It’s a minefield out there.
As all financial decisions start with cash, it should be easy to pick the best savings accounts for your needs, whether that’s a place to hold funds while you decide what to do next or a longer-term home in a low risk environment.
However, more and more, our best buy tables are being filled with accounts that pay the best rates, but with terms and conditions that you need to be aware of before you take the plunge.
We were recently contacted by a customer who felt that the Yorkshire Building Society Single Access Saver that currently resides in the top spot in our Easy Access Best Buy table, paying 1.15% gross/AER, should be deemed a fixed term account, since it actually only allows one easy access withdrawal per year – plus access on closure.
Whilst we understand this sentiment, this is an easy access account, albeit with restricted access. It is a good example of what savers need to be aware of and Yorkshire Building Society is not the only provider that includes withdrawal restrictions on an otherwise easy access account. The Select Access Saver 7 from Britannia offers another best buy interest rate, this time 1.10% gross/AER, but if you make more than four withdrawals in a year, the interest rate will plummet to a dismal 0.10% gross/AER for the remainder of the year.
There are other terms and conditions to watch out for, including introductory bonuses, where a best buy rate for the first year drops to a much less competitive level after 12 months. However, these accounts can be very useful, provided you switch to a better option after your rate drops – remember, providers are counting on you to leave your cash where it is, sticking with the lower rate.
An added consideration in recent years has been the rise to prominence of several providers that operate in the UK, but don’t come under the UK Financial Services Compensation Scheme (FSCS); deposits placed with these providers are instead protected by an equivalent European scheme. For example, the French RCI Bank has been particularly prominent in our best buy tables over the last two years with consistently competitive accounts, but savers do need to be aware that their funds are protected by the FGDR (Fonds de Garantie Dépôts et de Résolution) the French deposit protection scheme, therefore deposits of up to €100,000 are protected, not £85,000.
Anyone looking at our Easy Access Best Buy Tables would have encountered at least one of these issues over the years as these T&Cs are nothing new. But for those who want a more straightforward option, we’ll always include the best-paying normal easy access account on the market in our best buy table – no withdrawal restrictions, no introductory bonus and UK FSCS protection in place. At the moment, this is the Easy Access – Issue 3 from Charter Savings Bank; plain vanilla and therefore paying a slightly lower rate of 1.01% gross/AER.
These T&Cs are not restricted to the easy access best buy accounts. In fact the award for least straightforward accounts at the moment must go to NatWest and RBS for their easy access cash ISAs, where an introductory bonus is included within the tax free interest rates (1.01% and 1.05% respectively) – but only on the first £20,000 in the account.
To further complicate things, the interest rates are higher if you have a larger balance in the account, but you still only get the 1% bonus on the first £20,000. So, if you have £25,000 or more in the RBS account, you get a higher rate of 1.50% tax free on £20,000, but just 0.50% tax free on the rest of the balance. Bamboozled?
Whichever way you look at it, this is not simple savings.
The savings market can be a tricky place to navigate at times, but don’t let that put you off searching for the best rates. Don’t simply settle for the paltry rates your high street provider is offering, because they are familiar. Switching could mean a really significant improvement in the interest you earn, even in this low interest rate environment and we are on hand for help and guidance.
Our expert savings advisers are ready to take your call. We can help you to pick through the muddy waters of complicated terms and conditions and help you select the accounts that suit your circumstances.
Call us free on 0800 3213581, we’d love to hear from you.