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MoneySavingExpert.com » Banking & Saving » Regular Savings Accounts: Earn up to 7.5%

Important Update Note. A few of the accounts in this article have disapeared recently so we will be working on an update soon.

Best buy tables lie! Shockingly, they've excluded the top paying savings accounts for over six years. That title belongs to ‘regular savings accounts’, a hidden species paying up to a whopping 8%. Better still, contrary to their name, you can use a sneaky trick to invest lump sums.

What are regular savers? How do I invest a lump sum? The top regular savings accounts They really do pay this amount! The size of the savings Related Articles / Discuss

Huge returns on your nest egg!

What is a regular savings account?

The clue's in the name! Regular savings accounts require you to make regular monthly deposits, up to set limits – usually £250 or £500. Some limit the amount of withdrawals you can make, others force you to make a deposit every month, all have some rigid terms. However, with the best buys, their blockbusting interest rates make up for it.

Banks commonly use them as advertising tools, promising eye-catching interest rates. As many of these accounts only last a year, and the amount you can save is limited, the bank's aim is to get you to move the money to their other accounts when the regular saver closes, hoping to permanently capture your custom.

They're taxed like normal savings accounts; basic rate taxpayers pay 20% of any interest earned, higher rate 40%. So even with the super-high interest rates, most taxpayers should first use up their £3,000 annual tax-free mini-cash ISA savings allowance (for more read Where to Start With Savings).

Yet after ISAs, regular savers are the best bet. Sadly though, there are more hidden catches than Houdini's straight jacket. However, get it right and these are easy-to-use high payers.

Invest a lump sum in a regular savings account

Despite the restrictions on how much you can put in, with a bit of playing regular savers can net you higher rates on existing savings. The trick is to make mont

hly payments straight from your savings account to the regular saver (ensure your savings are paying max interest too - see Best Savings Account article). This way you’ll earn the best possible rate on all of your cash.

All regular savings accounts limit what you can deposit per month, and most require you to make a payment in nearly every month. So, make the maximum contributions in the first months to get the cash in quickly, while ensuring you've enough left to keep up the minimum payments for the account's lifespan. Then you’ve maximised the interest earned, while meeting the account’s terms and conditions.

The top regular savings accounts

The right account depends on a few things: how much you have to save, how much flexibility you want, and whether you’re prepared to switch accounts after a year to keep the best rate.

Yet luckily, there are no restrictions on how many regular savings products you can open; so if you have the cash to keep filling more and more, go for it!

The Winner

• Bigger Contributions for Longer - Yorkshire Building Society 6.6%.
  
  The Yorkshire BS Regular Saver pays a lower 6.6% AER, but you can squirrel away up to £500 each month. For anyone drip feeding large savings in, this is a huge plus. The monthly deposit can be varied, meaning if you may pay in more than £250/month and don’t want to juggle more than one account, this is worth a look.
  
  Again, you can only miss one monthly payment and make one withdrawal to still get the 6.65% AER.
  
  Account Term: Unlimited (up to a maximum £20,000 balance)
  Rate: 6.6%
  Contributions: £10 - £500/month
  

Got more cash to save?

For simplicity, if you've more cash, you may want to stick it in Best Instant Access Savings Account, yet there are other accounts where on rate alone it’s worth it. So here are further alternatives.

• Up to 10% if you have kids. There are a couple of regular savings accounts which can be opened in childrens names, meaning they're tax free too (do read the Best Child Savings article for details on the tax impact).
  
  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 can have five of these 10% AER paying accounts.
  
  There's also the Coventry Building Society's instant access Family First regular savings account pays a whopping 7.25% AER but only on cash from child benefit.
  
  
  
• Halifax Regular Saver 7%. This Regular Saver pays 7% AER for one year, after which the cash is transferred to a standard Halifax savings account. You can make deposits of £25 to £250, and you can’t miss any payments or make any withdrawals in the twelve month period without penalty.
  



• Abbey Monthly Saver 7.25%. The Abbey Fixed Rate Monthly Saver is again fixed for a year at 7.25% AER, with monthly payments capped at £250. Again, it’s inflexible, with any withdrawals or missed deposits resulting in you receiving a paltry 0.1% interest.
  
  
  
• 8% if you've got an HSBC account. While there are plenty of far better bank accounts available, paying over 6% in-credit interest and offering 0% overdrafts (see Top Current Account article); if you’ve some pressing reason to stay at the poor rates with HSBC, then consider its Regular Saver. It pays 8%, allows up to £250 contribution per month, and the rate lasts 12 months.
  
  
  

Regular savers really do pay these rates

Sadly regular saver accounts have often received negative publicity due to a flawed understanding of them, with comments like:

”Invest £3,000 for a year in a standard 5% savings account and you get £150 interest before tax, yet £3000 in a Regular Saver at 7% only earns you around £110 interest, so these accounts are poor.”

This is silly logic, as it assumes the £3,000 is doing nothing before you put it in the regular saver. In practice you're drip feeding the £250/month in, so the rest should be in another account earning high interest. For a fair comparison, include interest earned on the cash waiting to be fed in, as well as the regular savings interest. Do that and you'll find you're earning much more.

Save the maximum in Yorkshire BS’s Regular Savings account and you'd earn £230 in a year, before tax. Compare this to the same in a pitiful savings account like Halifax's Liquid Gold which would pay £45, or even a top paying savings account, at £200.

Even better, feed the cash across bit by bit from the top savings account to the top regular saver, and you’ll net a huge £400 before tax in just one year.

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