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Customers of AJ Bell’s investing app Dodl can now earn table-topping Isa interest on cash.
Dodl is offering 5.09 per cent interest* on cash held in its app to customers with an investment Isa or Lifetime Isa.
While Dodl does not offer cash Isas or cash Lifetime Isas, the 5.09 per cent interest rate will be paid on any money customers hold as cash that is not invested.
Customers will receive the interest into their Isa or Lifetime Isa accounts as a cash payment each quarter.
AJ Bell says the move is part of a drive to shift cash savers to investing. The interest on cash balances is available to new and existing customers of Dodl.
Best of both worlds? AJ Bell’s Dodl is paying customers 5.09% interest on any cash not invested in an investment Isa or Lifetime Isa
Dodl launched in 2022 and is much newer than the main AJ Bell platform, so it has a smaller customer base.
It is now looking to reel in new customers who have large cash balances which they are not yet investing.
Among consumers with £10,000 or more of assets they can invest, 9.7million UK adults held the majority or all of this in cash in 2022, according to the Financial Conduct Authority.
Of these, 4.2million UK adults said they had some appetite to take risk when investing. It is this group which Dodl is looking to tap into.
Is the Dodl interest rate any good?
When it comes to rival cash Isa savings rates, Dodl’s* 5.09 per cent is close to table-topping Plum’s cash Isa* which pays 5.17 per cent interest.
This is Money’s Simon Lambert prefers Chip’s cash Isa* at 5.1 per cent over Plum, as it is a flexible Isa that can help you beat easy access savings tax. Meanwhile, Zopa offers a 5.08 per cent cash Isa.
Dodl’s offer isn’t a cash Isa though and instead pays interest on money held in its stocks and shares Isa or Lifetime Isa accounts. Dodl customers obviously also have the option to invest money held in the stock market, which is not the case with other savings accounts.
With a Lifetime Isa you can save up to £4,000 each tax year and get a 25 per cent Government bonus.
Dodl’s* 5.09 per cent interest rate beats the current best cash Lifetime Isa, which is offered by Moneybox and pays a rate of 5 per cent.
The Moneybox Lifetime Isa rate includes a 1 per cent fixed bonus for the first year, and the underlying rate is 4 per cent.
There is no such time limit on the Dodl deal, but it is a variable rate that will change in relation to the Bank of England base rate.
The base rate is expected to fall soon, with pundits predicting the first cut to come in August or September, so savers could see the Dodl rate falling.
AJ Bell managing director, Charlie Musson, said: ‘By offering a leading rate of interest on cash deposits on the Dodl app, we’re giving customers the flexibility to save and invest in one place.
‘For beginner investors it gives them the opportunity to build up cash savings and start investing when they feel ready.’
Is Dodl FSCS protected?
Any money held with Dodl is protected under the Financial Services Compensation Scheme.
The FSCS protects customers’ money up to a value of £85,000 in the event the firm fails.
Funds in Dodl’s investment Isa or Lifetime are held in 13 partner bank accounts. These are:
- Bank of Scotland
- Barclays
- Santander UK
- Lloyds Bank, Corporate Markets
- Close Brothers
- Virgin Money
- Investec Bank
- Lloyds Bank
- Royal Bank of Scotland
- HSBC Bank
- Qatar National Bank
- Cater Allen Limited
- NatWest Markets
It is not unusual for firms who are not banks or building societies to lean on other institutions for FSCS cover.
AJ Bell’s Dodl app leans on these 13 banks for its FSCS protection. Customers’ money is pooled and distributed across 13 banks, with a maximum 35 per cent placed with any one bank.
Three of the 13 banks – Close Brothers, Investec Bank and Virgin Money – have a 15 per cent limit, with the rest having a 35 per cent limit.
Savers need to be aware that there is not a separate coverage limit for customers’ money protected under the FSCS. A customer will not know when opening a Dodl which of the 13 banks will be used for FSCS protection of their funds.
That means that if a customer put £20,000 in a Dodl Isa and it is placed in Barclays, and that saver already has more than £65,000 with Barclays direct, the amount over this will be unprotected.
A customer would need more than £240,000 in cash with AJ Bell to have any chance of reaching the £85,000 limit with any of the banks due to money in Dodl alone – due to the maximum limit of 35 per cent of the money being placed with any one bank.
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