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Our 5% bonds – Everything you want to know.

Thinking about putting some savings with us? Read on for all the details of our 5% p.a. fixed interest bonds.

5%… Sounds too good to be true right?

When you first hear it, it sounds impossible. It’s understandable to feel that way. Since 2008 interest rates in the UK have been stuck at historic lows. In fact, if you’re under thirty years old, it’s likely you’ve never known interest rates over 1%.

There was a time however, not so long ago, when 5% p.a. used to be the accepted ‘risk-free rate’, i.e. you could buy some of the safest bonds like the US Government’s Treasuries at 5%. So, as part of our mission to make saving easier and more rewarding for everyone we set out to develop financial products that make high interest more accessible.

At dozens, we are always thinking about two types of people – those struggling to save (people on the journey from Spender to Saver), and those who already have a chunk of savings but are looking for the best options for it (people on the journey from Saver to Investor). Within the app structure, the Save section, along with Track, is the one that tries to help people save through the use of budgeting, smart rules such as ‘save for a holiday every time it rains in London’, etc.

This is also the section where we want to reward people once they have managed to save. When we are a bank, we will do this through FSCS protected savings accounts where, in a challenge to the banking status quo, we will pass on the majority of the earnings from people’s savings back to them. But as we are not a bank yet, we have had to think innovatively about how to incentivise a new generation of savers in the meantime – without exposing them to risk.

As soon as the word ‘risk’ is shown alongside a financial product it is an immediate barrier for many (and quite rightly so for many early stage savers). To address this entry barrier, we wanted to create a product that was risk-free, liquid and offered high interest – almost like a secure cash back for saving, rather than for spending as most other financial service providers seem to offer. And here we have it, our 5% p.a. fixed interest ‘Trust bonds’.

The ‘Trust bonds’

Found in the ‘Save’ section of our app, the 5% p.a. fixed interest ‘Trust bonds’ are our first proprietary financial product, designed to bear practically no risk. With this bond dozens deposits the money invested plus the promised interest, into a separate trustee controlled account (where we can no longer touch it).

How are we able to do this? By simply treating the 5% as a cost of building an entire offering around savers. Why? Because we believe in the importance of having a high interest product for people who are just starting to save and experience interest, which is why we’re willing to fund this product from the revenues earned from our other products.

What are the details of the Trust bonds?

  • Our 5% p.a. fixed interest Trust bonds last 12 months and the interest is paid monthly. As the interest rate is fixed, it will not fluctuate in different market conditions.
  • With the Trust bonds you can start earning interest with as little as £100 by buying one bond. And anything above that needs to be a multiple of £100.
  • Should you wish to take your money out before the 12 months are up, you can sell your bonds to us at any time. You will receive all your money back, and the interest you’ve already been paid won’t be affected. For example, if you bought £1000 of bonds on 1 January and on 15 April you need the money, you can sell back your bonds, get all your money back and keep the interest from Jan to March that you’ve already been paid. You won’t receive interest for April as you did not complete the whole month.
    For logistical reasons, we will require you sell back all of your bonds from a single issuance. It cannot be a fraction of what you purchased. For example, during that bond issuance you purchased 10 bonds – £1000 worth – but now you need £200. You cannot just sell 2 bonds to us, you must sell all 10 bonds back to us at once. You will be selling the listed bonds to our holding company Project Imagine Ltd.
  • At the moment we have not set a maximum for how much you can save, however there are some practical restrictions on how many bonds you can buy at one time.
    We have earmarked funds for issuing at least £1m of our ‘Trust bonds’. Most likely we will be doing issuances in tranches of £100,000 so we cannot sell more than we have each time.
    Also, we want to ensure this £100k worth of a 5% p.a. fixed interest and the accompanying protection, can be enjoyed by as many people as possible. So, at the end of the booking period we will rank subscriptions starting with the smallest value being given highest priority. As subscription sizes increase, they will be placed further down the priority list, finishing with the largest value subscription being lowest priority. For two or more bids of the same value, the bids that came in earliest will be higher priority.
    Any subscriptions past the priority cut off point of that issuance will be unsuccessful. The success, or not, of your application in any previous programme does not have any bearing on future applications.
    So what this effectively means is that for each issuance, we don’t set the maximum amounts, our customers do, i.e. for a £100,000 issuance, if you subscribed for the full £100,000 and there was no other subscriptions, your bid would be successful.
  • The bonds are listed on NEX, have proper documentation governing their sale and are ISA eligible. When setting up, you have the option to choose between an Individual Savings Account (ISA) or a General Investment Account (GIA). You can open a new ISA with us if you haven’t already opened a stocks & shares ISA with another provider in the same tax year. In time you will be able to transfer an existing ISA to us. Note that we can’t provide you with tax advice, as everyone’s tax status is unique to them and depends upon your individual circumstances. Please also note that your tax status and tax treatment of products may change over time.
  • You are covered by the Financial Services Compensation Scheme for up to £50,000 for our misselling or default, as is standard with all investment products (not to be confused with your non-bond cash savings balance with us which has £85k FSCS protection). In practice we don’t believe you will need to rely on the 50k FSCS protection as with the Trust bonds your full investment money and interest is held separately for you in the trustee-controlled account.

