Regular Savings Accounts
Earn up to 2.75% on your savings
Regular savers have been hit hard recently, with 5% rates dropping like flies. But it's still possible to earn 2.75% interest on savings tax-free. Regular savings accounts are a hidden species designed for you to feed them every month – we've all the best buys 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 amount of withdrawals you can make, or forcing you to make a deposit every month.
How can they pay higher interest rates?
Often these accounts only last a year, and limit the amount you can save. Banks commonly use them as advertising tools, promising higher than usual interest rates (the top ones pay 2.75%) to grab your custom – many of them are linked accounts, meaning to get them, you need to have the bank's current account too.
Once it ends, your cash usually sweeps into a bog-standard account – so ditch 'n' switch to a better deal.
How does the interest work?
All interest from regular savings accounts is now paid tax free due to the personal saving allowance. Basic-rate taxpayers can earn £1,000 tax-free and higher-rate taxpayers £500. Additional-rate taxpayers get no allowance.
On regular savings 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 drip-feeding technique below.
When are they worth using?
As ISA rates have dropped and all savings interest is now paid tax free, start by filling your high-interest current account(s) up to the limit (usually around £2,000-£5,000), then trickle your money into regular savings (for more info, see the Where to Start Saving guide).
Rather watch than read? This helpful little video gives you the regular savings lowdown...
How safe are your savings?
After the calamities that hit several big banks such as Northern Rock, RBS and the Lloyds group, every 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.
For full info, read the 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.
Yet for regular savers which let you deposit more than that, or 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.
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Top bank-linked accounts
The top-paying regular savers come with a big 'but' attached – you must also hold or switch to the same bank's current account. We've listed any switching incentives along with other key info in the boxes below.
Get 2.75% if you have (or switch to) its current account + £50 for switching
First Direct's regular saver pays 2.75% AER fixed for one year. You'll need to deposit between £25 and £300 each month.
To open the regular saver, you'll need a First Direct current account, which is one of our top picks as it scores highly on customer service, with 85% of its customers rating it 'great' in our latest poll. Plus, newbies switching to it can get £50.
Rate: 2.75% AER fixed for 12 months
Min/max deposit: £25/£300 per month (can carry over remaining allowance)
How to open: Via online banking or in app
Missed payments allowed: No (see FAQs)
Withdrawals allowed during term: No, unless closing the account (see FAQs)
Savings protection: Shared with HSBC
New to First Direct?
Got a First Direct current account?
Get 2.75% if you've switched to its current account + £100 gift card for switching
M&S Bank pays 2.75% AER fixed for a year and you can save up to £250 each month.
To get the regular saver, you must have switched to M&S Bank's current account using its switching service and have two active direct debits. You can also get a £100 M&S gift card for switching.
Rate: 2.75% AER fixed for 12 months
Min/max deposit: £25/£250 per month (can carry over remaining allowance)
How to open: Online, by phone or in branch
Missed payments allowed: Yes (see FAQs)
Withdrawals allowed during term: No, unless closing the account (see FAQs)
Savings protection: Full
New to M&S Bank?
Already switched to M&S Bank?
Get 2.75% if you have an HSBC current account – but no switching perks
If you've got an HSBC current account, its regular saver pays 2.75% AER fixed for a year if you save between £25 and £250 each month.
HSBC doesn't currently offer any switching bonuses so we haven't put a link to its current accounts above. If you're looking for a new current account with a linked regular saver, consider M&S Bank or First Direct instead. But if you really want an HSBC current account, there's a range to choose from, all of which come with access to the regular saver.
Rate: 2.75% AER fixed for 12 months
Min/max deposit: £25/£250 per month (can carry over remaining allowance)
How to open: Via online banking
Missed payments allowed: No (see FAQs)
Withdrawals allowed during term: No, unless closing the account (see FAQs)
Savings protection: Shared with First Direct
Got an HSBC current account?
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 that aren't linked to other products below.
