Since Plum was launched in 2017, we’ve been busy building our money-saving and investing app into a holistic money management solution.
Sometimes we do that with small incremental gains, as we gradually develop and refine features over time… But it’s always exciting when there’s a brand-new product for us to shout about!
With the launch of Plum Interest, we want to get the lowdown on what it is and why it’s important. So, who better than Product Lead, Jess Williams, to tell us all about it? She was responsible for shipping this new feature to our customers, so let’s find out more…
What is Plum Interest?
Plum Interest is a relatively low-risk investment known as a Money Market Fund that currently pays a yield of up to 5.15%* VAR in the UK (5.00% VAR for non-Premium subscribers).
By investing, customers put their money into a diversified mix of cash-like assets, like short-term loans backed by the government or credit notes (see ‘What are the benefits of Plum Interest?’ section below).
The fund earns interest because those debts are repaid with interest that tracks the Bank of England base rate. It then passes a share of that interest on to investors. This is why Plum Interest will often deliver better returns than you might expect to receive in a current account from a high-street bank.
*Variable Annual Rate projection correct as of 20/11/23. The projected return is shown after fees (net). A projection is not a reliable indicator of future performance. Plum Interest in an Investment Product. Returns are not guaranteed. Your capital is at risk if you invest. Plum is not a bank.
Why is Plum Interest important to you?
“The introduction of this new product is a big deal because it addresses one of the most significant problems we want to solve for our customers. That is, the fact many high-street banks aren’t passing interest on to them, and instead are choosing to keep a cut for themselves.
At Plum, we want to help all our customers get the best rate available.
However, as things stand, even some of the most competitive savings accounts are still lagging behind the Bank of England rate.
And worse still, the biggest high-street banks are paying significantly less interest for their current accounts versus the Bank of England base.
This means customers could be losing out on interest totalling £1,000s.
The issue is that for the past decade banking interest rates have been sub-1%. So one common way for consumers to try and grow their wealth has been by investing in some combination of funds, company stocks and bonds.
For the first time in many years, interest rates have risen significantly. This could present a new opportunity for people looking to earn a competitive return on their cash, in a relatively low-risk way.
We're looking forward to launching Plum Interest for all our customers in the UK and across Europe.”
Plum Interest in an Investment Product. Plum is not a bank. Capital at risk. The value of investments can go down as well as up. The content relates to a product offered by Plum in the UK.
What are the benefits of Plum Interest?
The main benefit of Plum Interest is that it aims to track the Bank of England base rate. So it’ll typically yield a higher return than you might expect to receive in a current account from a high-street bank. And it should still be competitive versus some easy-access savings account interest rates.
It can be considered to contain low-risk investments because it only includes robust companies and governments.
In addition, only short-term assets are selected (gilts, cash deposits), reducing uncertainty and increasing stability. The shorter the time the bond debt is, the lower the risk that something could go wrong in the interim.
Finally, holding your money in an MMF is more diversified than having all your holdings at one bank. Given that the Financial Services Compensation Scheme (FSCS) only protects individuals up to a maximum of £85,000 per banking group, this could be worth considering for individuals holding a large balance, for a temporary period.
What are the fees for Plum Interest?
If you contribute money by adding it to your Plum Interest Pocket, you’ll be charged a yearly fee, based on the daily balance that you hold in the fund.
For Premium subscribers, this annual fee is just 0.10%, because we waive our usual 0.15% service charge, but for all other customers this total annual fee is 0.25%.
The remaining 0.10%, which all customers pay (including Premium subscribers), is the fund management fee for BlackRock. The fund value is automatically updated to reflect BlackRock’s fee, so you won’t see it as a separate charge.
Where applicable, Plum’s service charge fee is collected from your Primary Pocket on the first day of each calendar month.
Learn more about fees for investing with Plum.
How can I use Plum Interest?
There are no subscription fees for Plum Interest. It’s available to all customers using the Basic (free) version of the Plum app.
First, you need to download and install the app on your phone. And once you’ve created your account you can get started by tapping on the Plum Interest tile, from the ‘Save’ section of the app.
You can then add money into your Plum Interest Pocket to earn a bank-beating return that’s backed by the Government.
If you decide to withdraw your money, we’ll arrange an investment sell order on your behalf that executes at 9:30 a.m. (UK time) on the first available working day (so orders placed before this time will execute the same day).
Your capital is at risk if you invest and you could lose money.
Plum is regulated by the Financial Conduct Authority (FCA).
You shouldn’t invest or use any financial product unless you understand its nature and your exposure to risk. If you choose to invest you should be satisfied your investment strategy is suitable for you and your circumstances. Conduct your own due diligence, or consult a licensed financial advisor or broker before making an investment decision. Plum Interest is an Investment Product. Plum is not a bank. This content relates to a Plum UK product.Download Plum