Regular Savings Accounts
Earn up to 7.75% interest

Don't believe the best buy tables, it's possible to earn a mammoth 7.75% interest on your savings, but you must act quick. Regular Savings accounts are a hidden species that pay well over the odds as long as you're prepared to feed them every month. Yet if you're clever, it's actually possible to dunk lump sums in there too.

• What are regular savings account?
• BEST BUYS: Top Regular Savings Accounts
• Don't believe the bad press
• Dripfeeding: How to save a lump sum
• Calculator: How much will you earn?

Dripfeed your way to 10% savings

What are regular savings account?

The clue's in the name. Regular Savings accounts require you to put money away each month. They offer blockbuster interest rates, but tend to impose rigid terms and conditions, like limiting the amount of withdrawals you can make, or forcing you to make a deposit every month.

How can they pay such huge interest rates?

Often these accounts only last a year, and there are strict limits on the amount you can save. Banks commonly use them as advertising tools, promising eye-catching interest rates, in order to grab your custom in the hope of flogging or forcing you to have their other products too.

Once it ends, your cash is usually swept into a bog-standard account. So note the date, then ditch and switch to a better deal immediately.

When are they worth using?

While for pure interest rates, the top regular savers are unbeatable, they are taxed, meaning basic rate taxpayers lose 20% of any interest earned, higher rate 40%. This means, for many, the returns won't be as good as putting the cash in a tax-free Cash ISA; plus, if you don't use your £3,600 ISA allowance in a tax-year, you lose it.

Thus usually the right strategy is first fill your ISA each year and once that's done plump for the best regular savers (for more info see the Where to Start Saving guide). Yet occasionally a regular savings account will pay so much, it can beat even the top untaxed ISA; the calculator below will help you compare.

Best Buys: The Top Regular Savings Accounts

There's no restrictions on how many regular savings accounts you can have and as they all limit the amount of cash you can put away, you may want to use more than one.

The Top Accounts

The following accounts are available to both new and existing customers to these banks, and don't require you to hold another product (e.g. current account) with it.

• Barclays Monthly Savings 7.75% interest for a year & flexible

  The Barclays* one year Monthly Savings account pays a fixed 7.75% AER, allowing you to save up to £250/month. Importantly with this account you can miss as many monthly payments as you like without any penalty, and it allows you to withdraw cash, though if you do the interest for the following month drops to 3.03%.

  Rate: 7.75% AER fixed for 12 mths. Monthly Deposit: £20-250. Make withdrawals?: Yes, interest drops to 3.03% in any month you do this. Miss a payment? Yes Operated by: Online/Phone/Branch

• Abbey's Monthly Saver 7.25% for a year, but tighter restrictions

  The Fixed Rate Monthly Saver from Abbey lets you save between £20 and £250 per month, at 7.25% AER for a year. You can apply by phone or in-branch, although the only way to access the cash is via an Abbey branch.

  This account has much strict terms. If you miss a payment or make a withdrawal, the interest drops to 0.1% for that calendar month. Plus be careful, accidentally deposit over £250 in a month, and the interest drops to 0.1% for the rest of the year.

  Rate: 7.25% AER fixed for 12 mths. Monthly Deposit: £20-250. Make withdrawals or Miss payment?: Yes, interest drops to 0.1% in any month you do this. Operated by: Branch only.
  
  

• Halifax Regular Saver 7% interest for a year.

  For one year, Halifax's Regular Saver pays a fixed interest rate of 7% AER, and allows a big £500 to be deposited each month. Be warned though, its rules are rigid.

  Miss a payment, or withdraw cash at any point during the year and it'll be closed, and the interest will plummet to 4.1%, backdated for the whole time you were saving. Thus if you can't meet its minimum £25/month deposit for the year, or may need access to the cash, don't get it. Once the year's over, the money is automatically swept to a bog-standard Halifax savings account.

  Rate: 7% AER fixed for 12 mths. Monthly Deposit: £25-500. Make withdrawals?: No Miss a payment? No Operated by: Online/Phone/Branch

• Up to 10% interest for your children.

