Do you want to terminate a building savings scheme but you do not know how to go about it and what to watch out for? In this article you will learn what steps to take when giving notice on a contract, what to watch out for so that you do not lose the state support, and how best to make use of the released funds.
What is a building savings scheme?
A building savings scheme (colloquially "stavebko") is a financial product that combines interest from the building society and state support (since 2024 a maximum of CZK 1,000 per year). It is a long-popular and safe way to preserve and grow money.
A building savings scheme represents low risk, relatively good appreciation, but low liquidity – you have to leave the money in the account for at least 6 years from the establishment of the contract, and once you decide to bring the building savings scheme to an end, the money will reach your account only after 3 months.
Why and when to terminate a building savings scheme?
The reasons for which people most often terminate a building savings scheme include:
- The expiry of the binding period (6 years): People often resort to terminating a building savings scheme after 6 years, that is, after reaching the minimum saving period, with the aim of using the saved-up money – for a renovation, buying a property or for other larger expenses.
- Switching to another financial product: Clients may terminate the scheme in order to move the funds into more profitable investments, such as mutual funds, stocks, or micro-investments in real estate.
- Financial hardship: Unexpected expenses (health problems or job loss) may prompt people to terminate a building savings scheme early.
- Low interest: If the interest or the terms of a building savings scheme cease to be attractive compared with other savings or investment products, some clients decide to terminate the scheme.
- A change in life situation: Divorce, moving house or another significant change can lead to the termination of the contract, for example because of the division of property or a change in priorities.
The decision to terminate a building savings scheme should, however, be well thought out so that unnecessary financial losses do not occur.
What happens if I terminate a building savings scheme before the end of the binding period?
Early termination of a building savings scheme, that is, cancelling a building savings scheme before the end of the binding period, has its specifics, which you should importantly consider.
You will lose all the state support that has been credited and pay a fee to the building society, which can amount to up to 1% of the target amount. In addition, you will lose the advantage of the guaranteed interest agreed upon when signing the contract.
Giving early notice to terminate a building savings scheme is worthwhile only if the financial need outweighs the risks of losses.
How to terminate a building savings scheme step by step?
If you have decided to give notice on a building savings scheme, follow these steps:
- Read your contract again. Look for the section "notice on a building savings contract" and familiarise yourself with what fees or penalties may apply if you terminate the building savings scheme before the end of the binding period.
- Prepare the necessary documents. Fill in the forms and prepare your identity card, the contract number and other supporting materials. If you are not sure how to fill in the forms, look up a building savings notice template online.
- Submit the application. The simplest way to submit an application for notice on a building savings scheme is in person at a branch. You can also cancel it by post, but it is more complicated because of the official verification of your signature. After you fill in at home the notice template that you found on the building society's website, you print it out, and only with an officially verified signature can you send it to the building society's address.
- After the application is delivered, the notice period begins. The length of the notice period for a building savings scheme is 3 months. After it expires, the funds are paid out to you.
Withdrawing money from a building savings scheme
Do you not know how to withdraw a building savings scheme? You need not worry. The payout of a building savings scheme happens automatically after the contract ends. Make sure the building society has your current bank account available.
Some building societies may charge fees for managing or withdrawing funds. Find this out in advance!
What to watch out for?
- The importance of documentation: Make sure you have all the necessary documents filled in correctly.
- Penalties and fees: Find out all the possible costs associated with the early cancellation of a building savings scheme.
- Communication with the building society: Keep informed about the progress and time limits so that no delay occurs.
What next with the money from the building savings scheme?
After giving notice on a building savings scheme you can effectively grow the saved-up amount. Try putting the money in a savings account with higher interest, consider term deposits, invest, or all of these together. Diversification can be the key to the best possible appreciation!
Do you not know how to go about investing? We have put together a simple guide for you: How to start investing
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Conclusion: How to give notice on a building savings scheme and what to watch out for
When deciding on the termination of a building savings scheme, it is important to be clear about the terms of the contract, to weigh the costs and risks of early termination, and to think through how best to handle the released funds. Read how InvestBay works and handle your money safely and in a modern way!
With proper planning and consideration of all the options, you can maximise the return and secure a better financial future for yourself.
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