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Focus on: Nottingham's 2.62% non-bonus savings account grows in appeal

By MoneySupermarket.com  |  Posted: October 02, 2012

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Returns on savings have taken another tumble in recent weeks, leaving those with cash to stash even harder-up than they have been since interest rates fell to a measly 0.5% more than three years ago.

You can read more about this problem in Esther Shaw's article 'Savers, beware plummeting returns.'

In the meantime however, the worsening situation is shedding a different light on how savers might view easy access accounts that come with 'clean' rates of interest.

This means that, unlike the majority of savings accounts, they do not come with an initial bonus that falls away after the first 12 months has elapsed.

Here we take a look at one example, the Nottingham Building Society's e-saver Instant Issue 1, which is exclusive to MoneySupermarket, to see if it could be the right deal for you.

What's the deal?

Nottingham Building Society's e-saver Instant Issue 1 account pays a clean rate of 2.62%, so long as you can invest £500 upfront.

While this rate does not incorporate a bonus and therefore will not plummet after the first 12 months, it is variable so - in theory - could change at any time.

This is therefore something you will need to keep your eye on. As it says on the tin, you can make as many withdrawals as you like from the account, without penalty. This makes it a good choice for anyone who needs regular access to their cash.

The maximum sum you can hold in the account is £250,000 but if you are planning on investing a lot, remember that only the first £85,000 will be protected by the Financial Services Compensation Scheme (FSCS).

This account can only be operated online, so it won't suit savers who prefer telephone or branch access to their savings. It is a limited issue and may be withdrawn at any time without notice, so savers who are interested should move relatively fast.

It's also a deal that is exclusive to MoneySupermarket, so if you do decide it's the account for you, bear in mind you won't find it anywhere else.

Any catches?

Rates on savings accounts that incorporate upfront bonuses still tend to be higher than those on 'clean rate' accounts but since returns on have been slashed, the margin is narrowing.

For example, the highest-paying easy access account with a bonus is currently from Principality Building Society. Its e-saver Issue 6 Account, which can be opened with £1 and only operated online, pays a rate of 2.85% which includes a 1.20% bonus.

The difference in the upfront rate between this account and the Nottingham's is now only 0.23% which might not make much difference - especially on smaller balances.

What's more, if you forget to move your money after 12 months from the Principality and the variable rate doesn't change, this means your returns will plummet to 1.65%, so you would be better off with the Nottingham's 2.62% clean rate in the longer-term.

Allied Irish Bank, while offering a slightly lower rate of 2.80% on its Easy Access Reward Account issue 2, could be a better bet if you are prone to forgetting dates.

This is because the 1.30% bonus which is incorporated in its headline rate applies for the first 60 months, not just the first 12.

Nevertheless, with both of these accounts and others in the same field, such as ING Direct's Easy Access account, which pays 2.70% with a 2.17% bonus, and Tesco Bank's Internet Saver which pays 2.60% with a 1.35%bonus (both for 12 months), you will have to remember to move your money at some point.

What's the verdict?

Whether you should opt for a clean rate account or a slightly higher-paying account that comes with a bonus will come down to how pro-

active you are with your cash.

The good news is, if you don't want to shift your cash at any given date at all, you are losing out on less than you would have been since rates have fallen, and the margins between the two camps has narrowed.

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