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The Post Office says the simple pricing structure of Homephone will save customers 12 per cent compared with BT's Together Option 1 tariff, and says other households could save 20 per cent on their current bill.
Chris Williams, telecoms analyst at comparison services website Uswitch.com, said the company might be in with a chance - but only for average users. For medium (seven to nine calls a day) or heavy users (10 to 15 calls), Homephone comes way down Uswitch's tables.
Further advantages of the service include a single bill for both call charges and line rental; no minimum call charges or connection fees; per-second billing, a 10 per cent discount off 10 favourite numbers, plus free five-minute calls to loved ones on birthdays and at Christmas. Quarterly itemised bills will show the names of people who have been called, not just their numbers. Customers will also receive savings and rewards on other Post Office products and services, including savings or cashback on travel, car and home insurance, plus 25 per cent off selected Post Shop products, such as cards and stationery.
Williams says: 'Their offering is competitive, with a simple tariff combining low call rates and no hidden charges with a single bill including line rental and calls. However, higher phone users may not find this product competitive, and could be better off on a plan that offers free calls in exchange for a fixed monthly fee. Regular international callers are also advised to shop around for suppliers offering cheaper pence per minute rates.'
Travel money
In 2001 the Post Office became the first outlet to offer 0 per cent commission on foreign currency, and is now the UK's market leader, with a 26 per cent share. Twenty one currencies can be bought immediately in branches, and a further 34 can be ordered. The Post Office is also Britain's largest seller of Moneygrams, a fast and secure way to send money abroad.
Loans
In March, the Bank of Ireland deal (see above) saw Post Office branches offering loans. At a typical 6.9 per cent for £5,000 borrowed for five years, the loan is reasonably competitive, and has useful features such as the opportunity to take a payment holiday, and no penalties for early repayment.
Savings
The PO brought back saving stamps in August after scrapping them 40 years ago. The stamps, which cost £5 each, can be used as payment for any of the 170 services the Post Office provides, including bill payments and licences. They cannot be turned into cash because of rules against money laundering.
Last month, [October] the Post Office introduced its first fixed-rate savings product, going head-to-head with National Savings and Investments, whose products it also sells.
The Post Office's own one-year growth bond pays 5 per cent gross (4 per cent after tax) or 4.5 per cent gross (3.6 per cent after tax) over six months. While the bond is not the top payer for larger amounts (Saga pays 5.26 per cent gross on sums of £500 to savers aged 50 plus, according to data provider Moneyfacts, while the Progressive building society pays 5.4 per cent on £1,000), the Post Office is one of the few providers that will let you invest in a fixed-rate bond with as little as £100. It also beats NS&I's one-year fixed-rate bond, also on sale through the Post Office, which pays just 4.15 (3.32 per cent) on a minimum of £500.
Investments
The Post Office is selling two guaranteed equity bonds. The two-year bond offers 75 per cent participation in the rise in the FTSE 100, and the five-year bond offers 100 per cent participation. This compares unfavourably with National Savings' last GEB, now closed, which offered a return of 105 per cent of any rise in the FTSE 100. But the NS&I's last product was for a full five years only, and the minimum investment was £1,000, whereas the Post Office's product can be bought for just £500. NS&I will launch a new issue this year.
Insurance
Also on offer is a range of insurance products, including motor, home and travel insurance. The Post Office claims that its motor insurance is cheaper for three out of four customers, and that it will offer cover in 99 per cent of cases.
Home insurance was launched on November 1, with cover picked from a panel of 14 insurers. The Post Office guarantees no cherry-picking of customers and claims it will cover 98 per cent of applicants, including those who have been flooded (homeowners in Carlisle take note).
To come
Still to come this year are an equity based child trust fund (details coming out tomorrow), a credit card and mortgages.
Banking services
Customers of Barclays, Lloyds TSB, Alliance & Leicester, Co-operative Bank, Smile, Cahoot or First Direct (in Scotland), can use Post Office branches to pay in and withdraw money from their accounts. The latest banks to join the scheme are Bank of Ireland and Clydesdale, which will go some way to address the issue of bank access in Scotland, where branch closures have hit remote communities particularly hard. A further 12 banks and building societies offer 'basic bank accounts' via the Post Office.
If you simply want cash, it will pay you to queue up and take money out over the counter rather than use the cash machine in the corner, as about 70 per cent of cash machines in PO branches, most of which are operated by Alliance and Leicester, now impose a fee.
If you don't have a bank branch near you, paying in through the Post Office could be a life saver, though you might have to wait a day or two longer for a cheque to clear, because it has to be transmitted on a further stage. Cash is credited instantly.
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