The best regular savings accounts

by Simon Ward on 13 March 2013  |  3 comments
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If you want to save some money each month, there are a range of options. Here are the top rates at the moment.

Regular savings accounts, as their name suggests, reward you for regularly saving into them. If you’re saving up for a big purchase or want to put some money away for the short term, they can be a good option.

As savings interest rates continue to fall, regular savings accounts are offering far better interest rates than instant access and short-term notice accounts.

But bear in mind that you need to be able to save money each month into a regular savings account to benefit from these better rates. And most accounts will only allow you to save for a set period after opening, usually a year. If you withdraw money or close the account during that period you'll get a much lower interest rate.

There are also restrictions in terms of the maximum amount you can save each month. If you have a lump sum to save, take a look at The top fixed rate savings bonds, or for tax-free savings The UK's best Cash ISAs.

You should also remember that because you’re putting a little aside each month, you won’t earn the same amount of interest over a year as you would if you deposited a lump sum. That’s because you won’t have the maximum amount saved away until the final month of the year.

Let’s have a look at the top accounts on offer at the moment.

Top accounts… with strings attached

The top-paying regular savings accounts at the moment are only available to existing customers of the banks or building societies offering them.

While that might look restrictive, it’s worth bearing in mind that First Direct’s 1st Account has consistently been voted one of the best for customer service. And the bank is currently offering £100 if you switch your account to a 1st Account.

The other regular savers here are all linked to so-called ‘packaged accounts’, which charge a monthly fee in return for a range of benefits, or accounts requiring a high annual salary. If you are tempted to switch your current account to a packaged account to take advantage of the regular savings rates, do your sums. Make sure you’ll a) use the benefits of the current account and b) make enough interest from the saving account to cover the current account fees.

The top accounts with withdrawal penalties

Now let’s look at the best accounts that don’t require you to be an existing customer to qualify but do penalise you if you make withdrawals during your minimum term.

The top accounts with no penalties

If you want the option to have access to your cash, for example in an emergency, you’ll get a lower interest rate. But the top rates in this category are still pretty competitive, particularly if you’ll have to manage your account online because you don’t have a building society branch near you.

The Financial Services Compensation Scheme

Finally, just a reminder that all the above regular savings accounts are covered by the Financial Services Compensation Scheme (FSCS).  This guarantees your savings up to £85,000 per bank or building society group (if you want to see who owns who, read Who owns your bank or building society?) in the event that they go under.

More on savings

Compare savings accounts

The top fixed rate savings bonds

The UK's best Cash ISAs

Top Cash ISAs for transfers

The best instant access savings accounts

Top savings accounts for kids