Don't believe the best buy tables - it's possible to earn 6% interest on savings. Regular savings accounts are a hidden species that pay big as long as you feed them every month.
This step-by-step guide includes all best buy regular savers, plus tricks to help you maximise the interest you'll get.
What are regular savings accounts?
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, such as 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 you their other products too.
Once it ends, your cash usually sweeps into a bog standard account. Note the date, then ditch 'n' switch to a better deal.
How does the interest work?
One point to note is that the interest received will be around half the interest rate of the account as the money is being saved monthly rather than in one lump sum. To maximise your overall interest, use the dripfeeding technique below.
When are they worth using?
It used to be that the right strategy was to first fill your ISA each year, and once that's done, plump for the best regular savers. But that's all changed. ISA rates have dropped and now many current accounts are paying high-interest rates of up to 5% (for more info, see the Where to Start Saving guide).
Once you've filled your high-interest current account(s), start to trickle your money into regular savings. But don't forget that regular savers are taxed, meaning basic rate taxpayers lose 20% of any interest earned, higher rate 40%.
How safe are your savings?
Bank collapse was once easy to dismiss, then the credit crunch and global market turmoil hit. The UK soon found itself bailing out Northern Rock, Royal Bank of Scotland and Lloyds. These days, every sensible saver should ask "is my money safe?"
The answer is simple. Provided your money is in a UK-regulated bank or building society account, it's protected under the Financial Services Compensation Scheme (FSCS). Here's the golden rule.
The first £85,000 per person, per financial institution is guaranteed (falling to £75,000 on 1 January 2016).
Sadly this is the simple face of savings safety. The exact rules are more complex, involving how different banks are registered and what counts as a financial institution. For full info, read the full Are My Savings Safe? guide.
How to maximise safety
With regular savers, often there's no problem at all. Limits on the amount you can deposit mean the balance of the account gets nowhere near £85,000 (£75,000 from 1 Jan 2016), so there's no problem.
Yet for regular savers which let you deposit more than that, or if you have savings in other accounts with the same bank, for total peace of mind don't put more than £85,000 in any one institution (£75,000 from 1 January 2016); spread it around.
For those with very large amounts of savings (for example, from a house sale) this could lead to lots of accounts. Even if you've too much to stick to the £85,000 limit for each one (£75,000 from 1 Jan 2016), the general rule of not having all your eggs in one basket still works. For more info, see the how to get 100% safety section of the Savings Safety guide.
This guide and best buys
It's impossible to pick "which bank is in trouble?". We've seen great names of world banking like Goldman Sachs and Merrill Lynch in trouble. Therefore the only solution for this site is that we'll report the top rates regardless, alongside explaining any protection oddities. So far, world governments have reacted to protect their banks and no savers have lost money, and it's likely (though not certain) that will continue.
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The top-paying regular savers come with a big 'but' attached - you must also hold or switch to the same bank's current account. Happily, at the moment the best current account for new switchers also offers the highest regular saver rate.
Get 6% if you have (or switch to) its 1st account - no.1 for customer service
If you can save a little every month, and you have a First Direct 1st account current account, or are willing to switch to it, you can get its Regular Saver, paying 6% AER fixed for a year - the joint top rate on the market. However, you will need to be able to save something every month.
The 1st Account* is a top pick bank account - new customers switching to it get a £100 bonus, though you must pay in at least £1,000/month. It's won every bank service poll we've ever done, with 92% of its customers rating it 'great' - only 2% said they got poor service. See the Best Bank Accounts guide for full details.
You can deposit between £25 and £300 each month. If your deposit's less than £300 in any month, you can carry over the remaining allowance to the following months.
- You must make deposits by standing order from your First Direct bank account.
- If you miss a payment, or make a withdrawal, First Direct will close your account, and you'll get 0.5% interest instead.
- First Direct shares its £85,000 UK savings safety guarantee with HSBC.
