MSE News

Martin Lewis: How to earn 8% interest on your savings (and possibly £200 on top, too)

It's possible to earn 8% interest on your savings – more than four times what many earn – and gain an extra £200 on top. This is all about taking advantage of special regular savings accounts. Here's MoneySavingExpert.com founder Martin Lewis, explaining exactly how you do it – then jump below for key links and a transcript.

ITV's The Martin Lewis Money Show Live – Tuesday 28 November

Martin Lewis explains how to earn 8% interest on your savings.
Embedded YouTube Video

From The Martin Lewis Money Show Live on Tuesday 28 November, courtesy of ITV. All rights reserved. Watch the full episode on ITVX.

  • Transcript of what Martin said on the show

    Martin Lewis: "The highest possible interest rates come from regular savings accounts where you can earn up to 8%.

    "Now, these give you higher rates, but you can only put small amounts in. They are designed for saving each month; putting away money each month. If you do have a lump sum, what you could do is just drip-feed the money from your normal savings into these to get absolutely maximum interest if you're trying to do so.

    "So Tania [referring to a user who has written into the show] could put £130 a week in, but she could top it up from the rest of her savings to get the maximum. You can have more than one of these in different [banking] institutions. So you could have two or three different institutions. So some people could save over £1,000 at over 6%. Let me talk you through the top ones."

    Nationwide currently offers the top regular saver paying 8% interest – and an extra £200 to switch

    "All those in white [referring to Nationwide and First Direct in Martin's on-screen table] are linked to the bank account you have. So, you have to have the bank account to get them. The ones below [Saffron and Coventry building societies] aren't. So Nationwide pays the most interest – 8% for one-year variable. This will be the one that Tania should go for. The monthly amount, well, you don't have to contribute each month, that's why it says nought.

    Image shows a graphic from Martin's show detailing regular savings accounts. All the details of the graphic appear in the rest of this article, apart from the fact that you can earn max interest of £19 with Saffron's regular saver, and a maximum of £179 with Coventry's.

    "The most you can put in is £200, which means if you maxed it out over the year, you would earn £103 interest on £2,400 in there. If you're not with Nationwide, you can switch your bank account to it at the moment and it'll pay you £200 to switch, as well as giving you that. And you've got a possible one-year 0% overdraft."

    First Direct's regular saver pays slightly less, but you may end up earning more

    "The other one I pull out: First Direct 7%. That rate is fixed. You have to contribute each month, but you can put more in – £300 a month. So in total, over the year you would earn more interest because even though the rates are lower, you're putting more money in there and it pays you £175 [to switch an account into it]. And if you add those up [switching incentive plus interest], for those who can max the savings out, that's actually slightly more than Nationwide.

    "It's also a top overseas card for spending overseas, and it's got a £250 0% overdraft."

    Saffron Building Society and Coventry Building Society also offer regular savers

    "And if you're with any of these: Yorkshire, Skipton, Lloyds, NatWest, TSB, Halifax, and Bank of Scotland, then all of those have linked regular savers [paying] between 5% and 7.5%, which you could take advantage of. So if you bank with any of those places, have a look at what it is offering you.

    "If you don't, or you want to open a second or third account, anybody can open the Saffron Building Society account. It pays 5.75%. You can only put [up to] £50 a month in it, though, which isn't that much.

    "Coventry doesn't beat fixed accounts, so if you've got lump sums, I wouldn't use it. But if you've got easy access and you're putting money away each month, Coventry Building Society 5.5%, one year, it's a variable rate [and you can put] up to £500 a month in, you'd get £179 interest.

    "So the absolute maximum interest you can earn on your money is with these regular savings accounts."

    Why regular saver interest might be less than you expect

    Jeanette Kwakye (Martin's co-host): "I'm just looking at that OK, and Nationwide, for example, 8% on £2,400. £103 seems quite low. Why is that?"

    Martin: "Ooh, very good. Lots of people say that at the end of the year. I will explain why.

    "Because 8% on £2,400 would be a lot more interest. But you haven't had £2,400 in there, in the first month, you had £200 in there. So you only get interest on £200, then £400, then £600, then £800. So, if you think about it, your average balance over a year, about £1,200, isn't it, if you maxed it out that's about 8% of £1,200.

    "So people get annoyed because they get less interest than they think. But on every penny in there, once it's in, you cannot beat those interest rates. And of course, if you're waiting to move it in from a normal savings account, you'd be earning interest on that, too. So you drip-feed it across. Good spot!"

    Jeanette: "Well, I'm hoping that Tania has got her question answered."

Put money away monthly? Maximise every penny with a regular saver

Now here's what Martin wrote about these accounts in his big savings briefing in MSE's weekly email on Tuesday 28 November.

Regular savings accounts offer HIGH RATES on SMALL AMOUNTS. They're perfect if you put money aside each month out of regular income. Most usually last one year (then you can just open one again) and some lock the money away. Lump-sum savers who want to be 'on it' can move money out of normal savings each month into these, to earn more.

You can also have multiple regular savers in different places, so combined you could save £1,000+ a month in them at high rates. The top payers are given as perks for current account customers and two currently pay bank account newbies up to £200 to switch, and give access to the regular savers too.

Here are the top-paying regular savers right now:

  • First Direct 7% FIXED for a year on £25 to £300 a month. While the interest's a tad lower than Nationwide below, you can put in more, so total interest is higher – a max of £135 interest over the year. Don't have First Direct's current account? Switchers get a FREE First Direct £175* plus a top debit card for spending abroad, and many get a £250 0% overdraft. Full info in First Direct eligibility and review.
  • Nationwide 8% VARIABLE for a year on up to £200 a month. Maxed over a year at current rates you get £103 interest. It's a flexible account letting you make three withdrawals a year, and you needn't contribute every month. Don't have a Nationwide current account? Switchers get a free £200. Full info in Nationwide eligibility and review.
  • Bank with Yorkshire, Skipton, Lloyds, NatWest, TSB, Halifax, Bank of Scotland? These all have linked regular savers which pay 5% to 7.5% – see our top bank-linked regular savers.

This is the highest interest possible, even if it mightn't feel it

Many 'feel' they're being conned on interest in regular savers. Yet we can assure you, for money in the account, nowt pays more.

The problem is at the year end if you've £3,600 saved, some expect 7% of that as interest. But you haven't had £3,600 in for a year: you've been building it up, by £300 a month. In fact your average balance is roughly half that, £1,800, so you get around 7% of that. More in regular savings.

MSE weekly email

FREE weekly MoneySaving email

For all the latest deals, guides and loopholes simply sign up today – it's spam-free!