Regular savings: how to earn 2.71% without any risk
If you’re prepared to put the work in, you could earn 2.71% on your savings in one year.
It’s getting harder to earn a decent rate on your savings.
While rates languish at record lows and one of the best rates has been slashed there is still another route to secure decent returns.
It involves signing up to four high-interest regular savings accounts with some of the top banks and building societies in the UK.
That might sound like a lot of hard work but taking advantage of the linked regular savings accounts means you could earn a rate of 2.71% in one year – far more than you can get in a one-year fixed rate bond at the moment.
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What you need to do
The top regular monthly savings accounts available right now are available from First Direct, HSBC, M&S Bank and Nationwide, which all pay 5%.
But in order to access these deals you will need to have a linked current account with each of the providers.
Below I’ve set out the current accounts that make the most sense to open in order to access these deals along with the conditions you need to meet each month to keep them open.
|
Current account |
Funding requirement each month |
Direct Debit set up required |
Other requirements |
|
£1,000 |
- |
- | |
|
M&S Bank Current Account |
£1,000 |
Two active Direct Debits |
Only available to those that switch using the Current Account Switch Service |
|
HSBC Advance Current Account |
£1,750 |
- |
- |
|
Nationwide FlexDirect |
£1,000 |
- |
- |
You can pick one of these accounts as your main account and then set up three Standing Orders that deposits the funding requirement for the other accounts each month.
How the sums work
Below are the four linked regular saver accounts that you will get access to and how much each will allow you to earn in interest in one year.
|
Regular saver account |
Interest rate |
Min/max monthly contribution |
Maximum contribution over 12 months |
Maximum interest earned after 12 months |
|
First Direct Regular Saver |
5% |
£25/£300 |
£3,600 |
£97.50 |
|
M&S Bank Monthly Saver |
5% |
£25/£250 |
£3,000 |
£81.25 |
|
HSBC Regular Saver |
5% |
£25/£250 |
£3,000 |
£81.25 |
|
Nationwide Flexclusive Regular Saver |
5% |
£1/£500 |
£6,000 |
£162.50 |
|
Total after one year |
|
|
£15,600 |
£422.50 |
If you can drip feed £1,300 a month into these four accounts, you will save £15,600 and take away a tidy sum of £422.50 for your efforts, which amounts to a rate of 2.71%.
This trick can be doubly effective for couples, as they can put away £31,200 in all and earn this top rate. The combined effort would produce an impressive £845 after one year.
Should you bother?
If you’re fed up with miserly savings rates but don’t want to risk your cash this could be an option to make your money work harder for you.
All the banks are covered under the UK Savings safety guarantee and the interest earned would be free of tax under the new UK Personal Savings Allowance.
It does take a bit of doing to set up and keep stock of, and you'll need to ensure you satisfy the conditions of the current accounts to be eligible, but putting in the extra work does pay off.
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Comments
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Keep each account at the max and bung in the requisite amount to get the interest each month, then out a couple days later into the next account. It works, trust me, even our accountant and financial adviser thought so. It means you have instant access if necessary as well. If I recall correctly it works out about £16k in various accounts and we got about £500 p.a. on what we have that is not tied up in bigger investments. We read about it initially with Martin Lewis (The Money Saving Expert) It's called 'ping-ponging' apparently.
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What's the point in going to all that trouble when the maximum total amount you can save over 12 months is £15,600? You won't get 5% interst on that either since it won't all be invested until the final month.
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Money invested into these Saver accounts does NOT earn 2.71%; it earns 5%, because the money only 'earns' interest for the months it is invested. Before it is invested, it is either salary you haven't yet received so haven't got, or it is money you do have which is invested elsewhere. Your calculation includes the time when you may not have the money!!
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08 January 2017