Are regular savings accounts still worth your while?Trio of banks drop savings rates to 5%

04 October 2016

You can earn up to 5% AER with regular savings accounts

After a trio of banks cut the rates on their regular savings accounts, Which? weighs up whether they're still a good home for your money. 

First Direct, HSBC and M&S Bank all reduced the rate on their regular savings accounts from 6% AER to 5% AER last week.

These banks, along with Nationwide, still offer the best rates in our Which? Money Compare regular savings account tables - but these accounts are only available if you have a current account with the same bank.

Here, we compare these best rate accounts to other options for your cash savings. 

Which? Money Compare tables: savings accounts and Isas - hundreds of accounts compared

Regular savings accounts

If you have a current account with a regular savings account tied to it - and you're able to drip-feed a fair chunk of money into it each month - it's well worth doing so. 

Many regular savings accounts offer far better rates than other types of savings accounts or Isas, but you're limited to a maximum monthly deposit and won't usually be able to access your funds until the end of the 12-month term. 

The table below shows how much interest you can earn in one year when you drip-feed the maximum monthly deposit into the best rate regular savings accounts from First Direct, HSBC, M&S Bank and Nationwide, as well as the Kent Reliance Regular Savings Account, which is the best regular savings account in our tables that isn't tied to a current account.   

We've also included links to the Which? Money Compare tables where you can find out more about each deal. 

Regular savings account returns
AccountAERMaximum monthly depositMaximum return
Nationwide Flexclusive Regular Savera5%£500£165
Kent Reliance Regular Savings Account3.25%£500£106
First Direct Regular Saver Accountb5%£300£97
HSBC Regular Saverc5%£250£82
M&S Bank Monthly Saverd5%£250£82

Table notes
a Only available to Nationwide's FlexAccount customers. bOnly available to First Direct 1st Account customers. c Only available to HSBC Premier and Advance current account customers. d Only available to M&S Bank current account customers

Which? Money Compare table - regular savings accounts - our tables are updated daily

Consider high-interest current accounts

Savers can also earn up to 5% AER by storing cash in their current account, but only on small balances. 

Nationwide offers 5% AER on balances up to £2,500 in the first year (maximum annual return £125), while TSB offers 5% AER on balances up to £2,000 (maximum annual return £100). 

The Santander 123 current account offers 3% AER on balances from £3,000 to £20,000, but it comes with a £5 monthly fee and the rate drops to 1.5% AER on November 1. Once the rate drops, you'll be able to earn a maximum of £300 interest a year minus the £60 annual fee.    

All of these accounts require customers to make a minimum monthly deposit and meet other terms to earn interest. 

Find out more: best current accounts for customers who stay in credit - see our tables for more information

Savings accounts and Isas lag behind

Traditional savings accounts and cash Isas are currently offering rates far lower than the accounts above, with the best instant-access savings accounts paying just 1% AER.

However, the amount of money on which you can earn interest is typically far greater - up to £1m in many cases. 

There is a maximum allowance for Isa deposits per tax year - currently £15,240. 

The best instant-access Isas in the Which? Money Compare tables (excluding those with certain terms and restrictions) is 1.1% AER, offered by Coventry Building Society, M&S Bank and Scottish Building Society.

Which? Money Compare table - instant-access cash Isas - find a great deal  

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