Nationwide Regular Savings Account

It’s perhaps with a heavy heart that I write this blog entry.  It relates to the Nationwide Building Society, a mutual organisation, which in its' 2014 review of the year has the headlines, “Staying true to our mutual heritage”, along with “Delivering value to our savers”.

My issue concerns their Regular Savings Account.  The account advertises a headline rate of up to 2.5%, which in this day and age is a reasonable return.  However on closer examination the interest rate applicable to the account is linked to the amount deposited each month based on the following bands:-

Monthly	Interest rate in month
Deposit	on account balance
£1 - £99	0.10%
£100 - £199	1.35%
£200 - £499	1.85%
£500 - £1,000	2.50%

Initially I had a bit of difficulty understanding exactly how the account worked.  I have provided an example over the year of how the account would be a bad choice compared to other Nationwide Savings accounts on offer if you saved in a certain way.  The interest rates were quoted on their website in June, 2014.

	Regular Savings Account					Other Accounts
	Monthly	Cum.	Rate	Interest		Instant		Limited
						Access		Access
Month 1	500.00	500.00	2.50%	1.04		0.21		0.52
Month 2	99.00	599.00	0.10%	0.05		0.25		0.62
Month 3	99.00	698.00	0.10%	0.06		0.29		0.73
Month 4	99.00	797.00	0.10%	0.07		0.33		0.83
Month 5	99.00	896.00	0.10%	0.07		0.37		0.93
Month 6	99.00	995.00	0.10%	0.08		0.41		1.04
Month 7	99.00	1,094.00	0.10%	0.09		0.46		1.14
Month 8	99.00	1,193.00	0.10%	0.10		0.50		1.24
Month 9	99.00	1,292.00	0.10%	0.11		0.54		1.35
Month 10	99.00	1,391.00	0.10%	0.12		0.58		1.45
Month 11	99.00	1,490.00	0.10%	0.12		0.62		1.55
Month 12	99.00	1,589.00	0.10%	0.13		0.66		1.66
Total Interest				£2.04		£5.22		£13.06

As you can see from the above example if a customer decided to make an initial deposit of £500 in the Regular Savings Account, thus earning the maximum rate of 2.50% for the first month, but then only made a deposit in the following months of £99 which would put them in the 0.10% interest rate band, for the rest of the time they would only earn this rate on the full balance in the account, making total interest earned of £2.04.  This compares with saving in the Instant Access Saver paying 0.50%, earning interest of £5.22, or even better still the Limited Access Saver paying 1.25% earning interest of £13.06, however, this account only pays the rate if you make five or less withdrawals per year, but I presume if you were opening a regular savings account it would be your intention to save and not withdraw.  This example is an extreme one, but could happen.  I just hope the Nationwide being a “modern mutual”, would alert these savers that there are better rates, and, accounts available to them.

It also appears that if you can only afford to save £99 per month after your initial £500 deposit you may be better withdrawing, and, depositing from the regular savings account in alternating months in order to obtain a better return, as it allows unlimited withdrawals.  I could provide an example, but frankly when you have to get into this level of manipulation it seems like it would be something those comparison sites would recommend.  In my humble opinion people just want a fair deal, without having to juggle money left, right, and, centre.  Not everyone has the time and effort to waste on this.  What about the young, or, the elderly, or the people in between who have a real life!

I suppose my moral is fairness.  This account only starts to be fair if you can afford to save more than £100 per month, which at £1,200 a year is a lot of money, and then again there may be better options available for your money either at the Nationwide, or other financial institutions.

It is interesting to note from the “Summary Financial Statement 2014” the remuneration of some of the Directors at the Nationwide as follows:-

Director	Position	Fixed	Target	Maximum
		Pay (£)	Pay (£)	Pay (£)
Graham Beale	Chief Executive	1,349,000	2,312,000	2,749,000
Mark Rennison	Group Finance Director	895,000	1,367,000	1,603,000
Chris Rhodes	Exec Director Group Retail	762,000	1,199,000	1,417,000
Tony Prestridge	Chief operating Officer	742,000	1,162,000	1,372,000

It makes me laugh (if I didn’t laugh I would cry!) the differentiation between target and maximum, with maximum being indicative of truly exceptional performance.  From this I presume target is more reflective of average performance.  Shouldn't target be just a few thousand pounds over the base remuneration, to try and offer an incentive for exceptional performance?  For the Chief Executive the difference between target, and, exceptional is £437k, which is even less after tax, but the difference between fixed, and, target is £963k.  Shouldn't it be the other way?  I wonder if exceptional performance falls in to the category of dreaming up the tiered rate structure on the Regular Savings Account?  I’m only jealous, the salary figures I've quoted are just astronomical to me.

I wonder if any of the Directors save up to a £1,000 per month in the Regular Savings Account?  Perhaps they should publish where they do save so we can be confident they believe in the mutual they are employed by.

Anyway there we have it.  As always please check my facts.  To me fairness should not be the amount you have to save but whether you are prepared to tie your money up for a period of time or to commit to saving regularly, especially true for younger savers, who probably have less money.  Is this account rewarding these people?