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30 Sep 2019

Saga and Goldman Sachs launch new over-50 savings accounts

Find out if their accounts can compete with the top rates

Savers searching for a new home for their money have two new accounts to choose from, as Saga and Goldman Sachs - the provider of the popular Marcus instant-access account - team up to provide new products.

Saga now offers an instant-access account paying 1.4% AER, and a one-year fixed-term savings account offering 1.15% AER.

It's a vast improvement on the accounts previously been on offer, such an internet easy access account paying just 0.55% AER.

The accounts must be opened, managed and accessed through Saga, while the money is held by Goldman Sachs.

Which? looks into how they stack up against other accounts on the market.

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What do the new Saga savings accounts offer?

The Saga easy-access savings account pays 1.4% AER, but this rate includes a 0.25% bonus rate. After the first 12 months, the AER will drop to 1.15%. You can open the account with just £1.

The fixed-rate account pays 1.15% AER, and no additional deposits can be made after the first 14 days.

Any withdrawals made before the year is over will mean you have to close the account and pay an early-closure fee, which will either be all interest earned if you close it within the first 90 days, or the full first 90 days' interest.

Both accounts accept maximum deposits of up to £100,000. But be aware that you're only covered for up to £85,000 under the Financial Services Compensation Scheme (FSCS), so if the bank were to go bust, you may lose out.

While the Saga website says the account can be opened if you're over 18, Saga is an over-50s provider, so you generally have to be aged 50-plus to use its products.

Telephone banking

We've previously found that many top-rate accounts can only be managed online. The Saga savings accounts offer online access, but also allow you to manage your account over the phone, which may be appealing if you don't use internet banking.

Much like the Marcus by Goldman Sachs account, the savings accounts will be linked to one of your current accounts - all payments and withdrawals must be made to and from this account.

Saga membership perks

Savings account holders will also gain free access to 'Saga Possibilities' - a membership programme featuring hundreds of perks and discounts.

This includes discount travel offers on Saga holidays, restaurant and service discounts, and competitions.

How do the new accounts measure up to the rest of the market?

While interest isn't the only thing you should consider when shopping around, most people will want to their cash to grow at a competitive rate.

Neither of the new Saga accounts can beat the current rate of inflation, which was 1.7% in August, but how do they measure up against other market-leading rates?

Top instant-access accounts

The table below shows the top-five instant-access accounts currently on the market.

Al Rayan Bank Everyday Saver1.61% (EPR*)£500 minimum initial deposit.
Cynergy Bank Online Easy Access Account1.45%£1 minimum initial deposit. Rate drops to 0.75% AER after 12 months.
Virgin Money Double Take E-Saver1.45%£1 minimum initial deposit. Only two withdrawals permitted per year, including closure.
Marcus by Goldman Sachs Online Savings Account1.45%£1 minimum initial deposit. Rate drops to 1.35% AER after 12 months.
Kent Reliance Branch & Online Easy Access1.43%£1,000 minimum initial deposit.

*Expected Profit Rate. Source: Moneyfacts. Correct on 30 September 2019, but rates are subject to change.

These rates are all higher than the new Saga instant-access accounts. That said, many feature bonus rates and withdrawal restrictions that could affect your cash.

Apart from the Kent Reliance account, these accounts are all online only, which won't suit those who would prefer to bank in branch or over the phone.

Top one-year savings accounts

This table shows the top one-year fixed-term savings accounts.

Al Rayan Bank 12-month Fixed Term Deposit2.07% (EPR*)£1,000 minimum initial deposit.
Bank of London & The Middle East One-Year Premier Deposit Account2% (EPR*)£1,000 minimum initial deposit.
Gatehouse Bank One-Year Fixed Term Deposit1.9% (EPR*)£1,000 minimum initial deposit.
Axis Bank UK Ltd One-Year Fixed Deposit Account1.8%£1,000 minimum initial deposit.
Zenith Bank UK Ltd One-year Fixed Term Deposit1.8%£1,000 minimum initial deposit.

*Expected Profit Rate. Source: Moneyfacts. Correct on 30 September 2019, but rates are subject to change.

The difference between the Saga savings rate and the top rates is starker here, with a 0.92% gap between Saga's one-year account and Al Rayan Bank's market-leading offer. This could amount to a significant amount of interest lost over the course of a year if you have a large pot of money.

You'll need to deposit at least £1,000 in order to open these accounts, which means those with smaller savings pots won't be able to apply. By contrast, the Saga accounts can both be opened with just £1.

Several of these accounts are offered by Islamic banks, which pay an 'Expected Profit Rate' (EPR), rather than savings interest. This means the rate isn't guaranteed - although, to our knowledge, no Islamic banks have ever paid less than the EPR in the UK.

Should I get a Saga savings account?

If you're over 50, and want to use some of the other services Saga offers, these accounts can offer an easy way to save money. They may be particularly good if you struggle to find decent rates for accounts that can be managed by telephone.

However, while the instant-access account is only slightly behind the top rates, the one-year fixed-term account is not as competitive.

When you could earn 1.4% AER, with the convenience of unlimited additions and withdrawals, you're unlikely to opt for 1.15% AER and locking your money away for a year.

Tax implications

If you deposit the maximum £100,000 into the Saga instant-access account, and don't make any further additions or withdrawals, you'll earn around £1,409 in savings interest over the course of a year.

This would exceed your personal savings allowanceand result in a tax bill.

Basic-rate taxpayers can earn up to £1,000 in savings interest each tax year before having to pay tax, whereas higher-rate taxpayers only have an allowance of £500. Additional-rate taxpayers do not have any personal savings allowance, meaning all savings interest is taxable.

If you don't want to pay tax on your savings, a cash Isa could be worth considering, as all earnings within a cash Isa are tax-free.

However, you can only deposit up to £20,000 in any tax year, so if you did have £100,000 to save, it would take five years to move it over to an Isa account.