UK Savers Reap the Rewards of Regular Savings Accounts

By: MoneyFacts

With the savings market in steady decline, it’s hard to believe there is any positive savings news. However, research by Moneyfacts.co.uk reveals that there is one sector that is giving savers a glimmer of hope – regular savings accounts have turned against the flow of rate cuts, and as a result, the average fixed regular saving rate has risen by 0.10% in just the last six months.

Charlotte Nelson, Finance Expert at Moneyfacts.co.uk, comments:

“It’s great news that regular savings accounts are seeing an improvement in rates, particularly as savers are currently struggling to get a decent return. These accounts are often overlooked as they require a monthly commitment; however, the fact is they pay far more than many other accounts on the market.

“For example, someone who saves the maximum regular deposit in the best fixed rate regular savings account*, which pays 6% for one year, would earn a return of £119.17 per year. If they made the same regular deposit in the best paying easy access account, the interest rate of 1.45% would mean they would earn £90.77 less.

“Regular savings accounts can also beat alternative forms of earning interest: due to the generally poor rates on offer in the savings market, many savers have moved away from traditional savings accounts and turned to interest-paying current accounts. However, even the highest paying current accounts do not match the potential returns that can be generated from a regular savings account due to the restrictions on the size of the balance that can earn the maximum interest. For instance, the best paying current account pays 5.00% interest, but only on balances of up to £2,500.

“A Help to Buy: ISA, which is very like a regular savings account, can be used as another example to illustrate the benefits of these types of accounts. First-time buyers can achieve rates of up to 4.00% in these accounts, which is unparalleled in the standard ISA market, and invest up to £200 a month. The Government will then ‘top-up’ this balance with a bonus of up to £3,000, depending on the amount invested.

“However, those looking at regular savings accounts and Help to Buy: ISAs to build a nest egg will need to check the terms of the accounts carefully, as some can incur hefty penalties if the monthly contributions are not met or money is withdrawn. Nevertheless, there are a number of flexible deals, which means there should be a regular savings account to meet every savings goal, be it for a holiday, a large purchase or the deposit for a first home.”

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