Regular savings accounts

With a regular savings account, you commit to paying in a certain amount each month. In return, the bank or building society gives you a higher interest rate than you’d get with their current account or ordinary savings account.

Is a regular savings account for you?

Also known as ‘monthly savers’ or ‘regular savers’, a regular savings account might be for you if:

  • you don’t want to invest a lump sum
  • you want to get into the habit of regular saving
  • you’re saving for a special event like a wedding or a holiday
  • you want more interest than you can get with a current account or ordinary savings account.

How regular savings accounts work

Different accounts work in different ways, but with most banks and building societies:

  • you usually have to pay into your regular savings account every month – typically between £10 and £500
  • you might have to make a minimum number of monthly payments – often 10 or 11 – and the account might have a fixed term of, say, one year
  • with bank regular savings accounts, you’ll usually need to open a current account before qualifying for a regular savings account and your money will be moved to the current account once the limited term of the regular savings account ends.

Risk and return of regular savings accounts

At the end of the term, you’ll get back all the money you’ve paid into the account plus the accrued interest.

These accounts usually offer higher interest rates than current or instant access accounts. Some offer a fixed interest rate. With others, the rate is variable.

The interest rate might be reduced if you don’t save every month or if you need to make a withdrawal.

Access to your money

Rules vary between accounts. Some allow you to take money out but might give you a lower interest rate for that month or for the remainder of the term.

Other accounts don’t allow any early withdrawals.

It’s important to check the rules carefully before choosing a regular savings account if you think you might need to access your money during the term.

How safe are my savings?

Cash you put into UK authorised banks, building societies, or credit unions is protected by the Financial Services Compensation Scheme (FSCS).

The FSCS savings protection limit is £85,000 (or £170,000 for joint accounts) per authorised firm.

It is worth noting that some banking brands are part of the same authorised firm.

If you have more than the limit within the same bank, or authorised firm, it’s a good idea to move the excess to make sure your money is protected.

How to get a regular savings account

You’ll need to contact a bank, building society or credit union directly. Some accounts are only available online.

While others, especially some building society accounts, are available only through branches.

If you want a bank regular savings account and don’t have a current account with that bank, you’ll probably need to set one up.

If you don’t already have any accounts with the bank or building society you choose, you’ll need to show them ID and proof of your address.

You might also need to show these if it has been a long time since you opened any existing account.

Tax on your savings

The personal savings allowance means:

  • basic rate taxpayers can earn up to £1,000 interest on their savings without having to pay tax;
  • higher rate taxpayers can earn up to £500 worth of interest tax-free;
  • anyone who is an additional rate taxpayer does not receive the personal savings allowance;
  • any interest exceeding your allowance is liable to income tax.

There is also zero-tax band on the first £5,000 of savings interest.

This means that anyone with a total income including any savings interest of less than £18,570 in 2021-22 (as long as your personal allowance is the standard £12,570) won’t pay tax on their savings.

If things go wrong

UK banks, building societies, and credit unions are regulated by both the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA).

If you have a complaint you should give the business a chance to sort things out. If you’re still unhappy or the issue hasn’t been resolved you can take your complaint to the Financial Ombudsman Service.

Finding a regular savings account

Comparison websites are a good starting point for anyone trying to find a savings account tailored to their needs.

Comparison websites won’t all give you the same results, so it might be a good idea to use more than one site before deciding.

It’s also important to do some research into the type of product and features you need before making a purchase or changing provider.

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MoneyHelper is the new, easy way to get clear, free,
impartial help for all your money and pension choices.
Whatever your circumstances or plans, move forward with MoneyHelper.

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Looking for us? Now, we’re MoneyHelper

MoneyHelper is the new, easy way to get clear, free,
impartial help for all your money and pension choices.
Whatever your circumstances or plans, move forward with MoneyHelper.

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