Bank offers thousands of pounds of 'upfront' interest
Santander, the Spanish-owned bank, has launched a three-year bond in which investors will be paid the interest in a lump sum within days of taking out the bond. Usually interest is paid in monthly or annual installments as a bond matures.
The Santander deal means that anyone who invests the minimum amount of £10,000 in the bond will receive an interest payment of £833 within days. A saver paying the maximum amount of £2 million into the bond will receive payment of £166,720 just days later.
A bond is effectively a long-term loan between two parties which is repaid on a fixed date and at a fixed rate of interest.
The bank said that the bond, which launched yesterday and has a compound annual interest rate of 3.4 per cent, is perfect for anyone wanting a cash payment in time for Christmas.
Conditions stipulate that savers must have a Santander current account for the interest to be paid into. People who take out the so-called Upfront Interest Bond will also be unable to touch the original money that they invest for three years.
Mr Hall said: “We have approached our new savings bond from a completely fresh angle. It is the first savings bond which pays interest upfront, instead of monthly or annual installments. It is designed to give customers more control over their money at a time when we know they really need it.”
The bank spokesman said that such a deal had not been offered in the UK before.