A quick guide to regular savings accounts
Some of the better rates available on cash savings at the moment come with the regular savers linked to bank current accounts, although there are also regular savings accounts paying decent rates that don’t require you to switch banks. If you can afford to put away a regular amount each month for a year, up to the maximum allowed (typically £250-£500 a month), you could turbocharge the interest on your cash savings pot.
How do regular savings accounts work?
You save into the regular saver account each month for a year, typically, and then receive your interest at the end of the term. There may be conditions attached. If the regular saver is a sweetener to get you to switch banks, you’ll probably need to open a current account using the bank’s switching service. There may be stipulations such as getting your salary paid into the account, and having a minimum number of direct debits going out each month. Then there may be rules attached to the regular saver, such as having to pay in a minimum or set amount each month. If you miss a payment or pay less than required, you could forfeit your interest. You can’t usually make withdrawals once you’ve started paying in, so in that sense a regular saver is similar to a fixed-rate bond (read our guide to these here). When the fixed term is up, your regular saver will usually be automatically converted into a standard savings account on a much worse rate, so this could be a good time to look for a better deal.
Katie Brain, consumer banking expert at research and ratings provider Defaqto, says regular savings accounts look attractive compared to mainstream savings products even though rates have fallen.
“Regular savings accounts have historically offered better rates than standard accounts to attract regular deposits, but unfortunately the rates have dropped significantly in recent months leaving savers with fewer options.
“To make the most of your savings, it’s worth shopping around and seeing if you are eligible for a better rate at your local building society.” While a number of building societies offer deals which are available to savers nationwide, some decent ones are only accessible through local branches.
Where are the best deals for regular savings accounts?
Here are a few of the best bank-account linked and standalone regular savers available, but remember that deals and rates change rapidly so do your own research.
- HBSC pays 2.75% AER if you save £25-£250 a month (so a maximum of £3,000) on its 12-month regular saver, but you have to also have an HSBC current account. The bank is currently offering a switching bonus of £175 to move to its current account.
- First Direct pays 2.75% AER on £25-£300 a month (total maximum £3,600) but you need a First Direct current, which luckily comes with a £100 switching bonus and consistently top-rated customer service. First Direct is owned by HSBC so the FSCS’s £85,000 savings protection is shared by both banks as they count as one financial institution. This means if you saved £85,000 with each, only one lot would be covered by the scheme.
- Coventry Building Society pays 2.5% AER on its Regular Saver and you can add money as often as you like, up to £500 a month for a year (£6,000 max). Any withdrawals are subject to a charge worth 30 days’ interest. The account is open to all.
- Principality Building Society pays 2% AER on its 1 Year Regular Saver Bond, if you save up to £500 a month for a year (£6,000 max). You can make multiple monthly deposits but no withdrawals. You can close it early but you would forfeit your interest.