Thinking about putting some savings with us? Read on for all the details of our 5% p.a. fixed interest bonds.
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’.
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.
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.
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
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.
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
Article amended 28 January 2019 — Detail added on the difference between Trust bonds and EM bonds.
dozens is a trading name of Project Imagine Ltd, a company registered in England and Wales (No. 11153882). We are authorised by the Financial Conduct Authority as an e-money institution (FRN 900894) and also as an investment firm (FRN 814281). Our registered office is at 1 St Katharine’s Way London E1W 1UN. The card is issued by Wirecard Card Solutions Ltd pursuant to licence by Mastercard International.