Current rates hit new high

The current account war hotted up last week with the launch of two products from Abbey and Alliance & Leicester, which pay the highest interest rates around for those with balances in credit.

The Abbey account is paying 6 per cent for the first 12 months for those who switch to the bank via its account transfer service and who pay in £1,000 a month.

But the 6 per cent is only paid on balances up to £1,000 and any amounts above this will receive 2.5 per cent. Account holders will also have to wait before receiving the full 6 per cent - the bank will pay 2.5 per cent in interest monthly and the remaining 3.5 per cent will be credited at the end of the year. At this point, the interest rate reverts to 2.5 per cent on the whole balance.

Alliance & Leicester's new current account, Premier Direct, is available from tomorrow and requires a minimum investment of £500 a month. It pays interest of 5 per cent until 31 December 2006 for the first £2,500 invested and will revert to one per cent below the Bank of England base rate thereafter.

'Although the headline rate is higher on the Abbey account, our figures indicate that over a relatively short period - two years - customers with a £1,500 constant balance are better off with the Alliance & Leicester account,' said Stuart Glendinning, of Moneysupermarket.com. 'And that ignores the massive benefit that Alliance & Leicester offers in terms of its new authorised overdraft rate of 5.9 per cent, which is 0 per cent for the first year.'

Unhappy tippers

The stereotypical image of Britons as polite, formal and wishing to avoid a scene at all costs has been given a boost by findings from First Direct, which show that almost half of all adults in the country feel obliged to leave a tip even after bad service.

The biggest tippers, as well as those most likely to tip for poor service, are people in London and Scotland, while those in the Midlands are tightest when it comes to tipping. However, it's the Welsh who are the least likely to tip when they are unhappy with the service.

On average, we spend £54.50 a year rewarding service but as a nation we're not as generous in restaurants as we might like to think - the average tip left is just 8 per cent of the bill.

Bad time to retire

Those reaching retirement who have been contributing into a with-profits pension fund can expect their retirement pot to have fallen by up to 40 per cent compared with if they had retired three years ago.

The survey, by Investment, Life & Pensions Moneyfacts, shows that in July 2002 a male retiring at 65 who had contributed to his with-profits fund for 20 years would have accumulated an average of £98,450. The same man retiring today would be looking at £61,578.

A £100 monthly investment over five years into a with-profits fund would have seen a total pension pot of less than the £6,000 invested with Abbey, AXA, Clerical Medical and Scottish Life, said Moneyfacts.

Investors with unit-linked pension funds have fared much better. In July 2003, all the unit-linked pensions surveyed by Moneyfacts were worth less than the total contributions paid in after five years. But since then a recovery in stock markets means that the average five-year return has risen 32 per cent.

Borrow as you buy

The Post Office last week added to its array of financial products by launching a 'two in one' credit card and personal loan.

The card has an introductory rate of 0 per cent for the first six months on purchases and balance transfers, which then reverts to 14.9 per cent.

For any purchases made on the card of between £500 and £2,000 there is the option of transferring these into a loan-like facility attached to the card, which has an APR of 6.8 per cent. Card users will have a month from purchase of the goods to transfer this part of the balance to the loan pot and will then have a year to pay off this part of the balance. They can use the card-to-loan-pot transfer facility twice a year.