowest it has ever been since This is Money began tracking the building society’s bond six yeas ago.
Coventry Building Society’s Poppy Bond has slumped since it was launched the three-year bond in 2014
When it was first launched as a three-year bond in November 2014 it paid 2.4 per cent, meaning the rate has fallen nearly two-thirds in the last six years. And it is half what Coventry paid last year, a rate which was already the second lowest on record.
It means the rate on the Poppy Bond is lower than it was in 2016, when the building society paid 1.25 per cent as savings rates fell in the aftermath of the Brexit vote and the Bank of England’s decision to cut interest rates.
The falling rate of return is not just a case of the building society short-changing savers, however.
This is Money has used the bond as a useful barometer of the state of the savings market, with it paying close to the three-year average since 2016.
It paid an above average rate in the two years beforehand, although has not troubled the top of the best buy tables since the first year it was launched as a three-year fixed-rate bond, when it paid just 0.1 percentage points less than the best available account.
Between last Remembrance Day and this one, the average rate paid on a three-year fixed-rate bond has fallen from 1.52 per cent to 0.87 per cent and the average paid on a tax-free account of the same term length from 1.42 per cent to 0.8 per cent.
|Year||Coventry Building Society’s Poppy Bond rate||Top three-year fixed-rate bond rate||Average three-year fixed-rate bond rate|
|2018||2.1% (Five-year fixed-rate)||2.4%||1.85%|
|Source: Coventry Building Society/Moneyfacts|
Savings rates have fallen dramatically since this time last year due to the coronavirus pandemic and the Bank of England cutting its base rate to an all-time low of 0.1 per cent, squeezing banks and building societies’ margins and the rates they pay to savers as a result.
Access to cheap Bank of England money and reduced demand for lending during the shutdown of the economy and the housing market also hit demand for lending, meaning banks had less of a need to pay savers decent interest rates on their deposits.
Savers can still beat the Poppy Bond if they shop around, with the best three-year fixed-rate bond paying 1.41 per cent and the best tax-free version paying 1 per cent.
The Remembrance Sunday service at the Cenotaph, in Whitehall, London. Attendance was limited to a handful of veterans due to the coronavirus pandemic. Some 10,000 usually attend
However some may still wish to sign up if they feel their savings will help make a difference, especially in a year when the Royal British Legion has warned its fundraising has slumped this year due to the coronavirus pandemic seeing in-person collections cancelled for the first time in its 99-year history.
The charity said around a quarter of its 40,000 collectors had already not taken part this year, largely due to the fact many volunteers were older and more vulnerable to the coronavirus.
Captain Sir Tom Moore backstage at the Royal British Legion’s Festival of Remembrance at The Royal Albert Hall
The Remembrance Sunday service at the Cenotaph in London was also affected by the pandemic, with only a handful of veterans and senior politicians permitted to attend this year.
Instead the charity has urged people to donate online or over the phone, with celebrities including boxer Anthony Joshua and Captain Tom Moore urging people to buy a poppy.