Types of regular savings accounts

Savers who intend to contribute to a savings account on a regular basis have a variety of regular savings accounts to choose from. Regular savings may also be done through an ISA for tax-free earnings.

Choosing a regular savings account

The choice of a regular savings account may depend on the interest rate paid by the account and the other terms and conditions attached to opening the account. The saver may have a preference for online saving or for access to the account via a cash machine, and this will influence the choice. The regular savings account may require a notice period for withdrawing funds. A requirement for a notice period may also mean that the account offers a higher interest rate. The saver may wish to make an initial deposit in addition to the monthly savings, and should choose an appropriate account for this. Most regular savings accounts have a monthly minimum and maximum amount that can be saved, and this will also influence the choice of savings account. A regular savings account may have a fixed or a variable interest rate. At times when the Bank of England base rate is expected to rise in the near future, a fixed interest rate may be higher than the variable rate, though the saver should consider that the variable rate may rise as the base rate rises. The length of the term of the fixed rate account should be taken into consideration.

Over 50s accounts

Regular savings accounts also include some over 50s accounts. These generally offer similar terms and interest rates to other regular savings accounts, but there may be some additional features, such as a bonus for savers who have a low number of withdrawals. The advertised interest rate should be examined carefully, as with other types of account, to see if bonuses are included in the rate and what conditions are attached to payment of the bonus.

Regular savings ISAs

Some individual savings accounts (ISAs) are set up as regular savings ISAs and allow regular cash contributions up to the maximum tax free amount of £5,340 (for cash ISAs) in a year. Amounts may be earned in an ISA free of income tax and capital gains tax. Taxpayers may save regularly in a stocks and shares ISA, contributing up to the annual ISA limit of £10,680. Final word Generally, ISA providers offer a choice of different investment funds which may be used in a stocks and shares ISA, so savers may choose between a cautious, balanced or more risky fund. Savers should bear in mind that the past performance of a fund is not a guide to future earnings and that share prices may go down.