Regular Savings Accounts
Earn up to 3.5% on your savings
Regular savers were hit hard last year, with frequent rate cuts across the board. But it's still just about possible to earn 3.5% interest on savings tax-free. Regular savings accounts are a hidden species designed for you to feed them every month – we've all the top picks in this guide, plus tricks to maximise interest.
What are regular savings accounts?
The clue's in the name. Most regular savings accounts require you to put money away each month with interest paid yearly (unless otherwise stated). They offer higher interest rates than traditional fixed or easy-access savings accounts, but tend to impose rigid terms and conditions, such as limiting the number of withdrawals you can make, or forcing you to make a deposit every month. And the rate usually only lasts for a year.
Rather watch than read? This little video gives you the regular savings lowdown...
Seven regular savings need-to-knows
To help you make the most of a regular savings account, it's worth getting your head around the following need-to-knows...
This is crucial. Regular savers are for putting away specific amounts each month, and a few accounts are strict about this – fail to make the minimum deposit on time and you risk losing the interest or the provider closing your account.
While some regular savers let you skip the odd payment, try to avoid this if possible – you may not be allowed to make it up later, and you'd be sacrificing the interest.
If you've got a regular saver and can't make your normal payment, it's worth contacting your provider to discuss your options and see if it can help.
Most regular savers only last for a limited time – normally one or two years. After that, whatever you've saved is usually swept into a bog-standard account paying much less. So it's worth remembering to check for better rates after your regular saver ends.
Beware! Some regular savers have variable interest rates – here, the rate can change at the provider's whim, so keep an eye on it and be ready to switch away if it does.
Regular savers are for saving smaller amounts monthly. But if you've more to save, there's nothing stopping you from using more than one regular saver. For example, combine three of our top picks below and you could save £1,000/month – all earning 1% or more interest.
Just be aware that you can usually only have one regular saver with each provider at any one time.
While regular savings accounts can pay higher rates of interest, the problem with them is that it takes time to build up the amount of money you have in there. 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 easy-access account.
You'll then start earning interest on the full sum straightaway (see Top Savings Accounts).
Then, pay in to the regular saver from the easy-access account each month.
The key is to put as much as you can (up to the monthly limit) into the regular savings account to max the interest.
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 at any moment. Here's how it should work in practice...
Let's say you have £3,000 in savings. If you start by putting this in a top easy-access account and moving £250 across to a top regular saver in the first month, you'll have £2,750 earning the easy-access rate (eg, 0.5%), and £250 earning the higher regular saver rate (eg, 1.05%).
This way, you can keep getting interest on the lump sum while getting a higher rate on the money you pay in to the regular saver. After 12 monthly payments, the full amount will be in the regular saver. You can then move the whole lot to the top payer at the time and start the process again with a new regular saver (provided they're still around).
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.
- Put the lump sum in the top-paying easy-access account.
On regular savings, the interest you get will be about half the interest rate of the account. But don't worry, it's not a con – it's just how the maths works out. It's all down to the money being saved monthly rather than in one lump sum.
This has caused confusion and disappointment in the past, with some complaining that they've received less interest than they thought they would. Yet that's because they expected the wrong amount, not because they were underpaid. Here's an example (though for ease we've used a wildly unrealistic interest rate)...
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.
What does Matt expect 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, halfway through the year he was earning it on £1,500.
How should Matt 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 about 10% of £1,500 over the year, which is £150.
It's also worth noting that all interest from regular savings accounts is now paid tax-free due to the personal savings allowance. Basic-rate taxpayers can earn £1,000 tax-free and higher-rate taxpayers £500. Additional-rate taxpayers get no allowance.
The protection you get here is the same as normal savings. Provided your money is in a UK-regulated bank or building society account, it's protected under the Financial Services Compensation Scheme. The golden rule is...
The first £85,000 per person, per financial institution is protected.
While that sounds simple, the details are more complex – there are specific rules involving how different banks are registered and what counts as a financial institution. For full info, read our full Are my savings safe? guide.
How to maximise safety
With most regular savers, limits on the amount you can deposit mean the balance gets nowhere near £85,000, so there's no problem.
But if you have savings in other accounts with the same bank, don't put more than £85,000 in any one institution – spread it around. See how to get 100% safety.
Children's regular savers
If you've a child aged 15 or under, you can get 3.5% AER fixed for a year with the Halifax kids' regular saver. However, withdrawals are limited and you (or they) can only save between £10 and £100 a month. For more on this account, see our Kids' Savings guide.
Help to Save for those on low incomes
The Government's Help to Save scheme is designed to encourage people claiming universal credit or working tax credit to save. If you qualify, you can deposit between £1 and £50 a month, and get a 50% bonus on the amount saved (up to a maximum bonus of £1,200 over four years).
Our Help to Save guide has full info on the scheme, including when you should and shouldn't go for it.
Top open-to-all accounts
If you don't have the current account necessary to unlock one of the accounts above, check out the top open-to-all accounts below, which aren't linked to other products.
Recent rate drops mean these open-to-all accounts aren't as lucrative as the top bank-linked accounts. While there are still decent deals on offer, they can be beaten by branch-based accounts offered by building societies. So check if there's a decent account near you.
Regular savers open to all – what we'd go for
Here, the top rate is from Coventry Building Society, which pays 1.05% and lets you save a decent £500/mth. However, the rate's variable – so you'll need to keep an eye on it in case it drops.
Alternatively, if you want some added certainty, Principality BS pays 1% fixed for a year on up to £250/mth.
Whichever account you pick, it's worth remembering to move your cash when the term ends – otherwise the provider will move your money to a standard account paying much less.
Top branch-based regular savers
Local and regional banks and building societies often offer good rates, though you usually need to open accounts in branch. We've listed accounts paying more than the 'open-to-all' rates above. See if there's a branch near you.
North East England
- Darlington Building Society's regular saver offers 1.25% AER variable on up to £250 a month if you're an existing member or if you live in postcode areas DL, DH, SR, TS, YO or HG. Plus, it currently lets you pay in up to £750 on one month of your choice – so you can quickly boost your balance.
South West England
- If you're aged 16-25 and live, work or study in Bath, you can get 4% AER variable on deposits of £10-£50 a month with this regular saver from Bath Building Society.
- West Bromwich Building Society's regular saver pays 2% AER fixed for 12 months and you can save £10-£100 a month. It has 20+ branches in the West Midlands (find your nearest).
- Live in postcode areas B, DY, WS or WV? Tipton & Coseley Building Society's regular saver pays 1.25% AER variable on deposits of £10-£250 a month until 28 February 2022.
- Leek United BS pays 1.1% AER variable and lets you save an unusually large amount – up to £1,000 a month. But you can only get it if you've been a Leek United BS customer for at least a year or if you live in postcode areas CW, SK, DE, TF, ST, WS15.
The Regular Savings Calculator
Below is a special calculator designed to help you work out what you'll earn from regular savings. It assumes your savings interest is covered by the relevant personal savings allowance for your tax rate.
The calculator 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'll get, and compare it with keeping the money in a normal savings account.
For the most accurate answer, use the AER (annual equivalent rate) – which should be listed in your online account or statement. 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 what you'll earn.
Clever ways to calculate your finances