Get a better return with a ‘regular saver’ account

Interest rates on most savings accounts today are frankly derisory – even the best easy-access account currently offers just 1.4%. So if you’ve maxed out your Individual Savings Account (Isa) allowance, exploited as many of the high-interest current accounts as you can – such as Club Lloyds (up to 4% on £5,000) and Santander 123 (up to 3% on £20,000) – and still have money to spare, you may be struggling to decide where to put it.

Fixed-term savings accounts are the obvious option. But getting a decent rate requires ever-longer fixes: for 2.5%, you now need to tie up money for three years, hardly compelling. It may be your only choice if you’re looking for a home for tens of thousands of pounds. But for smaller amounts – especially if you’re steadily putting aside a few hundred extra per month and want a good rate on it – one or more regular savings accounts could be a much better solution.

Regular savers work exactly as their name suggests. You put aside a certain amount of money each month for a fixed term – usually a year. Most banks let you pay in a minimum of £25 per month and the maximum is typically £250-£400. The flexibility varies, but some let you miss payments, vary the amount you pay in, catch up in later months, or even make withdrawalsduring the one-year term. At the end of the term, your savings are transferred to a standard account. At that point, you can open a new regular saver and start contributing again.

The best regular savings accounts require you to have a current account with the bank. The best picks in this category offer 6% a year: First Direct (pay in up to £300 a month), M&S Bank (up to £250 a month) and HSBC for its Advance and Premier customers (up to £250 a month – it pays 4% for other customers). There’s also the Club Lloyds regular saver, which pays a lower 4% but allows you to contribute up to £400 per month. Running multiple current accounts is not hard if you don’t mind moving your money around to meet minimum pay-in requirements, but if you don’t want to jump through this hoop, Leeds Building Society offers the best deal open to all. It pays 3.05% on up to £250 per month.

The account that your regular saver turns into after a year won’t usually offer a good rate, so be ready to transfer the accumulated cash somewhere better. Thinking ahead can pay offhere. If you opened a regular saver now, it would mature at just the right time to top up your 2015/2016 Isa, or to start your 2016/2017 one. You could then start paying into a new regular saver, ready for your next Isa contribution.

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