Abbey tries first class: Postal service adds to growing competition for savers and investors

ABBEY National is launching its own postal account into a growing market, despite having 700 branches.

Since the Cheltenham & Gloucester Building Society launched the first postal account four years ago, the market has attracted building societies that want to cultivate a national market, despite operating relatively few branches.

The 12-branch Scarborough Building Society, for example, is just about to relaunch its First Post Plus Account, offering rates tiered between 7.75 per cent and 8.15 per cent. Because of lower administration costs, rates on postal accounts are about 2 per cent higher than accounts operated through branches.

The new Abbey National four-tiered postal account pays 5.40 per cent on investments between the minimum of pounds 2,500 and pounds 10,000. This is the same rate as the Abbey's 90-day notice investment account. Investments over pounds 10,000 attract the same return as those given on Abbey's High Yield Bond - from 6.95 to 7.35 per cent. Both rates are higher than its branch- run instant saver account.

A spokeswoman for Abbey played down the bank's interest in the postal account: 'Because we have a pretty broad national spread, we think this will just be an additional service that we offer for the more remote parts of the country or for people who are bedridden, for example. We will be offering it on a direct- mail basis, but it will be open to everyone. There won't be any big push or an advertising campaign. It is only being offered in selected areas as a pilot.'

Despite its muted launch, the Abbey postal account is likely to make a highly competitive market even more so. Eleven building societies now offer postal accounts, giving rates between 6.8 per cent and 8.7 per cent. The Skipton Building Society, for instance, launched its Money Post accounts in July with the aim of offering the top rates in the market.

A Skipton spokesman said: 'The more societies who come in, the higher the rates they will pay. We will definitely be a major player in the market but it is unlikely we will continue to be always at the top of the tree.'

The postal accounts are so popular that societies have sometimes struggled to meet demand. The original launch last October of First Post Plus by the Scarborough reached capacity in two months, rather than the anticipated six months.

The Bristol & West has been suffering from a backlog of several days in processing transactions on its highly popular Balmoral account. But a spokesman said that all withdrawals and deposits are now being processed within 24 hours, although new accounts are still suffering a four-day delay. The subdued launch of the Abbey National account is in keeping with the rather muted publicity that surrounded the Scottish launch of the Skipton account last year.

Although postal account rates have been falling recently, they are still highly competitive compared to other instant access accounts.

A spokeswoman for investment advisers Chase De Vere, says customers are attracted primarily by the rates but also by the convenience of not having to make visits to branches. 'The only query they have is whether it's going to take a week and a half to take money out,' she said. Most of the accounts are supported by a heavily automated back office, which responds immediately to customer instructions.

John Carrier, chief executive of the Scarborough, said postal accounts attract 'people who are financially astute and who don't want to be bothered with going down to the high street'.

----------------------------------------------------------------- HOW POSTAL ACCOUNTS PAY ----------------------------------------------------------------- Society Min Net % Top tier Net % inv (pounds) rate (pounds) rate Birm'ham Midshires 10,000 5.80 100,000 6.34 Bradford & Bingley 1,000 4.90 25,000 5.55 Britannia 2,000 5.85 10,000 6.04 Bristol & West 2,000 6.00 50,000 6.38 Chelsea 2,500 5.33 25,000 6.08 Cheltenham & Glouc 2,500 5.25 25,000 6.00 North of England 2,500 6.15 25,000 6.53 Norwich & P'borough 1,000 5.25 30,000 6.19 Northern Rock 2,000 6.04 20,000 6.40 Scarborough 250 5.10 100,000 6.11 Skipton 2,000 6.26 20,000 6.45 ----------------------------------------------------------------- Rates quoted apply to new investors Source: Chase de Vere (071 404 -5766) -----------------------------------------------------------------

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