The ‘Emerging Market bonds’

Remember we said we also think about the Saver to Investor journey. So, while the Trust bonds will be limited in issuance volumes and will remain targeted at small savers, we are also working on a similar bond with no issuance restrictions, but a higher minimum investment size, for the Invest section of the app. Let’s call these the ‘Emerging Market (EM) bonds’.

These ‘EM bonds’ will be offered to those who are able to bear higher risk and have larger amounts to invest. Just like we are looking to give anyone with £100 saved a return on their savings through access to a product they don’t usually get, we also want to offer a return to the people who have saved up £10k plus and currently aren’t getting the same returns as those with £1m+. That’s why we’ve come up with a structure where we purchase high interest bonds at larger amounts and create new smaller, more accessible bonds, with their own NEX listing and security. In this way we give you access to absolute-return seeking investment opportunities usually only available to those with £1m+.

This section is only accessible after a customer has completed a suitability assessment to determine their knowledge, experience and financial security to ensure we’re acting responsibly and only offering financial products suitable to them. We are working through final details on these and will release more details about these investment bonds in the coming weeks.

Meanwhile, there are already 16 thematic strategies on our Invest shelf for anyone with the appropriate risk appetite, liquidity and more than £1,000 to invest.

So why has no one else done this before?

Well, there’s the fact that most banks are very traditional financial institutions with rigid product silos that make it extremely hard to innovate financially. Even the newer fintechs, while they are able to innovate on the tech, are still not motivated enough to solve the financial problem. Whether old or new, they are all relying on your debt for their profit. So they tend to innovate on things to do with spending and credit rather than savings.

And to be honest – it’s bloody hard. It’s taken an incredible amount of hard work from the team and is not something a business would do unless it truly cared about financial equitability and innovation.

Why do we do it? Because financial institutions make a huge amount of money from your deposits, and we think it’s time you were offered a fair return.

If you’re interested in knowing more about the current financial system and what we think needs to change, check out our #Questionyourbank series

So how do I buy bonds?

Our Trust bonds will be available first and will be found in the Save section of our app. At the moment our app is going through its final tests. Download the app and complete the signup process to get in the queue.

You may also want to check out this blog post that tells you what to expect from the sign up process.

There must be a catch, somewhere in the smallprint?

Nope. No smallprint. It’s all here.

Please do shout if you have any niggling queries. Not only will we be happy to help but it will help us make this article the most informative it can be

@wearedozens on twitter, instagram or facebook. Email hello@dozens.com
Or chat to us and other dozens customers over in our community.




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Article amended 28 January 2019 — Detail added on the difference between Trust bonds and EM bonds.

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