Saving for Christmas – are Christmas savings clubs worth it and how is money protected?

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If you want to save for Christmas there are special accounts offered by everyone from banks and building societies to supermarkets and special Christmas savings clubs. Some pay a much better return than others but – watch out – because your money may not be protected.

Who offers Christmas savings schemes?
There are a number of different providers that offer Christmas savings schemes, including:

– Banks and building societies. As well as ordinary savings accounts, several offer special Christmas savings accounts.

– Supermarkets. Several of the main supermarkets offer them. There’s Tesco Clubcard Christmas Saver and there used to be an Asda Christmas Savings Card. Sainsbury’s doesn’t have a Christmas savings scheme, but says that many of its customers who have a Nectar card use that to save for Christmas spending. The Co-op has a Christmas saving stamp as well.

– Credit unions. Credit unions are often locally run, community based savings organisations. They may pay a special bonus or dividend at Christmas or may pay a set rate of interest. You can find out about credit unions near to you, or that you may be eligible to join, on the ABCUL website (it stands for the Association of British Credit Unions).

– Christmas savings clubs. Farepak, which went bust in 2007, was the best known name (although not for the right reasons), but the biggest company operating in this sector today is called Park. Another provider is called Variety.

– Local shops’ savings schemes. Milkmen, butchers and other local shops may have their own Christmas savings scheme.

– Post Office. Has its own Christmas club.

How Christmas savings clubs work
There are different types of Christmas savings clubs, but the idea behind them is basically the same:

– You save throughout the year. This can be by having an agent take cash from you (an option with savings clubs such as Park and Variety), through online top ups, at the till in your supermarket or at the Post Office.

SAVVY TIP: Agents who sign up friends/neighbours and colleagues can get paid commission. Park pays up to 25% commission (depending on the amount that is saved throughout the year and what the money is spent on).

– Your money is locked away. In most cases you can’t get at your money before a certain time (normally the end of October or November). Some accounts, such as the Post Office Christmas savings account, will let you get access to your money earlier, but you have to pay a £5 admin fee.

– You may earn a bonus. Some accounts pay a bonus. This varies from provider to provider.

SAVVY TIP: You may be paid in vouchers or cash. With some schemes (such as Asda’s), or those run by local high street shops) you have to spend your money in the store. The Post Office Christmas savings card can be used from November onwards in a variety of shops. Credit unions and building societies pay out cash.

Which card pays the most?

Asda’s Christmas Savings Card: You could get an extra £1 if you save £49, £3 if you save £97 and £6 if you save £144. That works out at an equivalent interest rate of 2.04% if you save £49, 3.09% if you save £97 and 4.17% if you save £144. You can only save up to £144 on each card but you can get as many Christmas Savings cards as you like.

When is the bonus paid: Throughout November.

Change given from card? No, if you have money left on the card, you don’t get any change from it.

SAVVY TIP: You can get your Christmas savings card at the Asda till or online. If you order online, you have to pay for delivery. If you lose your card it cannot be replaced. Asda says you should treat it ‘like cash’. You should register your Asda card online so you can get the card cancelled if it’s lost or stolen.

Co-op Christmas Savings Stamp: You can buy the stamps for £1 a time in Co-operative stores. There’s no limit to the amount of stamps you buy. You get an extra £2 for every £48 you save if you redeem them in December. That works out at an equivalent interest rate of 4.17% a year.

When is the bonus paid: Throughout December.

Post Office Christmas Savings Club: You can download an application form for the Christmas Savings Club, but you have to take the form into a Post Office to apply. You can save up to £1,000 with a minimum amount of £2.

When is the bonus paid: There’s no bonus.

Tesco Clubcard Savings Scheme: You can collect your Clubcard vouchers throughout the year and you’ll get £3 if you’ve saved £50 or more. If you save £100 or more, you’ll get £6. That works out the equivalent of 6% interest over a year.

When is the bonus paid? In November.

What happens if you lose your card?
Tesco’s Christmas savings club is run through its Clubcard, so it has a record of how much you’ve saved. With Asda’s scheme, there’s no central database unless you register your card. If you lose a savings card that’s not been registered, you’ve lost the money you’ve saved on it.

Beware – your money may not be protected
Unlike bank and building society savings, money that’s in a Christmas savings club or scheme isn’t automatically protected by the Financial Services Compensation Scheme – it will depend on who the provider is. However, your money may be protected, to a lesser extent, elsewhere:

– Banks, building societies and credit unions. These are protected by the Financial Services Compensation Scheme. This means that up to £75,000 of your savings are protected with each bank/building society or credit union.

SAVVY TIP: The rules are slightly more complicated than that because some banks are owned by others and, if they share the same banking licence, there’s one compensation limit of £85,000 per person between them, rather than for each bank/brand.

– Christmas savings clubs. There is a Christmas Prepayment Association, which has a code of conduct that states that customers’ money must be kept in a trustee account (i.e. ringfenced). It’s not set up by the government or the Financial Conduct Authority, but 50% of its trustees are independent. The problem is that not all schemes have to sign up to it.

SAVVY TIP: Park and Variety are members, as is the Post Office, although the money is actually protected by a different scheme.

– The Post Office. The Post Office scheme is offered by the Bank of Ireland, which means that money in its Christmas savings scheme is protected by the Irish deposit protection scheme, up to a limit of €100,000.

SAVVY TIP: If you use your Post Office Christmas club money to buy a ‘One4All’ gift card, your money isn’t protected by the Irish deposit protection scheme in the same way, although your money is placed in a ring fenced account at the Bank of Ireland.

– Supermarkets. Generally, your money isn’t ringfenced or protected in any way. Although it’s highly unlikely that these companies would go bust, they’re not obliged to keep your money separate. However, the Co-operative supermarket Christmas savings club keep smoney in a separate, ring-fenced trust account. Should Co-op go bust, this money will be used to pay savers in its Christmas savings scheme.

– Local shops. There may be no protection of your money so if the shop goes bust you may not get all your money back. Even if the shop is financially sound, it’s worth checking what happens if you lose your card/savings book.

Related articles:

Complaining to the Financial Ombudsman Service

Understanding the Financial Services Compensation Scheme

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