Save money on a regular basis and get a better rate of interest, we have regular savings accounts from the top savings providers in the UK.


What is a Regular Savings Account?

Specifically designed for people planning to save for a specific purpose like a wedding or a holiday, or building up an emergency fund for the future, Regular Savings Accounts allow you to build a lump sum of money for any purpose by putting money aside on a monthly basis.

This means you will not put a larger sum into the account at once, but commit to regular monthly payments instead.

Common Regular Savings Accounts are deposit accounts, paying interest on the money that clients put in. Commonly the interest rate is fixed over a preset term, usually about 12 months, and you are unable to access or withdraw your money within this term. This is why interest rates paid by the banks are usually significantly higher than for Easy Access Accounts, where you can access your money at any time and without giving further notice.

How do Regular Savings Accounts work?

The money is used by the banks to provide financial services for other users, such as loans, mortgages or credit card payments. Regular Savings Accounts are aimed at getting people into a regular saving routine, hence money has to be paid into the account every month. Unlike most standard savings accounts, accepting only monthly payments, other Regular Savings Accounts, however, may also allow you to pay in a larger sum at a time to increase its value.

Upon opening an account, you will most likely have to provide an ID and proof of address. As providers frequently use Regular Savings Accounts as a flagship to attract new clients and in order to gather capital they can lend to other clients for a higher rate, there are usually no or only very low fees to set up a savings account. Currently, you can earn up to 6 or 7% in interest with a Regular Savings Account.

However, often these accounts are limited to one year and there can be limits on the amount of money that can be saved. Regular amounts that you can pay start at £10 and are usually capped at sums between £300 and £500.  Providers can impose strict terms and conditions with rules varying among the accounts, some allowing you to take money out within the set term but penalizing you with a lower interest rate, while some may not allow any early money withdrawals at all.

Users of Regular Savings Accounts are often required to open a current account first, so that after the end of the term for the Regular Savings Account, your money can automatically be moved into you current account. Hence, at the end of the term, you will receive the entire amount you have paid into your account as well as the accrued interest.   

How are Regular Savings Accounts taxed?

Normal taxpayers always have to pay a tax on the interest that you earn with your account, unless you hold a tax free Cash ISA. The amount of tax that needs to be paid depends on your overall earnings, with a 10% starting rate for low earners. In April 2015, this regulation will be changed to a 0% starting rate in April 2015. Basic rate tax payers normally lose 20% of any interest, high rate tax payers 40% and top rate tax payers 45% of their interest. If you do not pay any income tax, check with HM Revenue & Customs for further regulations and the possibility to be paid interest without any tax deductions.

How safe is a Regular Savings Account?

Provided your money is in an authorized, UK regulated bank account, it is always protected under the Financial Services Compensation Scheme (FSCS), hence up to an amount of £85,000 per person, your money is generally safe.

However, you should make sure you to not go over this sum. UK banks and building societies are moreover regulated by the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA). However, it is always beneficial to look out for the exact terms and conditions to make sure your money is in a safe place.

Top Tips before choosing a Regular Savings Account

Unlike a Cash ISA, which has an annual maximum allowance, Regular Savings Accounts are not tax free. Hence it is a good strategy to first fill your annual ISA allowances before opening a Regular Savings Account. Other things to bear in mind include:

  • As with a regular Savings Account, you aim at building up a financial fund, so you should always shop around to get the best interest rates in order to maximise your overall profits.
  • Before choosing a provider, find out how your account will be operated. While some accounts can be operated exclusively online, others will require you to come to a branch for your monthly payments or changes to your account.
  • Some account providers require you to pay in a fixed amount each month, meaning you cannot change this amount over the course of one year. Before entering such an agreement, make sure that you will be able to stick to this amount, in order to avoid penalties or losing some of your interest.
  • Due to the fact that for many regular Savings Accounts strict rules and regulations apply, devote some of your time studying them in order to make sure that you will get the best deal for your needs and demands as well as saving habits. If you plan to withdraw some of your money within the set term, consider going for an Easy Access Account or other options instead.