Nationwide scraps 5% regular savings account: where can you find highest interest rates?

Nationwide's Flexclusive Regular Online Saver account, which paid a whopping 5% interest, will be closed to new customers from 6 April, the building society has recently confirmed.

The 12-month account offers one of the highest interest rates around, so why is it being closed? And what other options do savers have if they're seeking a top return on their cash?

Which? explains what this means for new and existing Nationwide customers, and what other options are out there to earn interest on your cash.

Is it too late for new customers to sign up?

If you hold a Nationwide current account, then you'll be able to sign up to the Flexclusive Regular Online Saver until the end of the day on 5 April. You'll then be able to hold the account for the 12-month term and earn 5% AER on what you save.

If you don't have a Nationwide current account, you'll need to open one before you're allowed to then apply for the regular saver account, so you may already be out of time.

For online applications, the Current Account Switching Service (CASS) takes seven working days, which won't be completed in time. But it's been reported that if you open a current account in-branch before the end of the day on 5 April, you'll be able to open the regular savings account at the same time.

What happens to those who already hold Flexclusive accounts?

Nationwide has assured existing customers who already hold the regular savings account, or those who sign up before the deadline, that there'll be no change to their terms or interest.

You can continue to save as normal for the 12-month term, receiving 5% AER when you deposit up to £250 each month.

Why is Nationwide closing this account?

A spokesperson from Nationwide told us that the account is being closed as it's 'not reaching its intended market'.

They said the account was launched to help Nationwide account holders get into the habit of saving. However, 86% of those who have opened the account are already savers, and have an average of £20,000 in other Nationwide accounts.

While the building society recently made a pledge to retain a branch in any town or city where it currently has a presence for at least the next two years - a welcome step for many of its customers - this is the latest in a long list of less welcome product changes.

In September 2018, the Nationwide Smart Junior Isa was withdrawn; October saw the building society up rates on its debit cards abroad; and in February of this year it scrapped its Simply Rewards cashback scheme.

Will there be any new accounts launched to replace it?

Nationwide has confirmed there will be no like-for-like replacement of the regular saver account.

Instead, it points to its new Loyalty Single Access Isa, which pays 1.4% AER. However, the account doesn't have a table-topping rate, and in order to be eligible you must have held a Nationwide account for at least a year. You're only allowed to make one withdrawal per year, or else the AER will drop to 0.5%.

Money held in the cash Isa account will, however, be tax-free - unlike cash held in a savings account.

Find out more:cash Isa rules and allowances

Which other regular savings accounts pay 5% interest?

There are a number of other regular savings accounts that pay 5% AER. For a regular account to work for you, you must be sure that you'll be able to make a deposit into it each month.

Some providers have withdrawal penalties, and some require savers to hold a current account before they can open one.

The table below shows the top five regular savings accounts, excluding the Nationwide Flexclusive Regular Online Saver.

 _{Source: Which? Money Compare. Correct 3 April 2019.} 

Like the Nationwide account, the First Direct, M&S Bank and HSBC accounts are only for a 12-month term.

They all require you to hold a current account - First Direct and HSBC current accounts require a certain amount to be paid in each month - and there are penalties if you make withdrawals before the year is up.

If you close the HSBC and M&S Bank regular saver account before its 12-month term, you'll only receive 0.2% AER - a drop of 4.8%. First Direct will penalise your savings to the tune of 0.15% AER.

The Kent Reliance and Virgin Money account terms are a little more laid back - although they pay 2% less. Both accounts allow penalty-free withdrawals and don't require you to open a current account.

Find out more:how to find the best savings account

Try a high interest current account

There are two current accounts that currently offer 5% AER on your cash, and one of them is with Nationwide. However, both come with several caveats that you'll have to bear in mind before signing up.

The Nationwide FlexDirect account requires a minimum of £1,000 to be paid in each month, and pays 5% AER up to £2,500 held in the account for the first 12 months - after that point, the AER will drop to 1%. You can have up to two accounts per person, but one must be joint, and the account comes with a fee-free overdraft for a year.

Elsewhere, there's the TSB Classic Plus account, which requires you to pay in at least £500 a month. You'll get the 5% AER on balances up to £1,500, but you'll also have to sign up for internet banking/paperless statements. You can have up to two accounts per person, but one must be joint.

Beyond these accounts, the highest rate you can get from a current account is 1.5% AER.

Find out more:best high interest bank accounts