Notice account rates highest in seven years: is this the best savings account for you?

The average interest rate for notice accounts has hit its highest level in seven years. What's more, 81% of notice accounts now offer rates that beat inflation, which measured 2.1% in April, the figures from Moneyfacts showed.

The past couple of weeks alone have seen the launch of a new table-topping notice account from Hampshire Trust Bank, in addition to new accounts launched from Yorkshire Building Society, Mansfield Building Society, and the likes of Secure Trust Bank and Saffron Building Society upping their rates.

Notice accounts allow you to withdraw your money provided you notify the bank in advance - with the notice period ranging from one month to half a year. So, could this kind of account work for you? And how much could your savings earn?

Here, we reveal the top rates for both notice savings accounts and notice cash Isas, and weight up the pros and cons that come with this kind of account.

Notice account rates growing more than instant-access and fixed-term

Notice accounts offer a middle ground - often both in terms of AER and access to your cash - between instant-access and fixed-term accounts.

There tend to be fewer accounts to choose from and little in the way of headline-grabbing rates, but things are on the up.

The graph below shows how the average rates for savings and Isa notice accounts have fared compared to instant-access savings and Isa accounts over the past year. The data is from Moneyfacts.

As the graph shows, notice account rates tend to be higher, and are currently rising - even as instant-access rates begin to level out.

Compared to one-year fixed-term accounts, notice accounts unsurprisingly offer lower rates, as you'll be able to access you cash more quickly. However, fixed-term account rates have begun to dip, even as notice accounts continue to climb.

• Find out more:how to find the best savings account

What are the top-rate notice accounts available now?

According to data from Moneyfacts, there are currently 159 notice accounts on the market, with notice periods ranging from seven days to a year.

These include 27 notice cash Isas and 132 notice savings accounts.

The table below shows the top-rate savings accounts, in order of notice term.

_{Source: Which? Money Compare. Correct 6 June 2019.}

One thing to note about the top-rate accounts is how unattainable they are for those with smaller savings pots. Only one requires a minimum initial deposit of less than £1,000. We recently wrote about savers with small deposit losing out on the best rates - and notice savings accounts don't appear to be an exception.

Secure Trust Bank's 90-day notice account pays the highest rate of all notice accounts on the market. Offering 1.92% AER is higher, it even beats top-rate one- and two-year fixed-term cash Isas.

If you are able to secure a top-rate account, watch out for the caveats. For example, all of Secure Trust Bank's accounts have withdrawal restrictions. You can make up to four 'interest withdrawals' - only withdrawing money that's been earned as interest - and up to three 'capital withdrawals' - chipping into the money you've deposited.

However, if you're willing to lock your money away for nine additional months, we found eight one-year fixed-term savings accounts that can beat it.

The Bank of London & The Middle East one-year premier deposit account, for example, has 2.20% EPR and requires the same initial minimum deposi.

• Find out more:how to find the best savings account

Best rate notice cash Isas

The table below shows the top-rate cash Isas, in order of notice term. These work similarly to notice accounts, with the tax benefits of an Isa wrapper.

_{Source: Which? Money Compare. Correct 6 June 2019.}

These accounts are more accessible to those with less to save, with some minimum initial deposits of just £1.

However, the rates all lag behind their savings account equivalents. While we recently wrote about the rise of instant-access cash Isas, the rates war doesn't seem to have extended to notice cash Isas yet.

Extra benefits of cash Isas

While it's true that notice cash Isa rates are lagging behind their savings counterparts, don't forget about these accounts' tax-free status.

With savings accounts, any interest your cash earns is taxable. If you qualify for the personal savings allowance this may not be a problem - basic-rate taxpayers can earn up to £1,000 per year, and higher-rate taxpayers have a £500 allowance - but if you pay the additional rate of tax, you don't receive this allowance.

So, cash Isas are particularly useful for high earners and those with a large amount of savings that may exceed their personal savings allowance.

If you're planning on keeping and adding to your savings over a long period of time, keeping it in a cash Isa means you won't come unstuck in years to come, when the effect of compound interest may mean your savings grow more quickly. It also means your savings are safe in the event that the personal savings allowance is scrapped.

• Find out more:how to find the best cash Isa

Should you get a notice account?

As with any kind of account, there are pros and cons to weigh up. The rules of each account vary depending on the provider, so you should always check the terms and conditions carefully.

Advantages

• You can usually make unlimited withdrawals.With some exceptions, most notice accounts allow you to make as many withdrawals as you like - as long as you provide the right notice. This is ideal for those who know they'll want to access the money, and when they'll need it.
• You can potentially earn more than with an instant-access account. Instant-access account rates are competitive at the moment, but they can still be beaten by some notice accounts, helping your savings grow.
• An enforced wait for your cash might deter spending. Having to wait at least a week before you can access to your cash might mean you change your mind on any spontaneous spending decisions.

Disadvantages

• There's no quick access to your cash. While you're not locking your money away for years, as with a fixed-term account, the prospect of having to wait for, say, three months, may not be too appealing either. You may either be blocked from accessing your cash at all - or you'll likely face a penalty in the form of lost interest
• Rates aren't always worth the wait. Plenty of accounts with a long notice period don't pay accordingly, and you could earn more without withdrawal restrictions.
• A better savings rate isn't guaranteed. In fact, we found just 23 accounts offering a higher AER than the current top-rate instant access accounts - 1.50% for both instant-access savings and cash Isas. To benefit from these rates, you'll need to commit to giving at least 45 days' notice.

_{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.}