However, the latest Bank of England figures show that more than £265bn worth of household savings are sat in accounts paying 0% interest, according to analysis from Coventry Building Society.
Regular saver accounts offer some of the highest rates on the market – and can be a good way to build up your savings pots, as they require you to pay in a certain amount each month, so your savings can build up gradually.
They can also help if you have a clear savings goal. From buying your first home, to Christmas expenses, there's a host of accounts offering a more targeted approach to saving. But, as with all regular saver accounts, there are caveats to watch out for.
Here, Which? takes a closer look at the pros and cons of opening a regular saver account, and compares the best available rates.
What are the best regular saver rates?
The table below shows the current top rates for regular savings accounts.
As you can see, all but one account in our table have restrictions on withdrawals. So you'll need to think about whether you can do without this money until the term is up. If not, an instant-access account could be a better bet; the current highest rate for a restriction-free account is 3.06% AER from Shawbrook Bank.
All of these regular saver accounts last for 12 months, and offer higher interest than the current top-rate fixed-term bond – which is 4.31% AER, from SmartSave. But, because of the way interest works for regular savers (more on this below), if you already have a significant sum of money to lock away, you can often earn more interest by opting for a fixed-term account.
The top four rates are all from some of the biggest UK banks, which is quite a contrast to the rest of the savings market, where the top rates for fixed-term and instant-access products tend to be offered by smaller providers.
Find out more:How do regular saver accounts work?
Regular saver accounts tend to offer higher interest rates, and can be great for those who don't have much cash saved already, but want to build up their savings while getting a decent return on their money. Rates are usually variable, so could increase or decrease at any time.
It's common for these products to only be open to existing current account holders. So, if you see a regular saver you like the look of, but you're not already banking with that provider, you’ll need to decide whether it’s worth a current account switch in order to use it.
As the name suggests, most regular savers require you to save regularly – usually you'll need to make a deposit every month, but minimum amounts tend to be quite low. Also, unlike fixed-term or instant-access bonds, which allow you to deposit a lump sum, you'll be restricted on the amount you can pay in, and it's also common to see limits on withdrawals.
Despite the high interest rates, the amount of interest you earn might also be more modest than you'd expect, due to the fact you can only gradually deposit the money.
Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, warns against getting too excited about the seemingly eye-catching rates. She says: 'If, for example, you were to put in £100 a month for 12 months at 6%, a back-of-the-envelope calculation might make you think you’ll make 6% on £1,200 – or £72. However, because it builds slowly, you’d actually make less than half of that (around £34).'
Find out more:Got a specific saving goal? These accounts might be for you
Having an account with a particular goal in mind – like saving money for a property deposit – can be motivating. Here are some examples of the most popular targets for regular saver accounts:
Buying your first home
There are a number of accounts on the market aimed specifically at people wanting to save for a property deposit.
Coventry Building Society's First Home Saver, for example, pays 4% AER and you can save between £1-£1,000 each month to put towards a first home deposit. The account lasts for 36 months – if you paid in £1,000 each month for the full term, made no withdrawals, and the interest rate stayed the same, you'd end up with a pot of £38,266.54. That's a maximum total interest of £2,266.54.
Elsewhere, Bath Building Society's Homestart Regular Saver pays 3.99% AER for young homebuyers aged between 18-34 (location restrictions apply), while Principality Building Society offers 3.25% AER for its First Home Steps account, which rises to 3.95% once your savings pot is worth £7,501 or more.
Find out more:First-time savers
Featured in the table above, Saffron Building Society's Small Saver and NatWest's Digital Regular Saver can both suit those who want to get into the savings habit but don't necessarily have a lot of cash to spare. You can make monthly deposits from just £1, and they also allow withdrawals.
You could also consider Nationwide's Start to Save account, which is a two-year bond paying a variable rate of 5% AER. You can pay in up to £50 a month and there's no minimum monthly deposit – but if you increase your balance by at least £25 in each of the six months leading up to its prize draws, you'll automatically be entered to win £250. The next one is on 22 August 2023.
Saving for Christmas
Christmas can be an expensive time of year, so some providers offer festive-themed regular savers that launch in December or January and run for 11 to 12 months.
Because of their seasonal nature, these accounts don't tend to stick around for long, and they aren't currently on the market. However, to give an idea of what kind of thing could be available in future, Monmouthshire Building Society launched a Christmas Saver Bond in December 2022, which paid 5.5% AER – a top rate at the time. Yorkshire Building Society's Christmas Regular Saver launched in January 2023, paying a variable interest rate of 4.5%.
source https://www.which.co.uk/news/article/regular-saver-accounts-can-they-help-you-reach-a-savings-goal-aeeW47n8yxzU