Sleep Easy With This Savings Account

In my quest for a super savings account, I'm looking for my three magic ingredients: a great rate, true instant access and security.

My latest pick is Abbey's new Instant Access Saver (Special Issue 2), which does a pretty good job of meeting all my criteria.

But I know many of the savers among are not too keen on the way some UK banks are run, preferring how building societies do business instead. So, in the spirit of fairness, for those of you who want to steer clear of banks, I'm going to tell you about my favourite building society savings account.

When the credit crunch first reared its ugly head, many savers turned to the relative safe haven provided by building societies.

Building societies are not usually funded in the same way as banks. There's a much greater reliance on funding through deposits from customers, rather than borrowing from other financial institutions via the wholesale money markets.

The global liquidity crisis has seen the money markets effectively run dry, but the theory is that building societies are better placed to weather the storm. (Read Northern Rock: Are Building Societies Safer? to find out more.)

That said, it hasn't all been plain sailing. At the beginning of September, Nationwide, the UK's largest society, took over the Cheshire and the Derbyshire, when the two smaller societies ran into trouble with bad debts leading to heavy half-year losses.

But if you still favour building societies over banks, where can you find a top savings account?

At the moment, I like Nottingham Building Society's Sleep Easy Saver, which is available to savers with £1,000 or more to put away. But does it have my three magic ingredients of a great rate, true instant access and safety? Here's how the account measures up:

Fantastic rates

Yes, the Nottingham account certainly ticks the box with a great rate of 6.50% AER, putting it very close to the current market-leader, Alliance & Leicester eSaver Issue 2, at 6.60%. And until 1 November 2010, the rate is guaranteed to be at least 0.50% higher than the Bank of England base rate.

The rate includes an introductory bonus rate of 1% until 1 November 2010. But there's a catch. To enjoy this top-up to your return, you can only make six withdrawals in each interest year. (The interest year runs from 2 November to 1 November).

Instant Access?

This leads me to my second magic ingredient: true instant access. I've got to admit Nottingham's account isn't perfect on this point. But, if your intention is to save, rather than spend, six withdrawals a year should be enough. And you can take money out at any time without giving notice. That said in an ideal world, you should be able to dip into your savings as regularly as you like without risking the rate.

Security

And so to my third ingredient: security. Can you really sleep easy with the Sleep Easy Saver?

I've said it before: nothing is 100% safe, but Nottingham appears to be in a reasonably comfortable position right now. For one thing, the society claims it has had absolutely no exposure to risky sub-prime mortgages and it has no investment in Icelandic banks. What's more, it says it has never bought a mortgage book from another financial institution, so there shouldn't be any hidden bad debts lurking beneath the surface.

Nottingham has also given reassurance on the quality of its mortgage business and says that its arrears levels are less than a quarter of the industry average. 

Crucially, 75% of its funding comes from depositors which is higher than many other societies -  the industry average is just 70%. This means the society is less likely to run into the kind of problems which forced the takeover of the Cheshire and the Derbyshire.

All-in-all, I think the Sleep Easy Saver is a pretty good choice. But some of you may be concerned that putting your money with a minnow like the Nottingham could be a mistake. I wouldn't blame you if you want the safety of a big-hitting bank, but remember: good things also come in small packages!