Earn 4% fixed on your savings and get instant access

There's still hope for savers! We show you an account that offers a great rate AND flexibility.

There’s been more bad news for savers this week: NS&I has announced it is withdrawing index-linked savings certificates because they have proved too popular.

However, there are still some decent savings accounts out there. I’m going to highlight a new account that offers the best of both worlds - a decent rate of interest and great flexibility.

What you need to know

Saffron Building Society - the regional building society serving East Anglia - has just launched the 12 Month Fixed Rate Regular Saver.

This is a fixed rate account, which allows customers to save between £10 and £200 every month for a year. You can vary the amount you save on a month-by-month basis, providing you stay within those parameters.

As an ‘open to anyone’, no catches account it offers a market-leading rate of 4% AER. And unlike most regular savings accounts, you can make withdrawals and miss payments whenever you like, with no financial penalties.

Just bear in mind that the account can only be operated through branches or by post - so it’s no good if you rely on internet banking.

The other proviso is that the balance in the account must stay above £10, or your rate will drop to 0.05% AER. That said, it will rise to 4% AER again as soon as the balance rises above £10.

You can apply for the 12 Month Fixed Rate Regular Saver online, by calling 0800 072 1100, or by visiting a branch of the building society.

The competition: Regular savings

So, the Saffron account is definitely one of the more attractive savings products on the market. But as always, you won’t know if you’ve got a good deal until you’ve sized up the competition.

There are two other regular savings accounts - open to everyone - that also offer 4%. Let’s see how they compare:

The Fixed Rate Monthly Saver (Issue 12) from Santander pays 4% AER for 13 months. And it lets you save a little more than the Saffron account - between £20 and £250 per month.

However, this is not a flexible account. If you deposit less than £20 you will receive a rate of just 0.1% for that month; and if you pay in more than £250, you’ll get that 0.1% rate for the rest of the account’s term.

The Regular Saver Bond (Issue 9) from Principality Building Society also offers 4% AER (for a year), and lets you save between £20 and £500 per month.

But this account offers even less flexibility: Make any withdrawals or miss any payments and your rate will permanently plummet to 0.1%.

If you’re certain you can deal with this commitment, Principality’s offering lets you save a much larger amount of money at that decent rate of interest. However, if you’re not sure when you might need to access your cash, the Saffron account is a much more sensible choice.

The competition: Instant access

In some ways, Saffron’s 12 Month Fixed Rate Regular Saver operates like an instant access account: You can make withdrawals and miss payments whenever you like, and you won’t be penalised.

So, let’s see how it compares with its more traditional instant access rivals:

The account paying the highest rates is the AA’s Internet Extra (Issue 3) Account with a rate of 2.8% AER. You can start saving with just £1.

Saffron’s account requires you to save at least £10 every month; so if you don’t feel you can commit to this, either of these accounts is a sensible alternative.

The other main reason to choose one of these is that they can both be operated online (neither Saffron’s nor Principality’s account can be).

Recent question on this topic

• kanfoosh asks:

  Hi all Are there any savings accounts (ISAs or anything else) that make it difficult for you to withdraw cash quickly? I need it as a disincentive!

  • 
    MikeGG1 answered "Iff you invest in Index-linked certificates from NS&I, the contract would be for 3 or 5 years to..."
  • 
    LoveKat answered "Depending on whether you have a lump sum or want to make contributions as you go, then you could..."
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The competition: Current accounts

It might seem odd to compare regular savings accounts with current accounts; in fact, they have more in common than you might think. Certain current accounts now offer very good rates of interest and other financial incentives.

In rate terms, the Preferred In-Credit Rate account from Santander tops the bill. It pays 5% AER in-credit interest on balances up to £2,500 for the first 12 months - and it pays new customers a £100 cash incentive when they sign up.

There are certain caveats to be aware of: You need to pay in at least £1,000 per month, and you need to move all direct debits and standing orders across to the account using its transfer service. After 12 months, the in-credit interest rate drops to 1%.

Personally, I think I’d opt for one of the regular savings accounts paying 4%, and stash my money there. The amount in a current account tends to vary widely, because you use it to pay everyday expenses. A regular savings account, on the other hand, is designed to help you get into the savings habit.

And of course, you don’t need to settle for just one account. You could use the Preferred In-Credit Rate account to save the first £2,500, and the 12 Month Fixed Rate Regular Saver to deal with any ‘overspill’.

Alternatively, you could take out two regular savings accounts with different providers, and maximise your interest returns that way.

Happy saving!

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