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Mon 20 Dec 2010 11:12 AM

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National Bonds to penalize short-term savers in new pay plan

New savers face up to 60% cut in profits from 2011 under revised payment scheme

National Bonds to penalize short-term savers in new pay plan
PROFIT CUT: Under a new payment plan, Tier I investors will receive just 40 percent of the bonds annual profit

Thousands
of UAE National Bonds savers face a huge cut in their profits next year, after
the company announced a new calculation method, effective from January 1.

Under
a new scheme unveiled by the state-backed company, investors will receive “weightings” – related to the length of
their savings – which will determine how much annual profit they receive.

Currently,
all the company’s 590,000 savers receive an equal annual profit, declared
early in the New Year.  Over the past three
years, this has totalled 16.64%.

However,
the weightings system means that from next year, savers who have invested for
less than three months will be declared “Tier 1” investors, and receive just
40% of the annual profit.  Tier 2 savers,
those with the company between 3-6 months will receive 60% of the annual
profit, and Tier 3 savers – between six and nine months – will get 80%.

Only
Tier 4 investors – those who have been with the company for over a year – will receive
the full profit declared.

In
statement, National Bonds Corporation said: “This step comes in line with our ongoing strategy
and commitment towards creating a saving culture and encouraging savings as a
solid, low risk investment option, in the UAE and across the region.

"This change
supports our objective to better reward the loyalty and commitment of our
customers.”

The
move means that thousands of new savers will now receives less than half the
profit from previous years. Last year the company cleared an annual profit
share of 3.54% for all customer.

However, if repeated through 2011, it would
mean many short term investors receiving around 1.42% for their savings – far
less than many standard bank account savings rates.

Established in 2006, The Investment Corporation of Dubai holds 50%
ownership in National Bonds Corporation. Each of its local shareholders - comprising Dubai
Bank, Dubai Holding and Emaar Properties - hold 16.6% ownership respectively.
Total sales last year topped $1.08bn.

 

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gypsy 9 years ago

Wonder why they didn't do this in the first place.. an annualised rate is what all deposits pay at the end of the day. It's customers choice whether he/she would want to invest.