  There are a couple of high paying regular savings accounts which can be opened in children's names. This means that, if as is usual, your child doesn't earn enough to pay tax, they're tax free (a full explanation of children's account ax is in the Best Child Savings guide).

  The Halifax's Children's Regular Saver pays 10% gross interest fixed for a year, however you can only deposit £10-£100 per month. Any adult can open this in trust for any given child i.e. if Mum, Dad, Uncle Jack, Aunty Jill or even Dave from down the pub, so little Jonny could have five of these 10% AER paying accounts.

  There's also the Coventry Building Society's instant access Family First regular savings account which pays 7.25% AER but only on cash from child benefit.

A few smaller building societies, like Principality and Skipton offer good rates too, but you need to apply in their branches.

Top Regular Savers but you'll need their current account

If you've already used the accounts above, or they don't suit, then most people should stick with the normal Top Savings Accounts. There are some other high paying regular savings accounts, but all require you to have their current account.

• Up to 12%, but don't bother...

  While Alliance & Leicester has many competitive current accounts (see Top Bank Accounts), its Premier current account (when you apply in branch or on the phone), which you need to have to get its 12% Premier Regular Saver, isn't one of them. Similarly HSBC's Regular Saver pays 10% AER, but it's only available if you have its Premier, Bank Account Plus or Passport current accounts, and all of these charge a monthly subscription fee.

  In both cases the benefit from the regular saver is unlikely to outweight the cost of having a non-competitive current account. .

Don't believe the bad press

Sadly regular saver accounts often receive negative publicity due to a flawed understanding. Many people say they've used regular savers, but only received around half the interest they thought they would... yet that's because they expected the wrong amount, not because they were underpaid. Here's a wee example...

Dripfeeding: How to save a lump sum

The problem with regular savings accounts is it takes time to build up the amount of money you have in there. So while they promise high interest, this is often just on a small amount of money. Yet if you have a lump sum of cash, and you want to maximise its earning, you can still take advantage

• Put the lump sum in the top normal savings account

  Put the lump sum you wish to save in a normal savings account paying as much interest as possible (see Top Savings Accounts).

• Pay the money into the regular saver from the savings account

  Now make payments into the regular saver straight from your normal savings account each month, instead of from your current account. Not all savings account allow this, so do check before you set the account up (you may have to move the cash to a current account first, then to the regular saver.

I call this technique 'drip-feeding', as you're slowly moving your cash across, month by month. And it means every penny you want to save is earning the most its can possibly do at any one moment. Here's how it should work in practice, lets take the same £3,000 savings as in the Mr. Matt Mattics example above...

To get the maximum gain, put as much in as possible in the early months, but always ensure you've enough left to keep up the minimum payments for the account's lifespan. Then you’ve got as much interest as possible, while meeting the account’s terms and conditions.

The Regular Savings Calculator

Below is a special calculator designed to help you work out what you'll earn from Regular Savings. It has two options...

• Regular Savings Only. Choose this if you want to know how much you’ll get from a Regular Saver alone.
  
• Drip Feed Calculator. If you want to save a lump sum, and are using the drip feed route above, this will tell you how much you get, and compare it to keeping the money in your normal savings account.
  

How much will you save each month? £

What’s the interest rate? (before tax) %

How long will you save for? years and months time.

How much tax do you pay? No Tax Basic Rate Higher Rate

How far ahead do you want to look? years and months time.

How much tax do you pay? No Tax Basic Rate Higher Rate

NORMAL SAVINGS ACCOUNT

What's the interest rate before tax? %

How much do you have saved in there? £

REGULAR SAVER

What’s the interest rate before tax? %

How much will you pay in each month? £

For the most accurate answer use the AER (Annual Equivalent Rate) which should be listed on your statement. Do remember, most normal savings accounts are variable rates, so the drip feed calculation will change if the rate does – but it’s a good indicator of the returns.