Derin Clark

Derin Clark

Online Reporter
Published: 05/11/2019

With average saving rates falling throughout 2019, this has not been the best year for savers, but having a savings pot is still an important way for consumers to achieve financial security particularly during these times of economic uncertainty.

To help savers make the most of their savings accounts, here we take a look at the different types of accounts available and which accounts suit different types of savers.

Saving for a first home

With Help to Buy ISAs no longer available to open after 30 November 2019, a Lifetime ISA will be the only way for those saving for a home to get the benefit of a 25% Government bonus. A Lifetime ISA is only available to those aged 18 to 39 years old and allows savers to deposit up to £4,000 each year. The ISA benefits from offering savers tax-free savings, up to a maximum of £4,000 each tax year, along with a 25% bonus each year up to a maximum of £1,000 per year. The money in a Lifetime ISA can be used to buy a first home, otherwise the money must be used to fund retirement and cannot be withdrawn until the saver turns 60 years old or if they are terminally ill with less than 12 months to live. Money can be deposited into the account until the saver turns 50. For more information about saving for a deposit read our guide How to save the deposit for a house or flat

Low-income savers

For those saving on a low income, a Help to Save account could be a good option, but savers should be aware this account can only be opened until September 2023. This account is available to those receiving Work Tax Credit, entitle to Working Tax Credit and receiving Child Tax Credit or those claiming Universal Credit and whose household earned £569.22 or more from paid work in the last monthly assessment period. Help to Save is a Government-backed account that gives savers a bonus, the amount of which depends on how much is saved in the account. Savers who deposit into a Help to Save account will receive a bonus of 50% of the highest balance saved in the account after two years. After a four-year period, savers will get a final bonus if they continue to save into the account. This bonus is 50% of the difference between the highest balanced saved in the first two years and the highest balance saved in the last two years. Savers should be aware that if the highest balance does not increase in the final two years then they will not earn a final bonus. 

Savers are allowed to deposit between £1 to £50 each calendar month and do not need to deposit money every month. Money can be withdrawn from the account into the saver’s bank account and the account closes four years after it was opened, with the saver keeping all the money from the account. Once it is closed, savers cannot reopen it or open another Help to Save account. If the saver chooses, they can close the account before the four years have finished but will not receive the next bonus payment.

Saving for a specific event

Those saving towards a specific event, such as a holiday or Christmas, might find that a regular savings account is a good option. A regular savings account requires savers to deposit money into the account on a regular basis, usually once a month, for a set period of time. When looking at the regular accounts chart, the rates being offered on these accounts can seem high, but it is important to remember that interest is calculated differently to a standard savings account. For more information about this, read our guide on Why do regular savings accounts seem to pay the highest rates?.

Saving for a rainy day

With today’s economic uncertainty and job insecurity, many savers are putting money away each month to prepare for any unexpected events. For these types of savers, a notice account might be a good savings option. A notice account usually offers a higher rate than easy access account, but in return savers have to give a pre-specified notice period before withdrawing money. The notice period can range from less than 30 days to over three months, with the higher rates generally being offered on accounts with longer notice periods. These accounts are ideal for those saving for a rainy day as they offer attractive rates, but will offer savers the ability to access their money. For more information about saving for a rainy day take a look at our guide How to start saving an emergency fund

Commenting on current savings trends, Rachel Springall, finance expert at Moneyfacts.co.uk, said: “Right now savers may want to be cautious with their cash and use either easy access accounts, notice accounts, or short-term bonds, instead of investing over the longer-term. This way they can move their money more freely or know that they only have so many months before getting their cash out of a fixed bond, should they desire.

“One of the easiest and quickest ways to compare savings accounts is to check online. Signing up to alerts and any newsletters is also a good idea to keep on top of changes in the market, and some accounts could be a ‘limited edition’ so don’t wait around too long to apply.

“Savers should get themselves into the habit of reviewing their savings account each quarter, particularly if they earn a variable interest rate. It’s also worthwhile to keep an eye out for any Bank of England base rate announcements, as any rise or fall can impact the rate you earn.”

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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