Best rates - regular savings accounts

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Regular savings accounts explained

At a glance

  • Regular savings accounts tend to pay the highest rates of interest among cash savings accounts, but there are certain restrictions involved.
  • Most have low maximum investment limits – you’ll only be able to pay in a certain amount each month, and the overall maximum will likely be capped too.
  • Some will penalise you for missing a monthly payment, and may not let you access your money until the end of the term.
  • That said, such accounts can be ideal for getting into the savings habit, and the high rates on offer make them a great option for those who can save regularly.

How does a regular savings account work?

At its most basic level, regular savings accounts ask you to pay in a set amount each month. They’ll typically ask you to specify how much you’re looking to pay in and how you plan on doing so (you may be asked to set up standing orders, for example), but some will let you change your monthly contribution and method of payment as the months go on.

All you have to do is meet the requirements and you’ll earn interest on your savings, with interest typically being paid on an annual basis. Just be aware of the penalties associated with missing a payment and making a withdrawal (if allowed), and make sure you can commit to the terms before you sign up.

Bear in mind that each account will have different requirements – some have lower maximum and minimum deposit limits than others, while some may not penalise you for missing a payment and others will even let you make a withdrawal. Remember too that the best regular savings accounts often have the strictest requirements, so always compare accounts and their features thoroughly before you make your decision.

Will the money in my regular savings account be taxable?

These accounts are taxed in the same way as any other savings account, in that you’ll be taxed according to your income tax bracket (basic, higher or additional rate).

How much interest can I earn?

The amount of interest you can earn all depends on how much you deposit each month, and your annual savings rate. Calculating regular savings interest is a complex process – rather than earning interest on one lump sum that you deposit from the outset, the money is being drip-fed into the account, so (for example) you could have an annual interest rate of 3% but only earn the full yearly amount on the initial deposit.

Depending on how and when interest is paid, you may need to consider the effects of compounding as well. Because of the complexity, it’s worth using a monthly savings interest calculator to get an idea of the amount of interest you'll earn, and as luck would have it, we’ve got one right here!

How much will I be required to put a regular savings accounts?

The amount you will have to deposit into a regular savings account will depend on the terms of the individual account. The minimum monthly deposit will usually be of at least £10, although this can vary depending on the account you choose. You’re also limited by a maximum you can put into your account each month, typically up to £250 or £500, to prevent people from depositing already hefty savings pots in the hopes of getting higher rates.

How to make the most of regular saver accounts

One of the most important decisions you’ll need to make is whether you want a fixed or variable rate deal. Fixed rates tend to come with more restrictions for the trade-off of a better rate, while with variable deals there’s the chance that the rate could change over the term of the account, so there’s no guarantee how much you’ll be left with.

There are a growing number of regular saver accounts with 12-month terms, which could be ideal for those saving up for a specific purchase in a year’s time. If you’ve got more long-term goals, such as saving for retirement or your child’s university fees, you may want to look at variable rate deals with no fixed term, which could allow you to benefit from compound interest over the years.

You may also want to speak to your current banking provider to see if you can secure even better deals – many banks offer loyalty-based regular saver accounts that are exclusive to current banking customers, and the rates on offer tend to be far higher than those offered to the masses. In this instance, loyalty can definitely pay, as you’ll often be able to find the best accounts by sticking with your bank, but that doesn’t mean it’s the only option.

Best regular savings accounts for the over-50s

The best regular saver accounts for the over-50s will be similar to those for any other age group, in that it’ll depend on what you’re saving for and the kind of account you’re after. If you’ve got a set goal in mind you may want an account with a fixed term, or if you’re saving for retirement, a variable rate deal without an end date could be more suitable. Again, to find the best monthly saver it may be worth speaking to your provider, who may be able to offer better rates.

Moneyfacts tip

Moneyfacts tip Leanne Macardle

Regular savings accounts are designed to kick-start your savings. Make sure you can commit to making the minimum monthly contribution, and that you won’t need access to your money during any initial term. Bear in mind that missed payment and withdrawal penalties are often harsh, particularly with fixed rate accounts, but it is also these that tend to pay the best rates.

Can you have more than one regular savings account?

Normally there are no restrictions on the amount of regular savings accounts a person can open at any one time, but keep in mind you will have to meet the minimum monthly deposits required for each account.

Are regular savings accounts worth it?

Yes, if:

  • You want to get in the habit of saving
  • You're happy to commit to a certain level of saving each month, and are comfortable with the restrictions associated with it
  • You're not planning on needing access to your funds for the foreseeable future
  • You want to secure a higher-than-average interest rate as you build up your pot

No, if:

  • You've already got a healthy savings pot and are looking to invest it in the right account (in which case a fixed rate bond could be worth considering)
  • You're not confident you can afford to set aside a regular amount each month
  • You think you may need to dip into your savings pot before maturity

Regularly saving into a dedicated account is one of the best ways to meet your goals, and with plenty of banks and building societies offering such a deal – often with loyalty bonuses if you’re already a customer – it makes sense to consider these accounts. Start comparing deals and see if you can benefit.

Compare Regular Savings Accounts ⇧

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