You pay money into a notice savings account and the account provider will pay you interest on the money in the account. However, you will have to give notice to the provider to let them know you want to withdraw the money.
You can have a look at the options for a notice savings account at the end of this page.
Key factors for a notice savings account
are:
- Notice period. The account will specify how much notice you need to give your provider to withdraw money - generally the higher the interest rate, the longer the notice period. Notice periods tend to be from 7 days up to 120 days, but could be longer.
- What if I need my money sooner? Some providers will allow you to withdraw the money without giving the full notice period and give you an interest rate penalty, but this is not the norm and for most account you have to give the full notice period.
- Opening balance. The details of the account will make it clear what the minimum amount required to open the account is (there are plenty of accounts that only require £1).
- Maximum balance. Most notice savings account accounts also have a maximum balance. It is not uncommon for the maximum balance to be £85,000 (in line with the Financial Service Compensation Scheme (FSCS) protection), but other accounts are up to £1,000,000. If you are fortunate enough to have these sums of money, a notice savings account probably isn't the best place to keep it!
- Interest rate. Interest is expressed as a percentage followed by AER (annual equivalent rate). For example, 3% AER - this means you'll get £3 interest a year for every £100 that you have had in the account for 12-months. If your money has been in the account for less time when the interest is paid, the interest payment is adjusted to reflect that. Notice savings accounts will have a variable rate, which will move up and down over time. In general, if the Bank of England Base Rate (BBR) goes up, the interest rate will go up and vice versa. If the interest rate is going to change, the provider should give you enough of a notice period equal to or greater than the notice you need to give them to withdraw the money. This means you have time to move it before the better rate runs out. For example, if you have a 90 day notice account, your provider should give you at least 90 days notice that the interest rate is going to change.
- Interest payments. When you are paid the interest will vary for each provider. Zopa, for example, pays you interest every month (on the same day you opened the account). The AER rate they offer assumes that you keep the interest payment in the account and you continue to earn interest on it. The monthly interest would therefore be slightly less than 1/12 of the AER they offer.
- Protection scheme. Ensure the account is protected by the Financial Service Compensation Scheme (FSCS). If your provider goes bust (it happens!), you'll be compensated for all the money you have in the account up to £85,000 for a single account, or up to £170,000 for a joint account.
ALWAYS READ THE TERMS AND CONDITIONS OF THE SAVINGS ACCOUNT BEFORE YOU COMMIT
What I have done. I have a notice account with Zopa. Although it's not the best rate at the moment, I like the simplicity of the application - you can give Zopa notice that you want to withdraw the money very easily through the app, and just as easy cancel the notice period if you want to.