Recent rate drops mean that the open-to-all accounts are giving bank-linked accounts a run for their money. However, both can be beaten by branch-based accounts offered by local building societies. Check if there's a decent account near you.
The Principality Building Society regular saver pays a fixed 2.7% AER for a year – but you can only deposit a maximum of £125 each month and can't withdraw unless you close the account. There's no penalty for missing a payment.
Note: After 12 months, you'll start earning a much lower interest rate – diarise this so you can move the cash elsewhere after the term ends.
Rate: 2.7% AER fixed
Min/max deposit: £10 min balance, £1/£125 per month (can't carry over remaining allowance)
How to open: Online, by post or in branch
Missed payments allowed: Yes
Withdrawals allowed during term: No, unless closing account
Savings protection: Full
The Coventry Building Society regular saver pays 2.5% AER variable and lets you save a fairly large amount: up to £500 each month (months are counted from your account opening date). There's no penalty if you miss a monthly payment. You can access your cash in this account, but there's a 30 day interest penalty each time, so try to minimise withdrawals.
Note: After 12 months your funds will be transferred to Coventry's Easy Access Saver which'll pay a lower rate of interest – so it's best to move your cash once the year's up (unless the variable rate decreases before then).
Rate: 2.5% AER variable
Min/max deposit: £1/£500 per month (can't carry over remaining allowance)
How to open: Online, by phone, by post or in branch
Missed payments allowed: Yes
Withdrawals allowed during term: Yes, though 30 day interest penalty
Savings protection: Full
The Virgin Money regular saver pays 2% AER fixed until 20 December 2020 and you can save from £1 to £250 each month. Unusually, this account also allows unlimited penalty-free withdrawals.
Note: When the fixed rate period ends on 20 December 2020, your account will become a variable rate account paying much lower interest – so diarise to move your money after this date.
Rate: 2% AER fixed
Min/max deposit: £1/£250 per month (can't carry over remaining allowance)
How to open: Online
Missed payments allowed: No
Withdrawals allowed during term: Yes
Savings protection: Full
Children can earn 4.5% - though withdrawals are limited
If you've a child aged 15 or under, you can get 4.5% 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.
Top branch-based regular savers
Local and regional banks and building societies often offer good rates, though usually accounts need to be opened in branch. We've listed the top accounts that pay more than the 'open-to-all' rates above. See if there's a branch near you.
South and east England
If you live near a Saffron Building Society branch, you could get its 12-month fixed-rate regular saver. It pays 3% AER for 12 months and you can deposit between £10 and £250 every month. You must open the account in a branch, and these are located in Essex, Hertfordshire and Suffolk. You can also apply by post if you're already a Saffron customer.
Kent Reliance's regular saver pays 3% AER when you deposit between £25 and £500 every month. The account must be opened in one of its nine branches, which are all in Kent, West Sussex and Hampshire.
South Wales and Somerset
Monmouthshire Building Society pays 3% AER on its regular saver for deposits between £20 and £300 per month. There's a network of branches in South Wales and two branches in North Somerset.
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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.
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.
Drip-feeding: How to maximise the interest
While regular savings accounts can pay up to 2.75%, 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 up to 1.45% interest on the full sum straight away (see Top savings accounts).
Pay the money into the regular saver from the easy access account
Now make payments into the regular saver straight from your 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 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. If you start by moving £250 across to the regular saver in the first month, you'll have £2,750 earning 1.45% and £250 earning 2.75%. This way you can keep getting interest on the lump sum while getting a higher rate on the money you pay into 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).
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 are covered by the relevant PSA 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 get, and compare it with keeping the money in a normal savings account. Note: There's currently a problem with the calculator when selecting the 'Basic rate' or 'Higher rate' tax options. We're working on fixing this. In the meantime, selecting 'No rate' will give you roughly the right figures.
For the most accurate answer, use the AER (Annual Equivalent Rate) which should be listed on your 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 the returns.
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