Stubbornly high inflation and plummeting interest rates are leaving savers with a pretty raw deal at the moment. But if you’re able to put away a set amount each month, you can often find higher rates with regular savings accounts.
In January, the consumer prices index (CPI) measure of inflation remained at 2.7% for the fourth consecutive month, while the retail prices index (RPI) rose to 3.3% from 3.1% in December.
With inflation at its current level, a basic-rate taxpayer would need to find an account paying 3.38% to beat CPI and an account paying 4.1% to beat RPI.
Unfortunately no instant-access or fixed-rate savings accounts are able to beat inflation at present but this is achievable with some regular savings accounts.
Would a regular savings account suit me?
Regular savings accounts require customers to make a contribution each month so they are ideal for savers who are saving for something specific and wish to drip-feed cash into their account in a disciplined way.
These accounts will usually limit the number of withdrawals you can make each year and restrict the amount of money you can invest each month. Be careful not to miss a payment or exceed the limit on withdrawals, as doing so can cost you interest.
The market’s best regular savings accounts
The best regular savings account currently available is offered by Norwich & Peterborough (N&P) and pays 4%. The minimum monthly deposit is just £1, while the maximum you can deposit is £250. You’re allowed one withdrawal a year without penalty.
In second place is Principality Building Society’s Regular Savings Bond Issue 12, with which you can earn 3.5%. Although the interest rate is lower than the account from N&P, you can deposit up to double the amount – so £500. However, the minimum contribution is also higher, at £20 a month, and you aren’t permitted to make any withdrawals without incurring a penalty.
Tied regular savings
To qualify for some accounts you have to be an existing bank account customer but the best rates available on these tied products easily beat the rest of the market.
Both HSBC and Marks & Spencer Bank are currently paying 6% on their tied regular savings accounts. The minimum monthly payment is £25 and the maximum is £250 but you won’t be able to make any withdrawals without penalty.
Although regular savings accounts can pay a more generous rate than other savings options, you’ll need to be sure that you can commit to making monthly deposits and can afford to make very few withdrawals, or sometimes none at all. If you need to access your money more often, take a look at our best rate instant-access accounts.