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Barclays Open Plan
Formerly an inspiration from the Woolwich, it was said when Barclays took them over that a big part of the reason was that those who claim to be fluent in finance were impressed by this financial model.
Well, they liked it so much they bought the company. And a couple of years on we were faced with a saturation level advertising campaign to bring the concept to the people. Promising savings of billions for the nation! So, as the adverts do not actually tell us, what exactly is Open Plan?
Well, it is a simple concept. You tell Barclays how much you want in your current account. As a minimum and maximum. If you drop below the minimum, it will sweep money out of your savings account to ensure you do not go overdrawn and get clobbered for charges.
Should you exceed the maximum in your current account, it will sweep these funds in to your savings account to allow you to earn a higher rate of interest on it. The only disadvantage is that Barclays current account rate is 0.1% and the savings rates vary between 0.4% and 2.95% gross, and you need £50,000 for that "top" return!
Given that places like Intelligent Finance, Cahoot and Halifax can murder these rates, the Open Plan option for the non-borrowing customer is, to be frank, poor value. Assuming average balances of £3,000 across a year, you can expect to be £30 a year better off simply by lumping all your money in to an IF current account and not messing about with the complexities of Open Plan and its sweeping system. What is a little more interesting is using Open Plan with a mortgage. You can effectively have your mortgage account, savings and current account linked together to offset the interest charged on your mortgage. So, if you had a £75,000 mortgage and £5,000 in combined current account and savings account balance, you would only be charged interest on £70,000 of your mortgage. Or, to put it another way, you would be earning the mortgage rate on your savings, but because of the clever way the plan is put together, you have no tax liability on the interest earned! This makes Open Plan (like Intelligent Finance) a product combination to consider for anybody who has a mortgage, savings and income tax liability. It is particularly good value for higher rate taxpayers.
So, what are the interest rates on the mortgage element of things? Well, it is a lifetime tracker deal guaranteeing 0.75% above Barclays own base rate. Now, assuming Barclays match the Bank Of England base rate (which they have done for many years), this gives you a very competitive borrowing rate of 4.50% variable, compared to a typical mortgage rate with Abbey National of 5.85%! In addition, the mortgage element is flexible and allows lump sum repayments as well as regular overpayments. Because interest is calculated daily, you get interest savings immediately for this! Open Plan will also give you a guaranteed overdraft option if you link in your mortgage and, if used, this overdraft is charged at the mortgage rate only! You are restricted, however, to mortgage and overdraft not exceeding 90% of the orignal value of your property.
How does it compare to other products available? Well, from my knowledge of the industry, it is the only offset product available on the high street. That said, Nat West and Royal Bank Of Scotland offer an all in one account that works on a similar basis. Ignoring service issues (as I have not shopped these places), the Open Plan deal is better from a rate point of view and better from a money management point of view as it keeps your accounts clearly separate. If the high street is no draw for you though, I feel that Intelligent Finance offer a better product range than Open Plan and also allow you to offset loans and credit cards too. Their rates are generally better, although the lifetime tracker guarantee of Open Plan is something IF do not give.
For those who do not hold a mortgage, I can genuinely see no benefit in Open Plan. It has poor rates and the sweep facility is rigid in the way it works.
Will it save the nation £billions? I doubt it. While the scenarios they give in the advertising are real enough, they assume that people will retain the same level of savings, or be able to overpay their mortgage for years on end. The reality, as we all know, is that we have children, need holidays and new cars and simply cannot commit in the way the perfect model suggests!
So, if you like the lifetime tracker guarantee on the mortgage, are a higher rate taxpayer and hold some savings as well as a willingness to have Barclays operate your current account, Open Plan will probably be perfect for you. If you want a fixed rate mortgage, they will not let you offset! If you don't have the savings, borrow elsewhere!
If you like the concept and can cope without the lifetime tracker guarantee, higher rate taxpayers with savings should choose Intelligent Finance for the wider range of products you can offset, combined with better rates on savings, current accounts, loans and credit cards.
Personally, I will simply keep a close eye on where my mortgage lives (currently Halifax at 3.74%, but regularly reviewed), ensure my savings have a high rate and good access (4.0% online, but 3.2% after the taxman bites) and keep a branch based current account (3.04%) to give me the right to talk to a real person face to face just in case anything goes wrong! Open Plan is not for me.
More information on Open Plan can be obtained form Barclays.co.uk; Intelligent Finance (home of mixed dooyoo reviews) is at IF.com and Halifax, who I currently love (but in banking, I have learned the passion of a new relationship can easily turn sour given time) are at Halifax.co.uk with Howard and his friends. New friends recently too!
I've had an Openplan for Years with the Woolwich, and it has been brilliant, but now Barclays heve taken over the Woolwich completely, it has become a nightmare to maintain. In fact Barclays have been useless since the merger, and I don't think I will be staying with them much longer, as they have downgraded our other accounts too, which we are very unhappy about indeed..........Roy......
Ratchev 06.03.2004 01:40
brilliant review, i am not happy with the open plan at all . pt
helencbradshaw 20.05.2003 22:46
I just moved mortgage, savings, current account, the lot, from Halifax to Open Plan. The reason, I got hacked off with getting charged lots of money if I inadvertently went over my OD limit, when I had money in fou savingsaccounts with Halifax. That said, the transfer to Open Plan has been far from smooth, and they didnt transfer all my DD's as promised, now leaving us with the painstaking task of doing it ourselves. I am keeping an open mind on the overall concept though, and intend to write about them in the future, when I have banked with them for a few months or more. Helen