Building society offers competitive 6% interest savings account (Image: Getty)
Savers on the hunt for inflation-beating returns can bag a competitve 6% interest rate with Earl Shilton Building Society.
Regular savings accounts can be a good option for those looking to build a savings habit, as they typically offer higher interest rates and encourage monthly deposits. Customers can launch Earl Shilton Building Society’s Monthly Saver with just £1, with interest paid on the anniversary of opening.
Monthly deposits are capped at £500, allowing for a maximum total contribution of £6,000 over 12 months. Based on current rates, that would earn around £199 in interest over a year.
Savers can launch the account with as little as £1. (Image: Getty)
The account is available to UK residents aged 13 or over, and can only be opened in a branch.
This account is more flexible than what’s typically expected from a ‘regular’ savings account, as up to two withdrawals can be made without penalty. If further withdrawals are needed, the account will have to be closed.
How does the account compare?
Santander currently tops the list for regular savings accounts with an interest rate of 8% AER. It includes a 5% AER bonus for one year, and allows customers to put up to £200 away per month. After 12 months, the interest reduces to 3.00% AER/gross. Interest is paid at the end of the term, with a full £2,400 deposit estimated to earn around £104. Withdrawals can be made at any time without penalty.
Zopa offers a 7.1% AER over six months, with a £300 per month limit, allowing savers to amass £1,800 in total. Interest is paid at the end of the term, with a full £1,800 deposit estimated to earn around £80. Savers can withdraw funds from the Zopa savings account at any time without penalty. However, they’ll only be able to replace the money within the £300 monthly allowance. For example, if you withdraw £500 but want to put money back in, you can only deposit up to £300.
First Direct offers a competitive 7% AER over 12 months. The account allows a monthly deposit of £300, totalling £3,600 in savings over the course of a year. At the end of the term, savers will have £3,736.50, including £136.50 in interest. Withdrawals are not permitted until the term ends.
Inflation-beating returns
Inflation remained stubbornly above the Bank of England’s 2% target in June, with the Consumer Price Index (CPI) rising 2.8%. Financial experts warned that savers with money in low-paying accounts face a “double blow” of weak interest rates and lacklustre spending power.
A recent analysis by LHV Bank estimated that a typical £20,000 savings pot, earning the average easy access interest rate of 2.12%, would grow to just £22,212 over five years. If the rate were 4.15%, it would reach £24,509.
However, with prices rising by 2.8%, LHV said that an account paying 2.12% yields a real return of roughly -0.66%, highlighting the importance of opting for inflation-beating accounts.
Alex Beavis, interim director of banking at LHV Bank, said: “Consumers continue to lose out to the loyalty penalty. Loyalty counts for little in savings. Banks profit from inaction, and savers who leave money in mediocre accounts get substandard returns, made worse by inflation eroding what they have.
“Being an active saver is the answer. Active savers don’t lock their money away for a ‘rainy day’. They check, they switch, and they keep doing it, which turns savings into real growth. Savers should also be able to trust their banks to offer simple, clear accounts that pay strong rates for the long term, not headline rates that fade to nothing within months.”
Rachel Springall, finance expert at Moneyfactscompare.co.uk, said: “It is never too late for consumers to start putting some cash aside for any future goals, as those who save little and often can feel more in charge of their financial wellbeing.
“Regular savings accounts are ideal for slowly building a pot as they encourage the savings habit. However, consumers will need to work out if they are the right choice for them, as some accounts can be restrictive and might not be suitable for larger deposits.”
