Is the new NatWest 3% regular saver account worth it? | moneyfacts.co.uk

Michelle Monck

Michelle Monck

Consumer Finance Expert
Published: 07/10/2020

NatWest has launched a Digital Regular Saver account that pays 3.00% gross. The headline interest rate is appealing when compared to the rates of HSBC and first direct, which offer 2.75% on their regular savings offerings. The Digital Regular Saver account also offers the flexibility of no withdrawal restrictions and the ability to change your regular payment. But is the account all it seems and is it the best way to earn the maximum amount of interest? We explore this and compare it with other regular savings accounts currently available.


NatWest, like many high street bank banks, restricts its top rate regular savings account to those holding a current account with them. Savers can pay in up to £50 each month. Once savers have more than £1,000 in this account, they should transfer any excess to another account as it will only earn 0.01%. With a maximum £50 paid into the account each month for 12 months, savers will earn £9.88 in interest in the first 12 months, equivalent to an interest rate of 1.64% if £600 was invested as a lump sum. After this, a £1,000 balance would generate over £30 in interest each year.

However, the Digital Regular Saver account is a variable rate account, and this means NatWest could drop the rates at any time. Michelle Monck, personal finance expert at Moneyfacts.co.uk, explains further:
“Savers need to make sure they stay on top of savings accounts that offer variable rates, as the lender can reduce the rate at any time. This account also requires savers to have a NatWest current account and this could be a ‘teaser rate’ to generate new bank and savings accounts. We have seen that drastic interest rate reductions do happen, with National Savings & Investments (NS&I) recently announcing that it is cutting rates from 1.16% to 0.01% for example.”
The first direct, HSBC and M&S Bank regular saver accounts all offer a fixed rate of 2.75% for their current account customers, and while this is lower than the rate from NatWest, they do allow larger monthly contributions of between £25 to £250 for the HSBC and M&S Bank accounts and £300 for the first direct product. In addition, having a fixed rate means that the interest rate will not change during the 12-month term. At the end of 12 months, the maximum balance this account can reach is £3,000 for the HSBC and M&S Bank accounts and £3,600 for the first direct account and the interest earned would be approximately £44.69 for the HSBC and M&S Bank accounts and £53.63 for the first direct account. This is equivalent to an interest rate of 1.50%. These accounts are not as flexible as the NatWest Digital Regular Saver as they do not allow withdrawals, but the monthly payment may be changed.

Michelle Monck continues:
“The NatWest Digital Regular Saver does offer the best rate of return pound for pound when compared to the other high street bank regular savings accounts. The low maximum balance makes the overall earning potential very small, so those that want to save regularly and get the absolute best rates could open this account, followed by a slightly lower-paying regular saver to maximise rates and the monthly allowances.”

There are other banks and building societies that offer regular savings accounts; for example, Cambridge Building Society offers a Loyalty Regular Saver that pays 3.00% fixed for 12 months. However, this is restricted to members of the building society that have held a mortgage or savings account with Cambridge Building Society for at least 12 months. Principality Building Society also has a regular saver – the Learner Earner paying 2.35% – but savers need to also open a children’s Learner Earner to qualify.

A regular saver account is a good way to start building an emergency savings fund. Savers need to make sure that if the account they choose does not allow withdrawals, they are comfortable with this restriction. An easy access savings account is an alternative for savers starting a savings pot and usually these have fewer restrictions when accessing funds. Right now, (excluding the account from NS&I that is reducing its rate next month) Newcastle Building Society has the top easy access rate of 1.05% for its Triple Access Saver and there are no requirements to hold another account with the society to open this account.

Find the best savings accounts

Find out more about how to manage your savings account in our guide or compare the latest savings rates using our charts.

Disclaimer

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.

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