If you have strong feelings on Brexit and how it could affect the pound, then there is a bank account that allows you to express that – and maybe make a tidy profit if you’re proved right.
What is it?
Family Building Society has launched two new fixed-rate bonds to appeal to both Brexiters and Remainers. The bonds pay a guaranteed return of one per cent over two years, plus an additional two per cent bonus if you correctly predict how the pound will perform against the euro at the end of the Brexit negotiations.
“We know that Brexit is an emotive subject for many people. Our innovative Brexit Bond gives savers a clear choice between two products one pays a bonus if the pound falls against the euro, the other if the pound rises,” says Keith Barber, director of business development at the Family Building Society.
What’s the difference between the two bonds?
You can choose either the Brexit Optimist bond or the Brexit Pessimist bond.
The Optimist bond will pay a two per cent bonus it the pound is stronger on 29 March 2019 compared to 28 March 2018.
The Pessimist bond will pay a two per cent bonus if the pound is lower against the euro on 29 March 2019 than it was on 28 March 2017.
Family Building Society is using the Bank of England’s spot exchange rates for the two days and the dates are significant. The 28 March was the day before Article 50 was triggered, beginning the two-year countdown to the UK leaving the European Union, which should take place on 29 March 2019.
So, if you are positive about how Brexit will affect the pound you can open the Optimistic bond and if the pound is stronger in two years’ time, you’ll benefit from a three per cent return on your savings. If it is weaker, you’ll get a one per cent return, still in line with many standard savings accounts over a two-year period but below the rate of a typical Isa.
If you think Brexit will be bad for the pound then the Pessimist bond will pay you three per cent interest if you are right, or one per cent if you are wrong.
You need a large amount of savings to take on this gamble, as the minimum opening deposit is £10,000. If you want to hedge your bets you can open both an Optimist and a Pessimist bond, but that guarantees that one of your accounts will only earn one per cent interest over two years.
If the exchange rate is the same on 29 March as it was two years earlier neither account will pay a bonus.
Once you’ve opened a bond you can’t switch your money into the other one.
“Of course we live in an uncertain world and there are many other things that affect the pound-euro exchange rate, not just Brexit negotiations,” says Barber. “This means that Brexit may not be the dominant factor determining the exchange rate on 29 March 2019.
“Irrespective of how savers voted in the referendum, they now have a further opportunity to express their view of Brexit and how it may benefit their savings.”
Should I open an account?
Probably not. Even if you correctly predict sterling’s movement the account is only a few pounds more profitable than the best standard two-year account.
A standard two-year fix bond from Atom Bank will pay you two per cent – the best rate at the moment. A £10,000 deposit in that account would earn £407 interest.
Depoist the same amount in the right Brexit bond and you would earn £416 interest, but if you chose the wrong account that would plummet to £201.
In addition, the bonus on the Brexit bond isn’t paid until the end of the term, while the Atom Bank bond pays interest annually, allowing for a little bit of compound interest in the second year, hence the small difference between the two.
So, you’d need be to very confident to make that £9 worth it.