Internet saving taking hold as providers avail products

Banking is one of the sectors that has been benefitting with increasing web awareness and faster broadband and consumers now have a variety of online products to choose from.

The latest product to enter the market is a new online savings account from Alliance & Leicester (A&L), which has jumped ahead of rivals in the mainstream savings market with a product offering 3.15 per cent gross/AER.

According to Andrew Hagger of Moneynet.co.uk, the rate will be paid from £1 and will remain constant irrespective of the amount of money in the account, although the underlying bonus will decreases the higher the balance gets.

This means that the bonus portion will be 2.65 per cent at £1 and the figure will decline to 1.65 per cent at amounts that are above £250,000,

"As has become common feature of late, the rate is boosted by a hefty bonus which in this instance falls away in August 2010," explained Mr Hagger.

"The account represents a great opportunity for customers to benefit from an excellent short-term rate without any withdrawal restrictions or penalties.

"However it is vital that savers make a diary note to review their account when the bonus element is withdrawn next year otherwise they could find themselves earning a poor rate of return and undoing all the benefit received in the first 12 months," he added.

Meanwhile, rejuvenated Coventry Building Society has re-entered the online banking market by re-introducing its highly successful 50 Plus eSave account, which offers instant and unlimited access without attracting a penalty.

Designed for people who are over the age of 50, the savings account pays a best buy rate of 3.25% gross/AER, which is fixed for a period of one year from the date the account is opened.

Just like the A&E product, the web-only savings account requires a minimum investment of £1 and has a cap of £250,000, although there is no bonus.

"We are pleased to re-launch our extremely popular easy access, eSave account," said Rachel Haworth, the head of marketing at the Coventry.

"In a low interest rate environment customers can now have the best of both worlds - a very competitive rate and the peace of mind of having easy access to their money."

The bank stated that the AERs are guaranteed to be at least on par with the Bank of England base rate on the first anniversary of the account opening.

Similar niche savings accounts from the Coventry include the Sixty-Plus range, which is divided into the Sixty-Plus Saver and the Sixty-Plus PostSave.

According to Mr Hagger, there is "a renewed appetite for retail savings" in both the fixed rate and instant access savings markets and this means that even better products could be launched by rival banks.