Buckinghamshire launches savings accounts with rising interest rates


Updated on 10 October 2012 | 5 Comments

The new Chiltern Gold Escalator easy access savings account and Cash ISA will build up to a rate of 4% in a year but pays an AER of 2.85%. Confused? Here's how it works.

Buckinghamshire Building Society has launched two innovative savings accounts. One is the Chiltern Gold Escalator easy access savings account and the other is the Chiltern Gold Escalator Cash ISA. The good news is that both will end up paying 4% on savings as long you can resist dipping into your pot.

The bad news is that it’s not as simple as it sounds!

How they work

Both accounts start by paying a modest variable rate of 0.5% in the first month, which increases by monthly increments of 0.5% until the maximum of 4% is reached in month eight. The monthly rate rises will look like this:

Month

Gross Rate

1

0.5%

2

1.0%

3

1.5%

4

2.0%

5

2.5%

6

3.0%

7

3.5%

8

4.0%

9

4.0%

10

4.0%

11

4.0%

12

4.0%

The cracking variable rate of 4% applies from the eighth month until the end of the year and beyond.

But in effect, because the rate is not consistent the account provides a gross AER of 2.85% in the first year providing no withdrawals are made (for more see below).

With the Cash ISA the 2.85% AER is paid tax free, but on the easy access version of the Gold Escalator account, you will have to pay tax on that interest.

Easy access with a catch

Both are no notice easy access accounts, but if you make a withdrawal you will be penalised. Your savings will have to start from scratch at the bottom as the rate will drop back to 0.5% and rise again month by month to the 4% ceiling.

Also, bear in mind you will not be able to replace the money you withdraw as these two accounts do not accept further deposits, just one lump sum. For the easy access version of the Escalator that means a lump sum up to a limit of £85,000, but the Cash ISA will take the 2012/2013 allowance of £5,640 and/or transfers from other Cash ISAs.

It’s a good idea to keep to a limit of £85,000 on both though if you want your pot to be covered by the Financial Services Compensation Scheme.

The increasing monthly rate rewards those that can leave their funds untouched. But the account still offers the security of being able to access your money.

How they compare

Once you’ve got your head around it all, both accounts stand up well against the competition, even in the first 12 months when the rate is only just building up! Below are two tables showing you what’s on offer elsewhere.

Easy access savings accounts

Account

Interest Rate Gross AER

Minimum Deposit

Bonus

Withdrawal limits

Buckinghamshire BS Chiltern Gold Escalator

2.85%

£100

None

Unlimited (but rate will drop to 0.5% and build up again affecting overall AER)

Shepshed BS Postal Account (Issue 2)

2.80%

£25,000

None

Withdrawals (minimum £1,000) can only be made by cheque or BACs.

Allied Irish Bank (GB) Easy Access Reward Account (Issue 2)

2.80%

£1

Rate includes a 1.30% bonus for the first 12 months

Bonus only paid if you make four or fewer withdrawals a year.

Teachers BS Smart Saver

2.80%

£25,000

None

Withdrawals (minimum £1,000) can only be made by cheque or BACs.

Nationwide BS
MySave Online Plus

2.75%

£5,000

Rate includes a fixed 1.21% bonus for the first 12 months

One penalty-free withdrawal each year

ING Direct Savings Account

2.70%

£1

Rate includes a fixed  2.17% bonus for the first 12 months

None

Principality BS e-Saver (Issue 7)

2.65%

£1

Rate includes a fixed 1.00% bonus for the first 12 months

None

Aldermore Easy Access (Issue 3)

2.60%

£1,000

None

None

The easy access account from Buckinghamshire tops the table and is not even bolstered by a bonus.

The next best rate of 2.8% gross AER requires a minimum £25,000 deposit, which excludes a lot people with modest pots. The alternative is the Allied Irish Bank (GB) Easy Access Reward Account (Issue 2) which also pays 2.8% but offers the chance to start saving from £1.

However, the Allied account includes a bonus of 1.3% which is only payable if you limit yourself to fewer than four withdrawals in 12 months. It seems the very best easy access accounts all come with some sort of restriction on getting hold of your money - but some access is better than none for the top rates.

Easy access Cash ISAs

Account

Interest Rate (AER)

Minimum deposit

Bonus

Transfers allowed?

Withdrawal limits

Skipton BS Super Cash ISA

3.10%

£50,000

None

Yes

Unlimited

Post Office Premier Cash ISA

3.01%

£100

1.26% bonus for 18 months

Yes

Two penalty-free withdrawals each year

Leeds BS Bonus ISA

3.00%

£1

1.7% bonus until 30 September 2013

No

Two penalty-free within bonus period

Marks & Spencer Advantage Cash ISA

3.00%

£100

None

Yes

Unlimited

Virgin Easy Access Cash E-ISA

2.85%

£1

None

Yes

Unlimited

Buckinghamshire BS Chiltern Gold Escalator Cash ISA

2.85%

£100

None

Yes

Unlimited (but rate will drop to 0.5% and build up again affecting overall AER)

Principality e-ISA Issue 4

2.85%

£1

1.05% bonus for 12 months

Yes

Unlimited

Sainsbury’s Bank Cash ISA

2.80%

£500

None

Yes

Unlimited

ING Direct Cash ISA

2.80%

£1

None

No

Unlimited

Santander Direct ISA (Issue 11)

2.75%

£500

2.25% variable rate bonus for 12 months

Yes

Unlimited

BM Savings ISA Extra (Issue 3)

2.75%

£1

1.05% bonus for 15 months

Yes

Unlimited

Saga ISA Saver (Issue 3)*

2.70%

£500

1.10 bonus for 18 months

Yes

Unlimited

AA Postal Access ISA (Issue 4)

2.70%

£500

2.20% bonus for 12 months

Yes

Unlimited

Barclays Loyalty Reward ISA**

2.64%

£1

0.6% bonus for 12 months

No

Unlimited

Halifax ISA Saver Online

2.60%

£1

2.35% bonus for 12 months

Yes

Unlimited

* Only available to over 50s

**Existing Barclays customers only

The Gold Escalator Cash ISA from Buckinghamshire BS doesn’t quite make it to the top on the ISA best buys. There are better rates on offer from M&S, Leeds Building Society and the Post Office. Skipton has the leading rate of 3.10% at the moment, but that will only benefit savers with a large deposit, as the account requires a £50,000 opening balance.

The Gold Escalator Cash ISA could do your savings some good in the long term though as the account will eventually roll into a new year with a variable rate of 4% - as long as you don’t need to dip into your pot. Considering how savings rates are plummeting and some savers are finding their attractive rate falls after a bonus period this is an interesting prospect.

Limited Edition

Both the Chiltern Gold Escalator and the Chiltern Gold Escalator Cash ISA are limited edition accounts so if you like the sound of a rate that is set to rise rather than fall and remain at a pretty attractive high you should move quickly. That said if you want a truly easy access account that doesn’t penalise you for using your savings you're probably better off with a more flexible account that might pay a bit less.

More on savings:

The top fixed rate savings bonds

Treasury orders banks to offer simple savings accounts

Save to buy: the savings accounts that help you build a deposit

 

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