Updated: 24/08/2015
For those who are looking for fixed rates or alternative savings ideas this summer, there are signs that the market is beginning to hot up by offering more competitive rates and bringing some much needed innovation. In the second of our two part summer feature, we let you know which savings accounts are performing well this summer by giving you our selection of summer sizzlers from the best the market has to offer.
Regardless of how long you can tie up your money, from instant access to long term savings alternatives, there should be something here for everyone from instant access and guaranteed fixed rates, to Cash ISAs and savings alternatives which offer the potential to beat what are still historically low savings rates.
Instant access – up to 1.40% AER variable
If you are looking for an instant access ISA, Nationwide’s Instant ISA Saver is currently paying 1.40% AER variable interest and can be opened by UK residents aged 16 and over from just £1. This simple, flexible account could be an option to consider if you are new to ISAs or are looking for a low-deposit ISA deal that is suitable for a young person over 16 who wants to start saving. For those who are seeking a non-ISA instant access savings deal and would prefer to receive monthly interest, the Online Instant Access Savings Account from State Bank of India offers an interest rate of 1.25% AER variable which is paid on a monthly basis. A minimum deposit of £500 is required to open this savings account.
Click here to find out more about instant access ISAs »
Click here to find out more about instant access savings accounts »
Instant access cash management – up to 1.63% AER variable
Savings Maximiser is a cash management service that compares the best buys from across the market and by regularly reviewing your accounts and making switches if a better rate is available, aims to secure a consistently competitive rate of interest. Aimed at those who want to retain instant access to their money at all times and have at least £25,000 to keep on deposit, the service offers full banking facilities and is simple, secure and saves you time. With the ever increasing number of savings rates on offer, the pace of change to market leading rates and potential interest rate rises on the horizon, this could be a perfect time to consider Savings Maximiser. Current rates available are up to 1.63% AER variable and there is a fixed monthly fee for this service.
Fair Investment view: “The upside to this type of account is that you have instant access to all of your money, whenever you want it, although there are still a few deals where the headline rate includes a bonus after 12 months so you may still need to plan ahead. However, we are also well into our seventh year of record low interest rates and the returns on offer from instant access are still low. With some signs that this may start to pick up, a cash management service which reviews the best rates for you could be a timely opportunity.”
Click here to find out more about Savings Maximiser »
Short term savings – 2.38% AER fixed for 2 years
For those who are able to tie up their money for two years and are also looking for a fixed rate of interest, the 2.38% AER on offer from Access Bank UK’s 2 Year Fixed Rate Bond is market leading. The minimum deposit is £5,000 and interest is paid at maturity. The account can be set up as a single or joint account and access to account information is online or via telephone. As with most fixed term accounts, no early withdrawals are permitted. You can apply online quickly and securely.
Fair Investment view: “A fixed rate bond such as this offers security for your capital, and you know exactly how much you will paid and when, but with savings rates still at some of their lowest levels of all time, even at 2.38% you could find that this type of savings account is offering significantly lower returns than the rates on offer a few years ago.”
Click here to find out more about the Access Bank UK 2 Year Fixed Rate Bond »
Medium term savings – 2.44% AER fixed for 3 years
If you are happy to tie up your cash for three years, and would like some flexibility in terms of how you receive interest, the 3 Year Fixed Rate Bond from Vanquis Bank may be of interest to you. Requiring a deposit of £1,000 minimum, the account pays 2.44% gross/AER fixed for three years, with the option to receive your interest on either a monthly or annual basis. No early closure or withdrawals are permitted.
Fair Investment view: “A fixed rate bond pays a known rate of interest at set times for the term of the bond, which are the most appealing features of this type of product. However, rates are at an all time low and so the returns available will be much lower than the fixed rates of yester-year. Also remember that if you do tie yourself in now and inflation goes up, your real return (i.e. the return after inflation and tax) could go down. The real question to ask might well be whether the fixed rate on offer is enough for removing access to your capital?”
Click here to find out more about the Vanquis 3 Year Fixed Rate Bond »
Medium to long term savings alternative – potential 4.50% each year
For those prepared to tie in for the longer term but who would like the opportunity for their plan to mature early, the Kick Out Deposit Plan from Investec includes the opportunity to mature each year from the end of year 3 onwards. The plan offers a potential 4.50% per year (not compounded) and will mature early or ‘kick out’ provided the value of the FTSE 100 at the end of each year from year 3 onwards, is higher than its value at the start of the plan (subject to averaging) – even if this is by just one point. That’s a potential 13.50% after 3 years, rising to 27% if the plan kicks out in the final year. If the Index is lower on all of these dates you will only receive a return of your initial deposit at the end of the full plan term.
Fair Investment view: “With our current leading 3 year fixed rate bond paying 2.50%, and lower rates available for fixing within a Cash ISA, the potential to earn 13.50% after 3 years could be an attractive option. However, you will need to be prepared to sacrifice a fixed rate on your savings since your return is not guaranteed.”
Click here for more information about the Investec Kick Out Deposit Plan »
Long term savings – 2.90% AER fixed for 5 years
The additional premium for committing your savings for the longer term has narrowed recently and yet the demand for this length of fixed rate is still high. State bank of India’s 5 Year Fixed Rate Bond is currently offering 2.90% AER/Gross with a minimum deposit of £25,000 and you can apply online. There are monthly, annual or maturity interest options but no withdrawals are permitted.
Fair Investment view: “The main attraction here is the security of being paid a known rate of interest at set times for the term of the bond, but with fixed rates at an all time low and a headline rate of just under 3%, you will need to consider whether it is worth tying up your capital for five years.”
Click here for more information about the SBI 5 Year Fixed Rate Bond »
Long term savings alternative – potential 33% growth return
For those looking for the potential for higher growth and are prepared to tie their money up for the longer term, the Investec 6 Year Defensive Deposit Plan offers an alternative that some savers might find attractive. By linking your return to the FTSE 100 Index, this deposit plan offers the potential for a 33% fixed return, which is paid provided the value of the Index at the end of the plan, is higher than 90% of its value at the start of the plan (subject to averaging). So the FTSE can fall up to 10% and you still receive the fixed return. However, if the Index is lower, you will only receive a return of your original capital.
Fair Investment view: “The best long term fixed rate savings bonds are paying a little over 3% AER whilst by linking your deposit to the FTSE, if this Deposit Plan pays out the 33% return is equivalent to around 4.85% AER. With record low longer term fixed rates forcing some savers to consider a wider range of options, the combination of capital protection plus the potential for a high growth return could be a compelling opportunity. Taxpayers can also benefit from tax free growth as the plan is also available as an ISA.”
Click here for more information about the Investec 6 Year Defensive Deposit Plan »
Compare instant access accounts »
Compare two year fixed rate bonds »
Compare three year fixed rate bonds »
Compare five year fixed rate bonds »
Compare alternatives to fixed rate bonds »
AER stands for the Annual Equivalent Rate and illustrates what the interest rate would be if interest was paid and compounded once each year.
No news, feature article or comment should be seen as a personal recommendation to invest. Prior to making any decision to invest, you should ensure that you are familiar with the risks associated with a particular plan. If you are at all unsure of the suitability of a particular product, both in respect of its objectives and its risk profile, you should seek professional advice.
