The last year has demonstrated to me just how important it is to keep a decent stack of savings within arm’s reach.
From needing a new washing machine to replacing the wheels on my car to replacing fences damaged in the winter storms, that safety net has come in useful.
It’s accepted that having money in an easy access savings account won’t get you the best possible rate of interest. But that doesn’t mean you can’t get a decent return on those savings. Which is why my eye was caught this week by an announcement from Nationwide, trumpeting the new market-leading rate of interest on offer from its MySave Online Plus account.
The account offers a rate of 3.17% AER (including a fixed bonus of 1.62%), which is indeed ahead of its rivals in the easy access arena. However, before you rush off to move your cash over, there is a nasty sting in the tail to be aware of…
An account for big savers
The trouble is, the only way to get such a whopping great rate of interest on your cash is to deposit a minimum of £25,000. Yes, you read that right. 25 grand!
If you don’t have that quite that much to place into the account your rate drops to a fairly mediocre 2.85% AER (including a fixed bonus of 1.31%).
How it compares
Suddenly, the account doesn’t look quite so amazing for the majority of us. Let’s see how it compares to the rest of the market for savers who don’t quite have that much cash to put in an easy access account.
|
Account |
AER/Gross |
Minimum investment |
Withdrawal limits? |
|
Nottingham BS eSaver Plus |
3.20% (including 2.20% bonus until June 2013) |
£500 |
Unlimited |
|
3.15% (including 1.15% bonus for first year) |
£1 |
Four penalty-free withdrawals a year |
|
|
Derbyshire NetSaver |
3.06% (includes bonus of 2.06% until June 2013) |
£1,000 |
Unlimited |
|
Skipton BS Online Bonus Saver |
3.05% (including 1.55% bonus for the first 12 months) |
£1,000 |
Unlimited |
|
3.03% (including bonus of 2.49% for the first 12 months)* |
£1 |
Unlimited |
|
|
3.01% (including bonus of 1.36% for the first 12 months) |
£1 |
Unlimited |
|
|
3.01% (including 1.36% bonus for the first 12 months) |
£1 |
Unlimited |
*New customers only
That’s seven accounts, all offering a rate above 3%, and all open to savers with far more modest savings balances. I like the fact that with the Coventry account you can open with just £1 and get a terrific rate, though the Coventry account is the only one of the leading deals which imposes penalties for exceeding four withdrawals a year.
Better options for big savers
Now, if you are one of those savers with a nice healthy balance in your account of more than £25,000, you may still be tempted by that Nationwide account. But hold on a second. Is an easy access account really the best home for a balance like that?
The first thing you should do is make sure you are using all of your ISA allowance. For the 2011/12 tax year you have a cash limit of £5,340 which you are allowed to place in an ISA. And the important thing to remember is that any interest you earn is completely tax-free, giving you a far better rate in reality than many leading traditional instant access accounts.
Here are the top cash ISAs at the moment that keep your money within reach:
|
Account |
Interest Rate (AER) |
Minimum deposit |
Bonus |
Notes |
|
3.5% |
£1,000 |
2.5% bonus until 30/9/13 |
New subscriptions only. |
|
|
3.5% |
£30,000 |
Fixed 1% bonus for 12 months |
You'll have to transfer old Cash ISAs to meet the minimum deposit requirement. |
|
|
3.3% |
£2,500 |
2.8% variable rate bonus for first 12 months |
Transfers and new subscriptions. |
|
|
Nationwide Online ISA Issue 3 |
3.1% |
£1,000 |
2.1% bonus until 30/9/13 |
Nationwide customers only. Transfers and new subscriptions. |
|
Skipton BS Bonus Cash ISA |
3.1% |
£1 |
1.1% bonus for first 12 months you have the account |
New subscriptions only. Transfers not permitted. |
|
3.1% |
£1 |
1.3% bonus for first 12 months |
Transfers and new subscriptions. |
|
|
Barclays Loyalty Reward ISA |
3.05% |
£1 |
1% bonus for 12 months |
Existing Barclays customers only. Transfers not permitted. |
|
3% |
£1 |
Fixed 1% bonus for 12 months |
Transfers and new subscriptions. |
Locking your money away
You’ll need to decide for yourself how much cash you need to keep in an easy access account, just in case. But if you have more than £25,000 set aside, chances are you won’t need all of it so close at hand, in which case you should look at bonds.
If you lock your money up in a bond, you are sacrificing access to that cash for a set period of time. However, in return you get a better rate of interest than if you kept it in an easy access account.
Here are some of the best bonds across a range of periods:
|
Account |
Term |
Interest rate (AER) |
Minimum deposit |
|
United Trust Bank One- Year Fixed Deposit |
One year |
3.55% |
£500 |
|
Aldermore One-Year Fixed Rate |
One year |
3.55% |
£1,000 |
|
One year |
3.40% |
£1,000 |
|
|
BM Savings Two-Year Fixed Rate |
Two years |
3.90% |
£1 |
|
Nottingham BS eSaver Fixed |
Two years |
3.85% |
£1,000 |
|
Two years |
3.80% |
£1,000 |
|
|
Saga Internet Three-Year Fixed Rate |
Three years |
4% |
£1 |
|
Halifax Fixed Online Saver |
Three years |
4% |
£500 |
|
BM Savings Four-Year Fixed Rate |
Four years |
4.20% |
£1 |
|
BM Savings Five-Year Fixed Rate |
Five years |
4.65% |
£1 |
Personally I would be a little wary about locking my cash up for four or five years. However, with predictions that the base rate won’t rise before 2015, it looks like a smart move to tie up some of your savings for a couple of years in one of these cracking bonds.
I haven’t included Sharia-compliant bonds in the table above as they work in a somewhat different fashion, but the returns on offer often match those of the market-leading bonds. For more on Sharia savings accounts, read Get a better rate with a Sharia savings account.
Alternatively, check out these clever accounts from Investec, which will ALWAYS be competitive, even if rates on offer from new accounts start increasing!
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