Rate: 6% AER fixed for 12 months | Min deposit: £25/mth | Max deposit: £300/mth | Access: Online and by phone | Missed payments allowed: No | Withdrawals allowed: No
Get 6% if you have (or switch to) HSBC Advance or Premier Account
HSBC Regular Saver
The HSBC Regular Saver pays 6% AER if you have its Premier or Advance current account. Plus, if you switch to the Advance Account (not the Premier account) you'll get an extra £120 switching bonus. But you need to meet certain criteria to be eligible for this - so it may not be for everyone.
- If you have (or get) the normal Bank Account or Graduate Account you'll be eligible for a slightly lower 4% regular saver. These are free to hold, though you must pay in at least £500 a month.
- You can deposit between £25 and £250 each month. If your deposit's less than £250 in any month, you can carry over the remaining allowance to the following months.
- You must make deposits by standing order from your HSBC bank account.
- If you miss a payment, or make a withdrawal, HSBC will close your account, and you'll get 0.1% interest instead.
- HSBC shares its £85,000 UK savings safety guarantee with First Direct.
Rate: 6% AER fixed for 12 months | Min deposit: £25/mth | Max deposit: £250/mth | Access: Branch & phone | Missed payments allowed: No | Withdrawals allowed: No
Get 6% if you're an M&S Bank current account customer
The M&S regular monthly saver was previously exclusively for its premium current account holders. But now anyone with an M&S Bank account can get access to its market-leading 6% rate.
You must deposit between £25 and £250 each month. If your deposit's less than £250 in any month, you can carry over the remaining allowance to the following months.
- If you're new to M&S you can open the monthly saver online at the same time as opening a current account. But if you already hold an M&S current account you can only open the account in M&S branches or on the phone.
- You must make deposits by standing order from your M&S current account.
- If you need access to your cash, you can close the account early, but you'll only earn 1.35% interest, not 6%.
- M&S Bank has the full £85,000 UK savings safety guarantee.
Rate: 6% AER fixed for 12 months | Min deposit: £25/mth | Max deposit: £250/mth | Access: Post, phone or branch | Missed payments allowed: No | Withdrawals allowed: No, but can close account
Lower 4% rate, but allows you to miss payments and make withdrawals
Club Lloyds Monthly Saver
The Club Lloyds Monthly Saver pays 4% AER if you have a Club Lloyds current account. It's a lower rate than the two accounts above, but it does give you more freedom in how you operate the account, plus it allows you to save a higher amount each month than most other regular saver accounts.
You can deposit between £25 and £400 each month. You can't carry over any remaining balance to subsequent months.
- You must make deposits by standing order from your Club Lloyds current account.
- You can apply for this account online, and also apply for the bank account at the same time if you don't have it.
- This account also allows you to make unlimited withdrawals, but if you do take cash out, you can't add money to the account to replace it.
- Lloyds Bank shares its £85,000 UK savings safety guarantee with Cheltenham & Gloucester.
Rate: 4% AER fixed for 12 months | Min deposit: £25/mth | Max deposit: £400/mth | Access: Online, phone or branch | Missed payments allowed: Yes | Withdrawals allowed: Yes
The top open-to-all accounts
If you don't have the current accounts necessary to unlock the big-paying accounts above, check out the top open-to-all accounts that aren't linked to other products. These accounts are increasingly rare, and tend to be offered by small, local building societies as branch-based accounts. Check if there's a decent account near you if neither of these accounts suit.
Get 3.05% without a linked bank account
Leeds Building Society Regular Saver
The Leeds BS Regular Saver (issue 3) pays 3.05% AER. It's a lower rate than all the accounts above, but does have the advantage that it's the top open-to-all regular savings account. It's also got no fixed term, so you can keep on saving in it, although because of that, the rate's variable, so you need to keep an eye on it.
You must deposit between £50 and £250 each month. If you miss a payment, you don't get the bonus, so the rate's a low 1.25%
- You're allowed to make one withdrawal each bonus period (runs from 1 Nov-31 Oct each year). Unless you open the account on 31 Oct or 1 Nov, your account will span two bonus periods, so you'll be able to make two withdrawals.
- If you make more than one withdrawal in any bonus period, the rate drops to 1.25% AER.
- The account doesn't have a fixed term, so you can save for as long as you like - but the rate's variable, so keep an eye on it.
- Leeds Building Society has the full £85,000 UK savings safety guarantee.
