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High interest cash accounts for SMSFs
In my last blog post, I mentioned that with the rising interest rates and low inflation, cash is becoming an attractive investment option especially when compared to the increasingly volatile stock market. I started my search for good high interest savings accounts and term deposits and noticed that some of the highest yielding accounts were not from the familiar big 4 banks but from banks with names that I was not familiar with like Ubank, MeBank, Raboplus, ING etc. While I wanted high interest, I also wanted the safety of the Australian government guarantee on my money and I was not sure which ones provided it. I was very fortunate that my search was simplified when my friend Alice told me about Ubank last Friday. I found out a few interesting facts when I checked out the Ubank website over the weekend which I thought may be of interest to other retail investors and SMSF trustees.
Firstly, in case you do not already know (like me), Ubank is backed by the National Australia Bank (NAB) which is one of the big 4 banks. Ubank was launched by NAB in October 2008 to cater to customers who prefer self-service. I must admit I much prefer to do my banking using the web rather than go into a branch, especially when banks are trying so hard to get their staff to cross-sell products or get customer satisfaction feedback all the time. When I last went into a branch to deposit a cheque, I felt “hassled” by all the well meaning bank staff and their supervisors who wanted to know what I planned to do with the money, if I wanted to buy insurance, and wanted me to rate their customer service, etc. Sorry for the digression but I bet many of you can relate with that. The main points I am trying to make here are:
- Ubank is pretty safe as it is part of a large AA rated Australian bank where deposits are covered by the Australian government guarantee
- Ubank is suitable for people who are comfortable with internet banking
The next thing I liked about the Ubank website is that they provide a Compare our rates page which provides an up-to-date comparison of their products with their competitors. Sure you can get comparative information at other sites such as Infochoice.com.au but if you want a quick comparison all in one page, this is a great resource. I also like banks who are transparent and are not afraid to show how they stack up against their competitors, even when some of their competitors may have better products than them in some categories. For example, I could see that Bankwest has a higher 12 month term deposit rate compared to Ubank. At least I know they are keeping an eye on their competitors and hence will strive to remain competitive. In fact, they have just come up with a rate assurance offer on their USaver product to match their main competitors’ rates.
Finally, I just wanted to point out that Ubank currently offers a 24 month term deposit which pays 6.26% of interest p.a. that is only available to Self Managed Super Funds. This is the highest rate that I have seen so far and I am considering locking in some of our SMSF funds at this attractive rate. The RBA may raise rates further but sometimes it is good not to be too greedy. So far Australia is the only country to start raising rates while most others have opted to keep their rates low, so I am not sure how much longer rates will continue to go up. I am glad we locked in a 4.99% three year fixed rate on our mortgage in 2008 even when the RBA was busy slashing rates then. For those SMSF trustees interested in this product, check out the Ubank’s Self Managed Super Term Deposit page on their website.
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Hi Christina, I have read a couple of your blogs which are quite insightful. Reading your blog re U Bank, I have had a deposit with U Bank for some time now. U Bank seems to operate as a low cost, no frills investment arm as part of the NAB group structure. As far as I know invested deposits with U Bank are not guaranteed by NAB.
You should also look into investments with the larger credit unions and building societies. Some of these groups have been trading for up to 100 years and have sizable value and receivable assets from consumer mortgages. They also are worthy contenders for investors
Hi Ivone,
Ubank is a division of NAB and is covered by the government guarantee. More info on this can be found on the Customer Help Page on their website. From what I read about the government guarantee, credit unions and building societies are also covered by the govt guarantee as long as they are eligible authorised deposit-taking institutions (ADI).
Ubank only lets a SMSF open an account if it has only 2 directors which seems rather strange. Our son is with us in our SMSF so we have 3 directors and they would not accept us!
Hi Kim,
That does sound strange, perhaps it is just a system limitation. Have you tried calling them? The call centre people are quite helpful.
Hi Christina, yeah they said it’s their policy which in my opinion is rather odd. What’s the difference between how many directors an SMSF has?