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.

Christmas savings clubs

There are a number of different providers that offer Christmas savings clubs or 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 a Tesco Clubcard Christmas Saver and there is 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 (and women), butchers and other local shops may have their own Christmas savings club.

How Christmas savings clubs work

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

1. 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 or at the till in your supermarket.

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

2. 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 may let you get access to your money earlier.

3. 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 or the Co-op’s or those run by local high street shops) you have to spend your money in the store. Credit unions and building societies pay out cash. Other schemes may pay you in gift vouchers.

Supermarket Christmas savings clubs

Several of the big supermarkets offer Christmas savings schemes. They work in a similar way, but some are more generous than others. Do bear in mind that you may have to spend money you’ve saved in a particular supermarket (such as with the Asda and Co-op Christmas savings schemes).

Asda’s Christmas Savings Card

You can pick up an Asda Christmas Savings Card in your local store and you can add to it at the till by rounding up your shopping bill.

What do you get? You can 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: You must have topped up your card by 5pm on 12th November to earn the bonus. The bonus is paid on 13th November.

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

What happens if you lose your card? You must register your card otherwise you’ll lose the money you’ve saved on it if it’s lost or stolen.  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 Co-op Christmas Savings Stamps for £1 a time in Co-operative stores. There’s no limit to the amount of stamps you buy.

What do you get? You get an extra £2 for every £48 you save if you spend them on your shopping in the Co-op December. That works out at an equivalent interest rate of 4.17% a year.

When is the bonus paid: Throughout December.

Is your money protected? There’s no official protection scheme like there is with ordinary bank savings but the Co-op says that any money you have on your stamps  is held in a trustee account (which means it’s kept separate from other money the Co-op may have).

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.

Tesco Clubcard Savings Scheme

You can collect your Tesco Clubcard vouchers throughout the year but you can also top up your Clubcard at the store checkout or at the customer service desk. You have to add a minimum of 50p and the maximum is £360. You’ll get a bonus depending on how much you’ve topped up your Clubcard by.

Do you get interest/a bonus for saving? You’ll get £1.50 if you’ve saved between £25 and £49.50, £3 if you’ve saved £50 – £99.50. If you save £100 – £199.50, you’ll get £6 and £12 if you save £200 – £360. That works out the equivalent of up to 6% interest over a year. You have to spend the money you’ve saved in a Tesco store, Tesco Direct (online) or in a Tesco petrol station.

When is the bonus paid? You must have saved a certain amount by mid October in order to qualify for the bonus, which is paid in November. In 2018, the cut off date is 16th October. Any money added to your Clubcard after that wouldn’t qualify for a bonus.

Is your money protected? There’s no official protection scheme like there is with ordinary bank savings but Tesco says that any top-up money that you pay into the Clubcard Savings Scheme is held in a trustee account (which means it’s kept separate from other money Tesco may have).

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.

Traditional Christmas savings clubs

There are a few specialist companies that run Christmas savings clubs. Variety and Park are the two biggest. Here you pick an amount you want to save every week or month and you save throughout the year until November. You don’t generally get a bonus for saving.

You can redeem the money you’ve saved as gift cards. Both Park and Variety have a wide range of gift cards you can choose from. You may also be able to order food hampers or gifts and toys, depending on the club you’re saving with.

WATCH OUT: Money you have on gift cards isn’t protected by any compensation scheme, so if you have a gift card that’s linked to a particular shop and it goes bust, you may lose all the money on that card.  Both Variety and Park issue Love2Shop gift cards which can be used in a wide range of online and high street stores. Be aware that if you pay for something by a gift card that’s less than the value of the card, you may not get any change.

Are Christmas savings clubs protected if the company goes bust?

It’s worth restating how your money is protected (or not protected) because the rules on this are quite confusing. There’s no single scheme protecting all Christmas savings clubs. Whether your money is protected will depend on the type of Christmas savings club and who provides it. In 2006 the biggest Christmas savings club, Farepak, went bust, leaving thousands of people out of pocket.

Here’s a rundown of how these schemes are protected:

  • Christmas savings accounts provided by banks, building societies and credit unions. These are protected by the Financial Services Compensation Scheme. This means that up to £85,000 of your savings (or £170,000 for a joint account) 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. You can read more about which banks are protected by the UK’s savings compensation scheme in my article.

  • Christmas savings clubs. The 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 Christmas savings clubs don’t have to sign up to it.

SAVVY TIP: Park and Variety are members of the Christmas Prepayment Association.

 

  • Savings schemes run by supermarkets. Supermarket schemes generally ring-fence your money and keep it in a separate account managed by trustees. Should the supermarket go bust, money in the separate account would be used to pay back those who’ve saved.
  • Savings schemes run by 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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