Rate: 3.05% AER variable (incl 1.8% bonus) | Min deposit: £50/mth | Max deposit: £250/mth | Access: Post or branch | Missed payments allowed: No | Withdrawals allowed: Yes - one per year
Get 6% if you've children - a great rate but you can only save £100 a month
Halifax Kid's Regular Saver
The Halifax Kid's Regular Saver pays a massive 6% gross interest fixed for a year, but you're limited in the amount you can save - plus, you must open the account for the benefit of your child, who must be aged under 15.
You can deposit between £10 and £100 each month. There's no penalty if you miss a payment in any month.
- You're not allowed to make withdrawals
- The account must be opened by an adult in the child's name. If, as is usual, your child doesn't earn enough to pay tax, it's tax-free (a full explanation of children's account tax is in the Best Children's Savings guide).
- Applications can only be made in Halifax branches - this account is not available via the Bank of Scotland.
- Halifax shares its £85,000 UK savings safety guarantee with the rest of the HBoS group including Bank of Scotland, AA, Saga & BM Savings.
Rate: 6% AER fixed for 12 months | Min deposit: £10/mth | Max deposit: £100/mth | Access: Branch | Missed payments allowed: Yes | Withdrawals allowed: No
Local building societies
Local building societies often offer good rates too on branch-only accounts, so keep your eyes peeled if you're visiting or walking past. We've listed a few of the top accounts below, but they're only available if you live near a branch.
South and east England
If you live near one of the 19 Saffron Building Society branches or agencies, you could get its 12-month Fixed Rate Regular Saver. It pays 3.5% AER for 12 months, provided you deposit between £10 - £200 every month. You must open the account in a branch, and these are located in east London, Essex, Hertfordshire, Suffolk and Norfolk. You can check if you live near a branch here.
Kent Reliance's one-year Regular Saver pays 4% AER when you deposit between £25 - £500 every month. The account must be opened in one of its nine branches, which are all in Kent, West Sussex and Hampshire. Ipswich Building Society offers 3.5% AER to residents in selected postcodes near Ipswich.
If you live near a branch in Birmingham, West Brom BS's Fixed Rate Regular Saver pays a decent 3.3% AER when you deposit between £10-£100 every month. Branches are in Birmingham and across the Black Country. Find your closest.
Nottingham BS's Regular Saver pays 3.1% AER. You need to deposit between £10 - £250 every month.
Or, if you head in to a branch and ask for the Special Regular Saver (issue 3), you can get a rate of 4% AER variable on between £1 and £400 each month. The account's a fixed term until the end of June 2016.
Branches of The Nottingham can be found in and around Nottinghamshire, Lincolnshire, Leicestershire, South Yorkshire and Northamptonshire. Find your closest branch.
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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 an example...
Mr Matt Mattics and his £3,000 savings
Matt has saved a total of £3,000 in a regular savings account paying 10% interest over a year, and is a non-taxpayer.
What Matt expects to earn? His simple sum works out that he's put £3,000 in at 10% therefore he should earn £300 in interest.
Why is this wrong? Matt only had £3,000 in there for the last month; it took a year to build up to that amount. You only earn interest on money in the account. So after the first month he was earning the 10% on just £250, half way through the year he was earning it on £1,500.
How Matt should work it out? Over the year, his average balance was roughly half the £3,000, in other words £1,500... so Matt should expect to earn around 10% of £1,500 over the year, which is £150.
Dripfeeding: How to maximise the interest
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 earnings, you can still take advantage.
Put the lump sum in the top paying current account
Some current accounts pay higher interest than normal easy access savings accounts, so put the lump sum you wish to save in one of these high interest current accounts (see Top interest-paying current accounts).
Pay the money into the regular saver from the current account
Now make payments into the regular saver straight from your high interest current account each month.
This technique is called 'drip-feeding', as you're slowly moving your cash across, month by month. This means every penny you want to save is earning the most it can possibly do at any one moment. Here's how it should work in practice. Let's take the same £3,000 savings as in the Mr Matt Mattics example above...
How to drip-feed £3,000 into regular savings
|Month||Top current account||Regular savings|
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.