The coronavirus crisis has ushered in a wave of falling savings rates and withdrawn accounts, but opting for a notice account could provide an alternative for those who don't want to lock up their cash to get a better rate.
If you want to be able to access your money in case you need it but still want a chance to make a decent return, then a notice account could be the answer.
Here, Which? weighs up the pros and cons that come with notice accounts and reveals where you can find the top rates.
Notice accounts occupy the space between instant-access accounts and fixed-term accounts, both in how accessible your cash is, and the interest rate you'll receive.
There tend to be fewer accounts to choose from, and the rates on offer don't usually grab any headlines, but competitive accounts can often be found.
The graph below shows how average rates for notice savings and cash Isa accounts have fared over the past year, in comparison to instant-access accounts, using data from Moneyfacts.
Since April, average notice savings account rates have decreased by 29%, while average notice cash Isa rates have dropped by almost 35%. But it's not as steep a fall as instant-access savings accounts and cash Isas, which are down 41% and 43% respectively.
In fact, the average rate for a notice account is now twice that of an instant-access savings account.
There is, of course, a lot of variation within these averages.
According to data from Moneyfacts, there are currently 92 notice accounts on the market; 42% fewer than there were this time last year.
These include 78 savings accounts and 14 cash Isas, withnotice periods ranging from seven days to one year.
The table below shows the top-rate savings accounts, in order of notice term.
|Tipton & Coseley Building Society 30-Day Community Notice Saver||1.1%||£1,000 minimum initial deposit; three withdrawals permitted per calendar year, including closure.|
|ICICI Bank HiSave 45-Day Notice Savings Account||1.25%||£1 minimum initial deposit; must have an ICICI Bank current account.|
|Manchester Building Society 60-Day Notice Account||1.1%||£1,000 minimum initial deposit.|
|Bank of London & The Middle East 90-Day Notice Account||1.1% (EPR*)||£10,000 minimum initial deposit; £1,000 minimum withdrawal.|
|ICICI Bank HiSave 95-Day Notice Savings Account||1.4%||£1 minimum initial deposit; must have an ICICI Bank current account.|
|The Melton Mowbray Building Society Online 100-Day Notice||1.36%||£1,000 minimum initial deposit; only available in-branch to customers living in Leicestershire, Nottinghamshire, Lincolnshire or Rutland.|
|Shawbrook Bank 120-Day Notice Personal Account||1.2%||£1,000 minimum initial deposit; interest rate falls to 0.05% if there is less than £1,000 left in the account.|
*Expected Profit Rate. Source: Moneyfacts. Correct on 12 June 2020; rates are subject to change.
As the table shows, it doesn't always follow that the longer the notice period the more interest you'll receive. You can currently earn the same amount of interest with the top 30-day notice account, as the top 60-day and 90-day accounts.
Make sure you can fulfil an account's minimum deposit requirement before you sign up; the majority of the accounts here require at least £1,000, and you'll need at least £10,000 to open the account with the Bank of London & The Middle East.
So, could you earn more with an instant-access account? The current top rate is 1.16% AER, which beats the top rates for 30, 60 and 90 days notice - but opting for more unusual notice term, such as 45 or 95 days, could get you a better rate.
This table shows the top-rate cash Isas, also in order of notice period. These accounts work in the same way as savings accounts, but as they are cash Isas any interest earned is tax-free, and additional Isa rules apply.
|Monmouthshire Building Society 30-Day Notice Cash Isa||0.75%||£10 minimum initial deposit; only available in England and Wales.|
|Kent Reliance 60-Day Notice Cash Isa||0.7%||£1,000 minimum initial deposit.|
|Teachers Building Society Education Isa (90-day notice)||1%||£100 minimum initial deposit; available to teachers and other educational professionals.|
|Marsden Building Society 95-Day Branch Cash Isa||0.55%||£1,000 minimum initial deposit. Existing customers only.|
Source: Moneyfacts. Correct on 12 June 2020; rates are subject to change.
You'll notice that the top cash Isa rates are all lower than their savings account equivalent, they do have the added benefit of being tax-free.
So, if you're likely to exceed your (£1,000 for basic-rate taxpayers; £500 for higher-rate taxpayers), or you don't receive any allowance due to paying additional-rate tax, then the benefit of saving on tax could outweigh what you miss in interest.
These accounts all fall short of the top-rate instant-access cash Isa, which is 1.1%.
As with any kind of savings account, you'll need to weigh up the pros and cons of a notice account before transferring your cash into one.
As well as making sure that the account can be opened and managed in the way you would like (i.e. is it just online?), read up on the account's terms and conditions as they can vary between providers.
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