M&S Bank offers regular saver account paying 6%

New M&S regular saver account pays a cracking rate of interest. But there's a costly catch.

M&S Bank has launched a regular saver account to coincide with the launch of its Premium Current Account.

The M&S Monthly Saver offers a fixed rate of 6% gross AER (or 4.8% after tax) to those who can deposit between £25 and £250 a month for 12 months.

That means the most you can invest in a year is £3,000.

No partial withdrawals are permitted, but if you choose to close the account early your savings will receive a reduced rate of 1.35% gross AER or 1.08% net.

A costly catch

But the M&S Monthly Saver comes with a catch that could eliminate the benefits of the cracking headline rate.

In order to take out a Monthly Saver with M&S Bank you need to have an M&S Premium Current Account - which you have to pay a minimum of £15 a month for.

That means the M&S Premium Current Account will cost £180 a year, which overshadows any interest you earn with the M&S Monthly Saver it gives you access to.

Even if you saved the maximum £3,000 you would only earn £96 before tax - not nearly enough to pay for the account!

However, if you value the other features of this packaged account you can offset the fee.

The M&S Premium Current Account offers 48 M&S Café hot drink vouchers worth £127, a birthday gift worth £10, treats vouchers worth £45, M&S vouchers worth £40, M&S reward vouchers worth £19 and a £100 interest-free overdraft. And for an extra £5 a month you get worldwide multi-trip family travel insurance worth £245.

So if you shop regularly at M&S, like to travel and love hot drinks, the account pays for itself. If not you might be better off looking elsewhere.

The First Direct Regular Saver, for example, pays a market leading rate of 8% AER. You need a 1st Account in order to apply, but unlike M&S this account doesn’t cost you anything so long as you pay in at least £1,500 a month, or have another First Direct product.

Regular savings accounts

Here is a round-up of the best regular savings accounts around at the moment.

Account	Interest Rate Gross AER	Monthly deposit min-max	Access	Notes
First Direct Regular Saver Account	8%	£25-£300	Online, phone	No partial withdrawals. You must have a First Direct 1st Account. Can carry monthly deposit limit into future months if you can’t meet the subscription.
M&S Monthly Saver	6%	£25-£250	Branch, post, phone	No partial withdrawals. Must be an M&S Premium Current Account holder.
HSBC Regular Saver	6%	£25-£250	Online, phone, branch	No partial withdrawals. Must have either a HSBC Premier, HSBC Advance, HSBC Advance Graduate or HSBC Passport account.
Nottingham BS Heartland Saver	5%	£1-£250	Branch	No partial withdrawals. Initial deposit minimum is £100.
Dunfermline BS Platinum Monthly Saver (Issue 1)	5%	£100-£500	Branch	Make one withdrawal and miss one monthly deposit during the fixed term without loss of interest.
Derbyshire BS Platinum Monthly saver (Issue 5)	5%	£100-£500	Branch	Make one withdrawal and miss one monthly deposit during the fixed term without loss of interest.
Cheshire BS Platinum Monthly Saver (Issue 5)	5%	£100-£500	Branch	Make one withdrawal and miss one monthly deposit during the fixed term without loss of interest.
West Bromwich BS Regular Saver Adult	4.10%	£10-£250	Branch	Withdrawals are not permitted within the 12-month fixed rate period. A minimum of 10 and maximum of 12 regular monthly payments can be made.
Norwich & Peterborough BS E-Regular Saver	4% (1.5% conditional bonus included)	£1-£250	Online	Conditional bonus applied if you save every month and make no more than one withdrawal a year.
HSBC Regular Saver	4%	£25-£250	Online, phone, branch	No partial withdrawals. Must be a Bank Account, Bank Account Pay Monthly or Graduate Bank Account customer.
Saffron Building Society 12-Month Fixed Rate Regular Saver (Issue 2)	4%	£10-£200	Branch	Withdrawals allowed without loss of interest.
Principality One-Year Regular Saver Bond Issue 11	4%	£20-£500	Branch	No withdrawals permitted.
Teachers Building Society Regular Saver (Issue 4)	4% (variable rate includes a fixed 2.4% bonus for 12 months)	£10-£250	Phone	One withdrawal permitted.
Progressive BS Regular E-Saver (Issue 1)	3.30% (variable rate)	£20-£250	Online	One withdrawal permitted a year but requires seven days’ notice.
Barclays Monthly Savings	3.25%	£20-£250	Online, phone, branch	Interest paid monthly. Rate falls to 3.03% in a month when you make a withdrawal.
Nottingham BS Regular Saver	3.10% (variable rate but includes 3% bonus)	£10-£250	Branch	Two withdrawals a year permitted.
Mansfield Building Society Regular Savings (2nd issue)	3%	£25-£500	Post, branch	Two withdrawals allowed a year without loss of interest. Additional withdrawals subject to loss of 90 day’s interest.
Ulster Bank Regular Saver	3%	£1-£1,000	Branch, online, phone	Save up to £15,000 with rate of 3%, and 1.5% on anything over. Unlimited withdrawals.

As you can see the top three headline rates are linked to current accounts some of which you have to pay for. In order to benefit you may need to switch. Read: Thinking of switching your current account? to find out how to go about it.

Elsewhere there are still great rates available, mainly from building societies. These providers don’t expect you to pay or to be existing customers, but you might have to be local as the accounts are only operated in-branch with a passbook.

Some of these accounts allow withdrawals. Mansfield, Saffron, Cheshire, Derbyshire, Nottingham, Progressive, Teachers, Norwich & Peterborough and Dunfermline building societies allow at least one withdrawal a year. Saffron is the most lenient offering uncapped withdrawals without penalty.

Ulster Bank only offers a rate of 3% but gives you the chance to save much more, with an upper monthly savings limit of £1,000. The account also allows withdrawals so if you need the money in an emergency you can dip into the pot penalty-free. Barclays Monthly Saver is also flexible, only reducing the rate for the month you make a withdrawal.

More on savings:

The top fixed rate savings bonds

Top savings accounts for kids!

The best instant access savings accounts

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