Regular Savings Rates Fall | moneyfacts.co.uk

Derin Clark

Derin Clark

Online Reporter
Published: 06/05/2020

Six months on from when the last 5% fixed term regular savings account was available and rates within the regular savings chart have continued to fall, with Coventry Building Society the latest provider to cut its 2.50% deal to 1.85%.

Today, the top rate in the regular savings chart stands at 2.75% from first direct. Although this deal might look more attractive compared to the top rate available in the easy access savings chart, which stands at 1.20% from RCI Bank, savers should be aware that interest on regular savings accounts are calculated differently to other savings accounts. As such, if savers were to make regular deposits of £250 into a regular savings account to accumulate a pot of £3,000 over the 12-month period, then they would earn £45.07 in interest, which is very different to £82.50 that would be earned on a lump sum of £3,000 over a year at 2.75%. Saying this, if someone invested £3,000 into the top easy access account paying 1.20%, they would earn £36 over the 12-month period.

Although more interest can be earned with a regular savings account than an easy access savings account, savers should also keep in mind that regular savings accounts usually require regular payments being made into the account on a monthly basis, as well as restricting withdrawals. As such, savers need to consider if they would rather earn less interest to gain more flexibility over their money.

In addition to this, savers considering a regular savings account should also be aware that many of the top rates in the chart are on accounts with opening restrictions. A full list of the regular savings accounts currently available, along with opening restriction information, can be found on our regular savings accounts chart.

Commenting on the fall in regular savings rates, Rachel Springall, finance expert at Moneyfacts.co.uk said: “It is clear to see that fixed term regular savings accounts are not immune to the rate cuts seen since the Bank of England made two cuts to the base rate in light of the Coronavirus pandemic. This means that any saver sitting on the fence would be wise to decide sooner rather than later to take advantage of the top deals.

“Six months have passed since the top 5% fixed term regular savings account was cut by M&S Bank and just today, Coventry Building Society has reduced its 2.50% rate down to 1.85%. This will be disappointing news for savers comparing the top rates, as unlike the Coventry Building Society deal that is open to everyone, many of the top deals require savers to open a current account to allow them access to the regular savings account (Bank of Scotland, first direct, HSBC, Lloyd’s Bank, M&S Bank).

“Fixed term regular savings accounts are a good choice for consumers who want a strict savings plan, as they will usually need to meet a minimum monthly deposit requirement, but they could also be denied access to their cash during the term unless they close the account and will typically be paid a reduced amount of interest.

“An easy access account could be a better choice for savers who want peace of mind and are prepared to earn a little less interest in exchange. Challenger banks are offering the top returns within the easy access market, with RCI Bank UK paying 1.20% gross and in the past month Shawbrook Bank and Ford Money have entered the top 10, paying 1.15% and 1.07% respectively. All three deals can be opened and managed online too, ideal for consumers looking to open an account during the lockdown.

“Whatever savers decide to do with their money to save towards a specific goal, it is vital they make sure to check the terms and conditions of an account, keep up with regular deposits and refrain from dipping into their savings pot unless absolutely necessary.”

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