Avoid These Savings Accounts!

Why special savings accounts for the over fifties should be avoided.

Are you a silver saver? If you are, then you make the grade for a range of tailor made savings accounts aimed exclusively at the over fifties and sixties.

This time last year silver saver accounts generated pretty competitive returns, but do they still have anything special to offer today?

Interest rates have dropped across the board following the long drawn out banking crisis. In fact, rates continue to worsen with each new base rate cut. When I last looked at silver savers, the market leaders offered tempting rates above 6%, but these days a return of around 3% is more typical.

This isn't very good news for those of you who are relying on interest from your savings to supplement your income in retirement.

Worse still, high street banks seem to have lost their appetite when it comes to targeting the over fifties market. Surprisingly, they don't appear keen to attract deposits from more mature savers in this way, even though they tend to have more savings than younger people.

Today Abbey is the only bank that still offers an account specifically aimed at the silver generation -- the 50+ Saver -- but it pays a rather unimpressive rate of 2.40% AER. The rest of the market is dominated by building societies.

What can building societies offer silver savers?

The most competitive rate I can find for silver savers is 5.12% AER from the West Bromwich Building Society High Income - Over 65s account. That seems pretty generous in the current climate, but to earn that market-leading rate you'll need to deposit a whopping £100,000!

Savers who can manage to stash away at least £5,000 will earn 4.85%. You'll also need to give 90 days' notice for withdrawals, so it's not much good if you need easy access, or you want to draw off the interest to boost your income.

For silvers savers who don't want to lock money away, the table below shows the best easy access accounts:

Best of the rest - easy access silver savers

*Minimum withdrawal £1,000. **Rate is 1.00% above the base Rate for the first 12 months and 0.25% below it thereafter.

Sadly, these silver saver rates are lagging behind the returns available from standard instant access accounts. The current market-leader -- ING Direct Savings Account -- pays 5% AER, so even the most competitive account from Coventry Building Society is falling short.

I don't think accounts for silver savers have much to offer right now. Unless you have a very large sum to deposit (£100,000 plus) there's better savings accounts on the market which are open to everyone regardless of their age.

So what's the answer?

That said there is one exception -- the Alliance & Leicester Premier 50 Current Account. True, it's not a savings account at all, but if switch your current account to A&L you'll receive a £100 bonus. What's more, you'll earn a fantastic rate of 6.5% on balances up to £2,500 (0.10% on balances over £2,500). And the rate is fixed for the first year, so there's no need to worry about future base rate cuts destroying a once healthy return.

Now that sounds rather good, and easily beats anything currently available in the savings market. But there is one drawback. The account provides rewards -- such as free annual multi-trip travel insurance and easy access to private medical care -- in return for a fee of £10 a month. But before you baulk at the idea of paying for an account when you're trying to maximise your savings, remember the £100 switching bonus will cover most of the monthly fee for a year.

So I think the Premier 50 Current Account still adds up to a pretty good home for the first £2,500 of your savings. For the rest of your savings my advice would be to look at the whole of the market, rather than accounts which specifically target silver savers.

And the best way to do that is to compare savings accounts at The Fool.