The best interest rates for a savings account are usually payable on an annual basis. But what if you want a monthly income?
There comes a time -- and, admittedly, I'm not there yet -- when you're done with 'saving for the future'. The future's arrived and it's time to start benefiting from the sums of money you've been salting away all those years.
A friend of mine was talking to me about this the other day. Her 74-year old mum has apparently got nigh on £25,000 in cash savings and she isn't really taking advantage of the income it could produce to supplement her pension. It's her nest egg but she might just as well be keeping it under the mattress!
What she needs, I suggested, is a savings account that pays interest on a monthly basis. That way she could enjoy the extra income from the interest without nibbling away at her capital sum. So, which accounts should she consider?
According to the independent research company, Moneyfacts, and our own research, the best monthly interest accounts are as follows:
|
Company |
Account | Gross | AER | Notice or Term | Deposit |
|---|---|---|---|---|---|
| Icesave |
Easy Access |
5.56% |
5.70% |
None |
£250 |
|
ICICI Bank |
HiSave | 5.51% | 5.65% | None | £1 |
| Kaupthing Singer & Friedlander |
Premier Base Rate 90 |
5.50% |
5.64% |
90 Day |
£25,000 |
| Bradford & Bingley |
eSavings 3 |
5.46% |
5.60% |
None |
£1,000 |
| Yorkshire Building Society | Internet Saver | 5.41% |
5.55% |
Instant |
£1 |
| Chesham Building Society |
Save Direct 90 |
5.40% |
5.54% |
90 Day |
£10,000 |
While we would usually suggest comparing the Annual Equivalent Rates (AERs), to find out the best overall deal for savers, this is not the case for those who want a regular monthly income from the interest paid on savings. In this instance you need to look at the gross amount because you'll be helping yourself to the interest instead of adding it to your pot and compounding it to get interest paid on the interest (if you see what I mean!)
Of course, my friend's mother needs to take into account the prevailing rate of inflation and the tax payable on her interest from savings, so she may not get as much of a monthly income as she'd like.But that goes for all of us. And it's better than keeping it under the proverbial mattress!