Hinckley & Rugby Building Society.
Local councils looking for a safe place to build up their reserve fund have, until now, found their options severely limited. Even now though, with several banks and building societies offering savings accounts for local councils, there are often various restrictions to navigate when sourcing the ideal account to meet the council’s needs.
Typical restrictions include complex account-opening processes – often requiring multiple documents in support of the application – and the need for multiple signatures for withdrawals (even when into the council’s own bank account), as well as high initial deposits. In addition, many banks only offer a savings account to councils that have a current account with them, further limiting the available choices.
For many banks, a local council savings account is a bolted-on option – more of an afterthought than a specially designed account – which perhaps explains why a local council’s unique requirements are not always catered for. In contrast, new accounts offered by some building societies are more tailored to those requirements, making an account much easier to set up and manage.
From an ethical point of view, too, building societies and local councils have shared values, providing for a more synergistic relationship. This is because building societies are owned by their members, not shareholders, and put profits back into the very communities that councils represent. Smaller building societies, in particular, tend to have their roots firmly in the community, sponsoring and supporting local charities and community groups. Saving with a building society, therefore, can be the more-appealing option.
One very important consideration, is how safe the council’s invested funds are. With a UK bank or building society, the Financial Services Compensation Scheme protects a small local authority’s deposited funds up to £85,000. Eligible councils are those with an annual budget of up to EUR500,000 (about £420,000).
Other types of investment, on the other hand, can come with an element of risk and major withdrawal restrictions, making them unsuitable for managing the ‘working’ savings of public funds.
Of course, for larger organisations, the FSCS protection limit may not cover the entirety of their reserve fund, which is one good reason to spread their funds across more than one savings provider. Another good reason is that interest rates, account terms and benefits can be fluid. Having more than one account enables the council to move money around and take advantage of the most favourable terms at the time, whilst maintaining optimal access and flexibility.
When it comes to the choice of account, the primary consideration will likely be the council’s savings strategy and how potential accounts meet that strategy. Each type of account offers a different balance of benefits, each designed to meet a specific requirement. That might be the need for instant access to deal with emergencies, or for planned access to pay for calendar events where a separate emergency fund exists – or a balance of the two.
The ideal is perhaps a choice of instant access and higher-interest notice accounts, with a reasonable initial deposit requirement, a simple set-up process, streamlined withdrawals, and multiple ways to manage funds with no fees. That may sound like a utopia, but specialist providers like Hinckley & Rugby Building Society have tailored their local council offering to meet that ideal.
Whatever the council’s savings strategy, it is important to shop around and regularly compare available accounts. Different accounts come with different restrictions, and they can change, which is another good reason to shop around and compare accounts at least annually.
Switching can be perceived as complicated, whereas the reality is simple and straightforward, and the benefits could outweigh the minimal effort by a considerable degree. The important thing is to choose an account or accounts that provide the ideal balance of benefits.
For details of Hinckley & Rugby’s range of savings accounts for local councils, please visit hrbs.co.uk/new-local-council-accounts