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20 Nov 2019

M&S Bank cuts top 5% rate on regular saver

Savers will have to turn to current accounts to find top rate

M&S Bank has nearly halved the interest rate on its previously market-leading regular saver account, from 5% to 2.75% AER.

The account was the last regular savings account paying 5%, after First Direct and HSBC both made similar cuts last month.

Existing account holders will continue to earn 5% until their 12-month term is up. But other savers looking to build up their savings pots will have to look elsewhere for the best regular savings rate.

Here we explain the best rates for regular savers now and alternative ways to save if you still want a rate of 5%.

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The best regular savings accounts

The top three regular savings accounts all pay 3%.

Links will take you through to Which? Money Compare, where you can find out more details.

AccountInterest rate (AER)Min/max monthly depositTermAccount openingTerms
Kent Reliance One-Year Regular Savings Account3%£25/£500One yearBranchMissed payment means account closed and transferred to easy-access savings account.
Monmouthshire Building Society Celebration Regular Saver Bond3%£20/£300One yearBranchNo withdrawals allowed. If you close your account before maturity, the account will not qualify for the 3% AER/gross interest rate. Any interest you have earned will be calculated at the variable rate of an Easy Saver account.
Saffron Building Society 12-Month Fixed-Rate Regular Saver3%£10/£25012 monthsBranch/postPostal opening available to existing customers only.

Source: Moneyfacts and Which? Money Compare. Correct as of 19 November 2019.

As you can see, the top rates on regular savings accounts at the moment are limited to being opened in a branch, so you may have to travel if you don't have one nearby.

Should you save into a regular savings account?

Regular savings accounts require you to deposit money each month without fail - so they can suit savers who are just starting out.

These types of accounts offer impressive-looking rates, but it's important to remember your money is building up gradually, so the overall return may be lower than you expect.

For example, if you saved £300 a month to build up £3,600 over a year in an account offering 3%, you would earn £58.68 in interest rather than the £108 you might initially expect.

That's because the headline 3% interest isn't paid on the entire sum, as it won't have all been in the account for the full year.

In contrast, if you opened a standard savings account that allowed you to deposit £3,600 in one go, you could earn the headline rate on the lump sum from day one.

Using a current account for your savings

If you are looking for the best rate for your cash you may want to consider a high-interest current account.

You will usually need to pay in a monthly sum and set up direct debits but you can get market-leading rates for your money if you can jump through these hoops.

The top accounts include:

  • Nationwide FlexDirect - pays 5% AER on balances up to £2,500 for the first 12 months, falling to 1% AER thereafter. At least £1,000 must be paid in each month.
  • TSB Classic Plus - pays 3% AER on balances up to £1,500. At least £500 must be paid in each month, and you also need to register for internet banking/paperless statements to qualify.
  • Santander 123 Current Account - pays 1.5% AER on balances up to £20,000. To qualify you must pay in £500 a month and have two direct debits set up. The account comes with a £3 monthly fee.

Find out more: best high-interest bank accounts

The best traditional homes for your cash

We've set out the market-leading rates across easy-access and fixed-rate bonds and Isas.

Products with links will take you through to Which? Money Compare, where you can find out more details.

Account typeSavings accountInterest rate (AER)Minimum initial depositTerms
Five-year fixed-rate savings accountUnited Bank UK Five-Year Fixed-Term Deposit2.36%£2,000
Five-year fixed-rate cash IsaUnited Bank UK Five-Year Fixed-Rate Cash Isa2.01%£2,000
Four-year fixed-rate savings accountBank of London & the Middle East Four-Year Premier Deposit Account2.1% (EPR*)£1,000
Four-year fixed-rate cash IsaUnited Trust Cash Isa Four-Year Bond1.75%£15,000Transfers in only
Three-year fixed-rate savings accountBank of London & the Middle East Three-Year Premier Deposit Account2.2% (EPR*)£1,000
Three-year fixed-rate cash IsaState Bank of India three-Year Cash Isa Fixed Deposit1.9%£5,000
Two-year fixed-rate savings accountBank of London & the Middle East Two-Year Premier Deposit Account2.1% (EPR*)£1,000

*Expected Profit Rate. Source: Which? Money Compare. Correct 19 November 2019.

Many of the top deals right now are from Sharia-compliant providers. These firms offer an expected profit rate (EPR) rather than an annual equivalent rate (AER).

The rate is not guaranteed and could be adjusted at any time - although, at the time of writing, we have not heard of an instance where an advertised EPR has not been paid.

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? Money Compare is a trading name of Which? Financial Services Limited.