The Co-operative Financial Services (CFS) has launched a new market-leading savings bond that offers customers a fixed rate of 5% for three years.
Fixed rate savings
The Co-operative’s three year fixed rate savings bond can be operated online, in branch and over the phone. Consumers interested in opening an account will need an initial deposit of at least £5,000.
Once opened, the Co-operative’s bond pays interest annually and offers savers a 30 day ‘access window’ at the end of each year. During this time, customers may take the decision to close the savings account and withdraw their money, subject to interest penalties.
John Hughes, Director of Retail Products at CFS, said: ‘We know that access to funds has become an important issue for customers in the current climate so we’ve introduced an annual window for savers to access their money and close the account should they wish.’
Interest rate penalty
However, as is usual with fixed rate savings accounts, an interest penalty will apply to anyone who decides to withdraw money from the Co-operative three year savings bond before it reaches maturity.
If savers choose to close the account, they will receive a lower return on the money that has been held in the bond during that ‘account year’.
The gross rate at which interest is paid for the final year the bond is held will be reduced by 2%, should a saver choose to release their funds early.
Find the best savings account for you
Which? Money editor James Daley commented: ‘It’s great to see that The Co-operative Bank is offering such a competitive rate to savers. Those who are prepared to lock their money away for a year or more can currently earn great returns, and this is a very good deal for anyone willing to tie their money up over three years.
‘However, the 30 day access window offered by this account shouldn’t tempt anyone who may need access to their cash into fixing. While it’s good that Co-op customers may be able to access their money in a crisis, the penalty for doing so is a sharp drop in the rate of interest they’ll earn.’
Which? experts recommend that consumers put aside between three and six months’ worth of salary payments in savings accounts that are easily accessible, so that they can get at their money easily if an emergency arises. To compare Best Buy instant access accounts, check out the independent Which? savings account review.
For more information on fixed rate savings and to compare the different deals available, visit our fixed rate savings review.
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