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Regular savings accounts

Regular savings accounts can be a great way to save for a special event or simply to build your savings over time, allowing you to save gradually rather than depositing a lump sum. Regular savings accounts, also known as monthly savings accounts, have the added benefit of helping you to pick up good savings habits and learn how to save consistently.

What is a regular savings account?

With a regular savings account, you commit to saving a set amount of money each month, usually between £25 and £250. With a monthly savings account, you automate these monthly payments, so you know exactly how much you’re saving and when.

Monthly savings accounts may offer more competitive interest rates than standard savings accounts but are typically less competitive than lump sum savings accounts.

What is the difference between a regular
savings account
and
a monthly savings account?

There is no difference. This type of account is called a regular savings account because you save money regularly, and it’s also known as a monthly savings account because you save money each month.

What are the key considerations when
opening monthly savings accounts?

  • You can open more than one regular savings account across different banks. A regular savings account is designed for you to save smaller amounts monthly. If you have more to save, you can open more than one monthly savings account.
  • The total amount you earn from a regular savings account is likely to be less than you would earn from a fixed rate bond or notice account. This is because you’re saving a smaller amount each month and growing your savings pot, rather than earning interest on one lump sum.
  • Monthly savings accounts tend to be quite restrictive, such as limiting the number of withdrawals you can make or penalising you if you miss a payment, so be sure to do your research to help you find the best monthly savings account for you.
  • Some regular savings accounts switch to standard savings accounts after 12 months. At this stage, it could be best to switch accounts to one that earns a better interest rate.

Who is a regular savings account good for?

A regular savings account might be right for you if you don’t have a lump sum to invest but can save a small amount on a monthly basis. It’s also a good way for teenagers and young adults to learn how to save and get into the habit of saving.

If you’re planning for a special event like a wedding or holiday, a monthly savings account might earn more interest than a standard savings account, but it would also be worth considering a notice account which would typically offer a higher interest rate.

How is interest paid on regular savings accounts?

How interest is paid on your monthly savings account will vary, but most banks pay interest annually directly into your savings. It’s always best to check this before you open an account. The interest you earn will also depend on the interest rate and how much you deposit.

How do I make deposits?

You will typically be required to automate a monthly deposit into your regular saver. The amount you deposit is up to you, but a minimum and maximum deposit will apply and will depend on the account you open. The minimum monthly deposit is usually £10, and the maximum £400.

What restrictions should I look out for?

Regular savings accounts tend to have better interest rates than standard savings accounts, but restrictions apply:

  • Most monthly savings accounts have low maximum deposit limits to moderate the interest you can earn
  • Some banks may penalise you if you miss a monthly payment
  • You may be restricted from accessing your money until the end of the term

What happens if I miss a payment?

Monthly savings accounts tend to have strict rules, and fulfilling your commitment to a monthly payment is often one of those rules. If you do miss a payment, your account may be closed or your interest rate reduced. It’s always best to check the small print before you open an account.

Will I be taxed on my savings?

Basic rate taxpayers can earn up to £1,000 of tax-free interest on their regular savings account. Higher rate taxpayers can earn up to £500. If you earn more than £150,000, you won’t benefit from this personal savings allowance. However, if you earn less than £16,000 per year, you’re eligible for the zero-tax band, meaning that you don’t need to pay tax for the first £5,000 you earn from your regular savings account.

Is my money protected in a regular savings account?

Yes, the money you deposit in regulated UK banks and building societies is protected by the Financial Services Compensation Scheme (FSCS) up to £85,000 per person, per banking group (or £170,000 for joint accounts) in the event your bank or building society collapses.

Are notice accounts different from
monthly savings accounts?

Notice accounts are a type of savings account that allows you to withdraw your money at a date of your choosing by giving your bank notice that you want to make a withdrawal. Notice savings accounts provide a mix of the benefits of different types of savings accounts, featuring interest rates comparable to fixed rate bonds and the flexibility of easy access accounts. This type of account is right for you if you want to take advantage of competitive variable interest rates and want to be able to withdraw your money after a set notice period.

What are my options once I've built up
my savings in a monthly savings account?

Aside from withdrawing your savings to pay for something special, you could use the money you’ve saved to make a lump sum deposit into a fixed rate bond or notice account, where you can earn a better rate of interest.

If you want to open a lump sum savings account through our marketplace, ICICI Bank (UK) offers 1.60% AER variable for 95 days with a minimum investment of £1000. You could also consider at AER fixed for with a minimum investment of £1000.

How does Raisin UK work?

If you want to quickly and easily open fixed rate bonds or notice accounts with attractive rates from a range of UK banks, register for a Raisin UK Account and log in to apply. It’s free to open an account, and once you’ve been approved, all you need to do is deposit your lump sum and watch it grow.

If you have any further questions, our UK-based Customer Services Team will be happy to help.

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