New three-year savings account guarantees rate risesHow do escalator and tracker bonds compare?

09 October 2015

Piggy bank with a chain and padlock around it

Which? Money looks at a new savings account that guarantees mid-term rate rises to see if it's a good option for savers.

If you want to find out more about alternative savings accounts, we've included links to the Which? Money Compare savings tables.

New escalator savings bond enters the market

Leeds Building Society has launched a new escalator savings bond that guarantees a rate rise every year over three years and comes with the added benefit of allowing some penalty-free withdrawals.

In year one you'll earn a fixed-rate of 2.00% AER, rising to 2.25% AER in year two and 2.75% AER in year three. 

Customers can access 25% of their money without penalty as long as they maintain a balance of £100 and can choose to have interest earned paid into this bond or an account held elsewhere.

This account can be opened in-branch, via the internet or online with an initial deposit of £100.

Is it a good savings account option?

Despite being the only three-year 'escalator' bond on the market today, rates on standard three-year fixed-rate bonds are better. For example, the average return on the Leeds Escalator Bond is 2.33% AER, but you could earn as much as 2.60% AER in the top-paying ordinary three-year deal.

Click on the links for information on the best rate three-year fixed-term accounts from Al Rayan Bank and Paragon Bank, paying 2.60% AER and 2.56% AER respectively.

However, the account from Leeds could be a good choice if you want to try out a bond, especially if you would like the peace of mind of retaining some access to your funds.

Which? Money Compare table: Fixed-rate savings accounts - compare hundreds of deals

How do tracker bonds compare?

The new two-year variable-rate tracker bond from National Counties Building Society offers 2.00% AER, beating all other tracker bonds on the market..

It pays the Bank of England base rate (currently 0.50%) plus 1.50% AER for the two-year term and requires a minimum initial deposit of £5,000. 

It also offers a better rate than the top-paying instant access account and the potential of a rate rise if the base rate increases during the next two years.

The Which? Money Compare tables let you search hundreds of savings accounts and cash Isa deals from providers large and small so that you can find a good home for your nest egg. We also combine this with our unique customer scores that show you how well the providers featured are likely to treat you in the long run.

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