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20 Oct 2018

Could the new RBS savings account be the best place for your cash?

Find out if you could earn a table-topping rate

Royal Bank of Scotland (RBS) has launched a new regular savings account with instant access and a competitive rate. But the criteria for earning interest might not work for everyone.

RBS is pitting its new account as the deal to beat in the growing instant-access savings market.Customers can earn 1.5% AER on their savings, and you can start saving with just £1. However, there are requirements you'll need to meet to open the account and qualify for the highest interest rate.

Which? looks into what else the account offers, who can use it and whether it's a good deal.

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How does the RBS Savings Builder account work?

The Savings Builder account pays 1.5% AER on money saved. You can open the account with £1, and it offers instant access, meaning you can make as many withdrawals as you like - highly unusual for a regular savings account.

But there are a few caveats.

Firstly, in order to open the account, you have to hold an RBS current account.

If you already have one, then there's nothing you need to do and you're free to open the savings account. If you have a current account elsewhere, you could switch (and also earn a £125 bonus), but you'll have to do this by 3 December.

Secondly, the 1.5% AER is only paid on balances up to £10,000 and any money exceeding the threshold will receive just 0.2% AER.

What's more, if you want to earn 1.5% AER, you have to deposit at least £50 a month.

While you can make as many withdrawals as you like, at the end of each month your balance must have increased by at least £50 to receive the interest. Any months your balance isn't up by £50, you'll receive 0% interest.

While it is marketed as a regular savings account, the fact that it also offers instant access arguably positions it as a hybrid between the two.

We've looked at how the account compares to both of these account types.

How does it compare to other instant-access savings accounts?

The table below shows the five top-rate instant-access savings accounts.

Marcus by Goldman Sachs Online Savings Account1.5%Minimum initial deposit £1. Rate reverts to 1.35% after 12 months.
Charter Savings Bank Easy Access Issue 101.4%Minimum initial deposit £1,000.
Shawbrook Bank Easy Access Issue 131.4%Minimum initial deposit £1,000. Minimum withdrawal amount £500. Interest rate reduces to 0.05% on balances under £1,000.
Paragon Limited Edition Easy Access Issue 71.37%Minimum initial deposit £1
AA Member Saver Issue 41.37%Minimum initial deposit £100. Must have another product to take out this account.
RCI Bank Freedom Savings1.37%Minimum initial deposit of £100.

Source: Which? Money Compare. Correct 19 October 2018.

The RBS account doesn't show up on the table as comparison sites classify the product as a regular savings account, so you might want to bear this in mind if you're searching for it.

Compared to instant-access accounts, it sits in joint first position with the Marcus by Goldman Sachs account. While the latter offers the same AER, it does not have the same restrictions, as you don't need to hold a specific current account or increase your balance by a minimum amount.

The Marcus account also pays on balances from £1-£250,000, so it could be better for those with larger savings pots.

But you should be aware that the AER on the Marcus account will drop to 1.35% after the first 12 months, so you may want to switch your account at this point to make sure you maintain a competitive rate.

You can use theWhich? Money Compare comparison tables to search hundreds of savings and Isa accounts to help find the best account for you.

How does it compare to other regular savings accounts?

The table below shows the five top-rate regular savings accounts.

First Direct Regular Saver Account5%Must have a First Direct current account and pay in £25-£300 each month. Fixed 12 month term. No partial withdrawals.
M&S Bank Monthly Saver5%Must have an M&S Bank current account and pay in £25-£250 each month. Fixed 12 month term. No partial withdrawals.
HSBC Regular Saver Preferential Rate5%Must have an HSBC Premier or HSBC Advance account - other account holders will receive 3% AER. Must pay in £25-£250 each month. Fixed 12 month term. No partial withdrawals.
Saffron Building Society 12 Month Fixed Rate Regular Saver3.5%Must pay in £10-£200 a month. Fixed 12 month term. Unlimited withdrawals.
Kent Reliance 1 Year Regular Savings Account3%Must pay in £1-£500 a month. Fixed 12 month term. Unlimited withdrawals.

Source: Which? Money Compare. Correct 19 October 2018.

In comparison to the top regular savings rates, the RBS account lags behind in terms of interest, but it is also free from some of the restrictive terms.

The First Direct and M&S Bank accounts offer higher rates than even five-year fixed-rate accounts, and all five accounts easily beat the current rate of inflation, unlike the RBS account.

However, First Direct, M&S Bank and HSBC accounts stipulate that if you want to make any withdrawals during the 12-month term, you'll have to withdraw all of your money and close the account, plus take a huge hit on the interest you would have earned.

With RBS, you can freely make withdrawals. And as long as you top up your account afterwards (replacing the money you've withdrawn and adding at least £50 extra), you'll still earn the highest interest rate.

Conversely, Saffron Building Society and Kent Reliance offer unlimited penalty-free withdrawals, and don't require customers to hold a current account with them, giving more freedom than RBS and the other banks in the table.

A benefit of the RBS account is that there is no specified maximum monthly deposit, which is great for savers who feel restricted by top-rate accounts that only allow an average of £250 to be paid in each month.

There isn't actually a minimum monthly deposit, either. Many regular savings accounts will automatically close if you fail to deposit the specified minimum. With RBS, if you fail to increase the account balance by at least £50 a month, you simply won't receive interest.

Another plus is that it's easier to qualify for an RBS current account, which you need in order to open the Savings Builder, as there is no minimum monthly deposit for an RBS current account.

To qualify for a First Direct current account and the HSBC Premier and Advance accounts (which, in turn, mean you'd qualify for the preferential rate on the Regular Saver), you need to have a certain amount of money being paid into your current account each month.

Such restrictions could price out those on lower incomes.

Finally, the RBS account allows regular savings for an unspecified amount of time, while all five top-rate accounts are all restricted to a fixed 12 month term - so you might find you could earn more over time.

Should I get the new RBS account?

The requirement to pay in £50 a month means you should carefully consider whether you'll have enough spare cash to save each month, and how much you to initially deposit.

For instance, if you open the account with £9,000 you'll earn 1.5% on everything - but if you increase the balance by at least £50 each month (£600 a year), plus interest, it's going to take less than two years until your balance exceeds the £10,000 threshold.

This means that some of your money will only grow by 0.2%. If you transfer the excess to another account, you'll be penalised a month's interest for not increasing your balance by £50.

Ultimately, it depends how you want to save your money. The RBS account offers less flexibility than a typical instant-access account, but more than most regular savings accounts.

If you can work within its parameters, it could work for you.

Please note that the information in the table(s) above is for information purposes only and does not constitute advice. Please refer to the particular terms and conditions of the savings account provider before committing to any financial products.

Which? Limited is an Introducer Appointed Representative of Which? Financial Services Limited, which is authorised and regulated by the Financial Conduct Authority (FRN 527029). Which? Mortgage Advisers and Which? Money Compare are trading names of Which? Financial Services Limited.