Top savings accounts come with a catch

Savers are having to jump through hoops to earn rates of 1.3 per cent.

Banks and building societies are making it hard for savers searching for top easy-access deals. They are coming out with so-called easy-access accounts with rates of 1.3 per cent – but savers often have to jump through hoops to earn this headline rate.

In many cases you are restricted on how many times you can take money out. With some accounts, the top rate only lasts for a fixed time, after which your money is moved into another account. Others come with a bonus which runs out after a year, at which point your rate drops to a pittance. Sometimes you need to trawl through the lengthy terms and conditions to find the catches.

Virgin Money has raised the rate for new savers in its Double Take E-Saver to a top 1.3 per cent.  Shawbrook Easy Access, RCI Bank Freedom, Coventry Building Society Limited Access Saver and Sainsbury’s Bank Defined Access Saver also pay this top rate. But while the rate is the same, the accounts are very different.

With Virgin Money, you only earn the 1.3 per cent if you limit your withdrawals to two a year.  Once you have made the second withdrawal, you can’t make any more until the next calendar year. Closing your account counts as a withdrawal, so you won’t be able to close or have any access to your money in a year where you have already made two withdrawals.

Sainsbury’s Bank Defined Access Saver lets you make three withdrawals a year.  Unlike the Virgin account, you can make more but your rate drops to 0.5 per cent.  The Coventry account also limits you to three withdrawals; if you make more you will face a charge equal to 50 days’ interest. The rate also includes a 0.3 percentage point bonus, payable for a year.

Neither the Shawbrook Bank Easy Access or RCI Bank Freedom have withdrawal restrictions or short-term bonuses.  But with RCI Bank your money is covered up to €100,000 (around £88,000 at the current exchange rate) under the French compensation scheme, while with Shawbrook you get up to £85,000 under our own Financial Services Compensation Scheme if the banks run into trouble.

You could end up better off in the RCI account over the longer term on the rate front, however. In the past, the bank has passed on rises in its rate to both new and existing savers.  Shawbrook, on the other hand, tends to bring out a new issue of the same account when it changes its rates and pays it only to new savers.  Its current issue is number 12 paying 1.3 per cent for new savers.  Some loyal savers in previous issues earn as little at 0.75 per cent.

Ford Money pays a lower 1.22 per cent, but it pledges that when it alters its rates, the new deal will apply to both new and existing savers. 

Skipton Building Society has launched two accounts pledging savers will earn a fixed amount over base rate for the next two years. The Skipton Super Tracker and Super Tracker Cash Isa, both at 1.02 per cent, come with an unusual guarantee to pay 0.52 percentage points over Bank of England base rate.  If bank rate rises, this will prove to be a good deal.  But it limits you to two withdrawals a year; if you want to make more, you need to close your account.  And the tracker guarantee only lasts until June 2020; then you need to be ready to move your money, as you could end up in a poor-paying account.   

-June 2018: What are the best savings account rates?