The slashing of the time period in which interest rate changes take effect on sharesave schemes will cut the high costs that were hitting administrators over the past year.
The changes, which will come into effect on 29 April 2009 as part of the Finance Bill 2009, mean that the minimum period between the date when a notice with revised sharesave certifications, including interest rates, is issued and the date when the new rates come into force will be reduced to 15 days.
The annual bonus rate review, which usually occurred in about September, will also be scrapped. Bonus rate changes will be linked to three and five year swap rates – if they move by more than 50 basis points over a 20 day moving average the trigger would be breached .
Gill Evans, corporate business manager at Yorkshire Building Society, said: “These changes are very important to our business, particularly in this current environment.”
A change could take 60 days to implement, so one Bank of England rate change might have been announced, then another two announced while an administrator was still putting in the first change. “So we were just way behind. As far as the economics of offering the account goes it was becoming too expensive,” she said.
Evans pointed out that the changes will mean that sharesave participants will get a rate that is more aligned with what is going on in the economy.
See also: Budget 2009: HMRC to specify sharesave bonus rates