The Savings Guru: Sylvia Morris says that notice accounts are lesser-known way to get a top rate
For savers seeking to squeeze every last drop of interest from their nest egg, there’s a new place to look.
Normally, the best rates are on easy-access or fixed-rate accounts. But, for the first time I can remember, lesser-known notice accounts top the charts.
These are like easy-access accounts in that they pay a variable rate of interest.
But the key difference is that you must give your provider warning if you intend to make a withdrawal.
They are regarded as a halfway house between easy-access and fixed-rate deals as you cannot access your money whenever you wish, but it is not locked up for a full term of a year or more.
You need to be organised to use them as they often ask for between 30 and 90 days’ warning of withdrawals.
Before using them, you should make sure there is enough in your easy-access account to cover emergencies and planned spending.
You can earn as much as 5.4 per cent on the top-paying notice account — from Vanquis Bank and offered on deposits of a minimum of £1,000. You need to give 90 days’ notice to get your money back.
In contrast the top one-year fixed-rate bond pays 5.15 per cent on a minimum £5,000 at Investec Bank. The top easy-access account is 5.1 per cent from Close Brothers — and you need at least £10,000 in your account to earn it.
Notice accounts, once a mainstay of bank and building societies’ savings ranges, were overtaken by easy-access deals. Now they are offered by a few building societies and new banks.
Monument Bank and West Bromwich Building Society pay 5.25 pc with 60 days’ warning. Investec Bank also pays 5.25 per cent but with a 90-day notice period.
Also worth a look are those from Shawbrook bank at 5.14 per cent for 45 days’, Charter Savings Bank at 5.15 per cent on 95 days and Kent Reliance at 5.13 per cent on 60 days.
Providers warn they can withdraw the accounts from sale at any time — and will if they suddenly become popular.
Watch out for the terms and conditions. You can’t usually get your money back at once even if you are happy to pay a fee — you have to sit out the notice period.
And with West Bromwich you need to be very organised. You can make as many withdrawals as you like but can only have one notice period on the go at a time. You must wait for the current notice period to end before the next.
West Bromwich has launched a tax-free cash Isa version of its account at a lower rate of 5.06 pc. Unlike its non-Isa version, you can get your hands on your account immediately — Isa rules say providers must allow this. But you will pay a charge equal to 60 days’ interest — £8.30 for each £1,000.
It joins a small handful of providers, which offer notice cash Isas so you can enjoy top rates and earn tax-free interest.
Furness BS offers 5.01 per cent on 90 days’ notice. Chorley BS pays 5.05 per cent but with 150 days’ notice to make a withdrawal. Aldermore Bank asks for 30 days’ notice and pays a far lower 4.5 per cent.
Variable-rate accounts, including both notice and easy-access types, pay more in general than fixed-rate bonds due to differences in the way they are priced.
Fixed-rate bonds have tumbled over the past few months as providers have priced in the fact that interest rates are expected to fall from their current level of 5.25 per cent.
Variable-rate accounts tend to reflect what is happening to interest rates in close to real time. They have not fallen as steeply as fixed-rate accounts so far — but are likely to do so as soon as the Bank of England cuts the base rate.
> Check the best savings rates in our tables compiled by Sylvia and This is Money
NS&I slashes ‘green’ bond rate yet again
National Savings & Investments (NS&I) is culling the rate on its Green Savings Bond.
The eco bond now pays 2.95 per cent fixed for three years. It is the second cut in two months from the high of 5.7 per cent last summer.
The new version will pay £911 interest over three years on £10,000, £321 less than the previous issue at 3.95 per cent and £898 down on the 5.7 per cent last summer.
Worse, it fails to beat the current inflation rate of 4 per cent.
National Savings & Investments is culling the rate on its Green Savings Bond
Money in NS&I’s Green Savings Bonds funds ‘eco’ projects picked by the Government, such as eco-friendly transport and renewable energy projects. You can earn a better 4.6 per cent fixed for three years with Access Bank, DF Capital or Close Brothers Savings.
You need to watch your personal savings allowance if you have a NS&I bond. This gives basic rate payers their first £1,000 interest in ordinary savings accounts each year tax-free, while higher rate payers get a £500 allowance and additional rate taxpayers get none.
All interest earned on your Green Savings Bond over the three years counts towards your allowance in the year the bond matures rather than being spread out over the years.
Coventry’s new triple access acount pays 5.15%
Coventry BS is paying 5.15 per cent on its new Triple Access Saver account. But it only allows three free withdrawals a year, and after that it will charge, which adds up to just over £7 to take out £1,000.
The top rate is only available if you open the account online. Savers who prefer to open an account in a branch have every right to feel peeved. They will get a much lower rate — 4.65 per cent rather than the 5.15 per cent offered to those willing or able to go online.
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