With new market-leading accounts launched for both notice and easy access savings accounts, we look at whether you should sacrifice access to your cash for a better rate.
Finding a decent home for your cash is a tough one for savers. Do you want to keep your money within reach with an easy access account, or sacrifice a bit of access for the sake of a better rate.
The debate reared its head again last week, as Kent Reliance Building Society launched a new, market-leading notice account.
The Kent Reliance online notice account
The new notice account from Kent Reliance offers a very competitive 3.35% rate.
You can open an account with £1,000, manage it online and choose to have interest paid monthly or annually.
But there is one catch - the notice period.
Giving notice
Withdrawals from the Kent Reliance savings account are only allowed if you give 60 days’ notice.
In order to obtain funds, you need to send a signed withdrawal request to the KRBS Head Office with the details of your nominated account (which incidentally has to be the account you transferred the initial deposit from).
For some, 60 days may seem like a long time; it’s a whole two months and sounds like a massive inconvenience especially if you're caught out by an unexpected bill or emergency boiler repair.
You can request the money comes out immediately, but you will incur a penalty of 60 days’ loss of interest on the amount withdrawn.
The appeal of notice accounts
Typically notice accounts require savers to provide a warning of between 30 and 90 days before a bank or building society will release funds.
By giving your bank or building society a heads up on when you plan to take money out, notice accounts usually reward you with higher interest rates. This is the main reason savers would look to them as a home for their money.
In terms of flexibility, notice accounts offer a happy medium between easy access savings accounts (which usually let you access your money at any time without penalty) and bonds (that tie-up your money for as long as five years).
I can wait
If you can stand the wait, take a look at the top seven notice accounts currently paying the best rates in exchange for your patience.
|
Account |
Interest Rate AER |
Minimum Deposit |
Notice |
| Manchester BS Variable Notice Account | 3.36% | £1,000 | 60 days |
|
Kent Reliance BS Internet 60 Day Notice Account Issue 2 |
3.35% |
£1,000 |
60 days |
|
3.12% |
£2,000 |
90 days |
|
|
West Bromwich BS |
2.80% |
£1,000 |
90 days |
|
Principality BS |
2.60% |
£1,000 |
60 days |
|
National Counties BS 1st Issue Notice Saver |
2.00% |
£1,000 |
45 days |
|
FirstSave 30 Day Notice - Base Rate Linked |
2.00% |
£100 |
30 days |
|
Investec Bank plc Direct Reserve 3 |
1.80% |
£25,000 |
30 days |
I need access now
If the waiting period is putting you off, these are the top seven easy access alternatives.
|
Account |
Interest Rate AER |
Minimum Deposit |
Withdrawal limits |
Bonus |
|
3.25% |
£500 |
Unlimited |
1.25% |
|
|
West Bromwich BS Direct Bonus Account 4 |
3.22% |
£10,00 |
Four penalty free withdrawals a year |
1.71% |
|
3.20% |
£1 |
Unlimited |
2.70% |
|
|
3.19% |
£1 |
Unlimited |
2.64% |
|
|
3.06% |
£1,000 |
Unlimited |
2.06% |
|
|
3.06% |
£1,000 |
One penalty free withdrawal a year |
1.52% |
|
|
2.80% |
£1 |
Unlimited |
1.55% |
Who wins?
Generally when you give up the right to have instant access to your cash, you should benefit from a much higher return.
It is true that the new notice account from Manchester Building Society exceeds the interest pay-out on the leading easy access account from Coventry Building Society - but not by much! The difference between the table-toppers from each sector is just 0.11%.
[SPOTLIGHT]Which begs the question, are you willing to sacrifice instant access for this minimal percentage difference on the return?
With the Coventry BS Telephone Saver you are allowed unlimited withdrawals, as long as these are at least £500 (a minor annoyance as you can just take what you need and deposit the rest back). The Santander eSaver Issue 5 offers less wacky terms for unlimited withdrawals and will still give you access to a great 3.20% rate which is just a 0.16% sacrifice.
Why bother?
So if the rates are nothing to shout about why choose a notice account?
Well, they are still accessible accounts where you can get hold of your stash without penalty as long as you play by the rules. I suppose the benefit of having to give your bank or building society forewarning that you intend to withdraw money is that you will think twice about whether you really need it.
Also easy access accounts have their downsides. Most with the best rates are bolstered by a temporary bonus, which usually means that after 12 months the rate will plummet and you will have to shop around again to find a new home for your savings.
Furthermore, in some cases easy access accounts don't always offer unlimited access and can be limited to a few withdrawals per year as is the case with the West Brom and Nationwide options.
Want more for your savings?
Whatever you decide, the best notice account or the best easy access account currently available is unlikely to keep your money safe from the eroding effects of tax and inflation.
If you want to protect the value of your money against rising prices and the tax man a Cash ISA should be your first port of call, but if you reach your limit (currently £5,640), try a regular savings account or a bond which are able to offer inflation busting rates.
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