There are many different types of UK savings accounts.
The market is competitive and different accounts offer a range of potential interest rates, terms and conditions when it comes to withdrawing your savings, and other perks and incentives.
In a story published in its edition dated the 19th of July 2017, the Telegraph newspaper reported that there are currently some 1,700 different UK savings accounts from which to choose – an increase of 300 in the last six months alone.
Making your choice might seem bewildering at first, so how do you compare savings products in such a diverse market?
Ease of Access Savings Accounts
- Savings products typically offer two basic choices – the ability to withdraw some or all of your savings on demand or rules which prevent your withdrawing the funds for a given period of time;
- So-called instant access savings accounts give you the convenience of immediate access to your money, but fixed accounts reward you for leaving the funds untouched by offering a higher rate of interest;
Instant Access Savings Accounts
- Also called easy access savings accounts, these allow you to withdraw your money at any time, akin to the way the current account at your bank or building society might work;
- If you want to save, but know that you are likely to need to dip into those savings from time to time, or to keep them available for any unexpected expenditure that arises, this might be the appropriate form of saving for you;
- What you gain in flexibility and access, however, you pay for in terms of a typically lower rate of interest;
Fixed-Rate Savings Accounts
- With a fixed rate savings account, however, you agree to keep your savings on deposit for an agreed length of time – typically, for between one and five years – during which time you may withdraw none of the cash, or bear a financial penalty for doing so;
- Since the deposit-taker has the use of your funds for a defined and definite period, interest rates are typically higher than those offered on instant access savings accounts;
- Fixed accounts differ to notice accounts. With a notice account, you need to inform the bank or building society of your intention to withdraw funds in advance – typically, with periods of notice between 2 and 6 months. However, a fixed-term account may incur a penalty charge for early access, if it allows withdrawals;
Savings Account Interest Rates
- Whether you choose an easy access or fixed-length savings account, comparing savings rates may be further complicated by the fact that interest rates may change – some offer fixed rates, others are variable;
- There are also savings accounts where the rate of interest is fixed for an agreed period of time and then becomes variable, and others where the rate of interest is fixed at one rate for an agreed time and switches to another predetermined rate after that period;
- When comparing savings products, you might also want to take into account the ease with which you may make additional deposits or access your funds through withdrawals;
- In order to keep abreast of modern technology, most institutions today need to facilitate transactions online, through telephone banking or mobile apps.
The sheer number of UK savings accounts may make it difficult to choose the one suitable for your own needs and circumstances, so a careful comparison of competing savings rates is essential.