Savings rates are still nothing to write home about, despite all non-ISA rates rising this month, with inflation likely to wipe out any real return. One exception to this is regular savings accounts, with top rates available that can still beat inflation. However, to get the highest rate deals, our research shows that you'd need to switch your current account.
Certain regular savings accounts require you to be a current account customer first, which means switching if you don't already happen to be with the right provider. While this may seem like quite the hassle, an interest rate of 5% might just be worth it.
As you can see in the table below, there are several providers that offer a rate of 5% to their loyal customers, which is quite a bit above the inflation level of 2.9% recorded in May. One aspect that might put people off regular savers though, regardless of the rate or provider, is the low investment limit that comes with them, with that 5% letting people earn from £82 to £165 per year.
|Provider ||Interest gross||Product||Max inv total||Rate type||Interest earned |
on max inv
|Best linked regular savers* - one-year term||first direct||5.00%||Regular Saver||£3,600||Fixed||£99|
|Nationwide BS||5.00%||Flexclusive Regular Saver||£6,000||Variable||£165|
|Best non-linked regular savers - one-year term||Saffron BS||3.50%||Regular Saver||£2,400||Fixed||£46|
|Kent Reliance||3.00%||Regular Savings||£6,000||Variable||£98|
|Virgin Money||2.25%||Regular E-Saver||£3,500||Fixed||£49|
|*Linked = Existing relationship, current account customer. 5% also on offer from alternative providers.|
This limitation is even more pronounced in the unrestricted regular savings market, where people don't need a linked current account to open a regular saver. While Saffron BS pays the highest current rate of 3.5%, customers can earn more money with Kent Reliance, who despite its lower 3% rate allows up to £98 to be earned in interest thanks to its higher maximum investment limit. Of course, "these are [both] outstanding returns when considering the average easy access account pays 0.39%," says Rachel Springall, finance expert at moneyfacts.co.uk.
If you've got a large savings pot, your only recourse, if you don't want to risk your money in a stocks & shares ISA, would be to take out multiple regular savings accounts. However, there are some other restrictions to take into account with these, as Rachel explains: "The flaw to regular savers is that they are not designed for taking out cash, as you can get penalised for doing so, which is why some people prefer to use easy access accounts."
Rachel goes on to say that "Eligible first-time buyers saving for a deposit would be wise to seek out a Help to Buy ISA or Lifetime ISA to get a 25% bonus from the government, which can help them reach their desired deposit more quickly.
"It's never too late to start saving towards a specific goal. If consumers take some time to arrange a regular deposit straight out of their bank account, it will remove the fuss of making separate monthly deposits and effortlessly build a decent nest egg over a year."
To see exactly how much you'll gain by putting a certain amount of money away each month for a certain amount of time, you can use our monthly savings plan calculator.
Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.