Zombie saving accounts
Saving the world
Now that the storms have calmed down I’ve found a new way to lose sleep – zombies. Ever since a letter plopped through my letter box the other day warning me that the interest rate on my late parents’ hard-earned nest egg will plummet to a pitiful 0.5 %, I’ve been haunted by fears of so-called zombie savings accounts where rising prices and falling interest rates nibble away at your savings as efficiently as a daily trip to Costa or Starbucks.
They’re called zombie accounts, apparently, because they allow dopes like me, through a combination of apathy, ignorance and fear, to let their cash aimlessly sleepwalk down the drain, rather than get on its bike and earn its keep like all good decent coppers did in the war.
But what to do? From childhood we have been programmed to save for a rainy day (a quick look out of the window tells me it may well have arrived), not to take risks (does that mean keeping it in a bank whose interest rates don’t match inflation?) and to look after the pennies and the pounds will look after themselves.
Great advice normally, but does it work today when, if you’re not careful, what in the past would be considered good cautious thrift, by simply putting your money away and forgetting about it, can be interpreted as apathy and wilful neglect.
According to Dan Hyde writing in the Telegraph last year, some zombie accounts can cut their interest rates as low as 0.1% meaning a thousand pounds would earn you a princely £1 a year in interest. And if they are right and we are fiddling while our money turns to papier mâché in front of our eyes then what are the alternatives?
I turned for inspiration to Nicola Horlick, the apple-cheeked City Superwoman who held down a city career and a reassuring bob while raising six children, one of whom died aged 12 of leukaemia. Turns out Ms Horlick is back and she means business. She’s about to launch a new venture, Money & Co, on 17 March, based on peer-to-peer lending where savers and entrepreneurs hook up to lend and borrow money from each other without troubling a bank but letting an online intermediary match them up for a cut of the action. It’s a bit like internet dating, without the needy desperation.
To prove her faith in peer-to-peer lending she put her empty wallet where her mouth was and sought the support of peer-to-peer lending company Seedrs to raise the capital for her business.
I’m intrigued. Traditional banks and financial advisers are understandably sniffy about alternative money-raising ventures like crowd-funding and peer-to-peer lending, and not just because they’re taking business away from them. Unlike bank customers, peer-to-peer lenders are not protected by the Financial Services Compensation Scheme (the body that guarantees our bank savings up to £85,000 each no matter what happens to the bank) but from 1 April they will be regulated by the Financial Conduct Authority, which does offer some protection to investors. Some peer-to-peer lenders, like Zopa and Ratesetter, have set up their own internal “safety net” fund, which is designed to protect investors against a monumental collapse and so far so good. Plenty of would-be ventures have failed, but so far no investors have lost their money, and returns for those investing in such schemes seem to hover around the 3-5% mark after fees – which does look attractive at the moment compared with conventional savings accounts.
Looking around for some cool calm facts about peer-to-peer lending I came across this piece in the Guardian, which offers some particularly sensible advice for newbies like me. If you are in the market for a bit of a flutter you could do worse than dip your toe in this particular new well spring – especially as you can start with just a tenner. I’ve lost more down the sofa…