You pay in money every month to a regular saver account. You'll tend to get a higher rate of interest than other savings accounts, but with more rigid terms and conditions.
You can have a look at the regular saver account options at the end of this page.
Key factors for a regular saver account
are:
- Monthly contributions. You contribute an amount of money to the account every month, but there will be a maximum amount allowed. Some accounts have a minimum amount each month, some will allow you to skip months, and some will allow you to withdraw money. There is a lot of variation across the providers, so do check before opening.
- 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. The rate offered by a regular saver account is normally fixed for the length of the account (mostly one year, but some are longer), and the account will switch to a much lower rate after that, so it is worth moving the money once the time period is over.
- Interest payments. Assuming you pay in the same amount every month, the interest you earn will work out as slightly over half the advertised rate. This is because the money is paid in monthly, so only the first payment is actually in the account for the full period, and the last payment is only in the account for one month. Use this calculator to show what you can actually expect.
- Linked accounts. Many of the accounts that pay a higher rate require you to have another account with the provider (normally a current account). It is worth checking what your current bank offers.
- 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 regular saver with my current account provider, and pay the maximum in monthly. It was the best rate on offer at the time (less the providers whom I didn't already bank with). In order to maximise the interest gained, I hold the money for the monthly payment in my easy-access savings account, so I gain interest on it before I am able to put it in the Regular Saver.
