Buckinghamshire launches savings accounts with rising interest rates

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