Get a consistent savings rate
Building societies have offered savers the most consistent rates over the past 12 and 36 months, despite fluctuations in Bank of England interest rates causing havoc for many savers’ returns.
With the savings climate switching from 7% plus headline rates in the second half of 2008 to historically low interest rates today, finding a home for your money that pays out consistently has been a battle. While some people are happy to move their money regularly from one best-buy deal to the next, or take advantage of introductory bonuses to boost their returns, others would prefer a consistently good rate of interest.
Research from data provider Moneyfacts shows that building societies offer the most consistent savings rates. Welsh building society Principality has been named the most dependable provider over five categories, with Sainsbury’s Finance topping the internet savings consistency table.
Michelle Slade, analyst at Moneyfacts, says accounts that offer a consistent rate of return may not all feature in best-buy rates, but will achieve the best rate of return for people. Moneyfacts compared providers who have maintained their rates over the past 18 and 36 months.
“If you are happy constantly switching your money then you can get higher returns, but many savers don’t have the time or inclination to keep moving accounts,” Slade adds.
Savers who took out Egg’s cash ISA 18 months ago would have earned the most consistent rate on interest on a £1 deposit. Principality also offered consistency on its e-ISA, as did Kent Reliance’s Direct ISA.
For those saving over a 36-month period, building societies dominate, with Kent Reliance coming out top followed by Tipton & Cosely Building Society and Yorkshire Building Society. The latter’s e-ISA, which currently pays 3.3%, also made it into Moneyfact’s best-buy table.
Principality comes out top in the most consistent internet savings accounts over the past 18 months, with its e-Saver account, followed by Yorkshire Building Society’s 3.75% internet saver and Sainsbury’s online account.
Again, Yorkshire Building Society’s internet saver was also named a best-buy product, showing it is possible to achieve a competitive rate and consistency.
Over a 36 month-period, Sainsbury’s internet saver came up trumps, followed by Nationwide’s e-savings deal and Coventry Building Society’s NetSave instant savings account.
Norwich & Peterborough, NatWest and Halifax also feature in the top six most consistent interest savings providers over 36 months to January.
Beverley Building Society comes up trumps with its no-notice postal account, gaining the consistency top spot over 18 and 36 months. The Teachers Building Society also did well in this category, with Moneyfacts naming it the second most consistent provider over 36 months and the third most consistent over 18 months.
In was beaten in the latter comparison by Birmingham Midshires’ Direct Telephone Savings Account.
Elsewhere, Bath Building Society, Britannia and Chesham Building Society all offered consistently good rates over 18 and 36 months. Again Principality, the most consistent savings provider of all, offered consistency with its postal account.
Other than Halifax, building societies completely dominate the consistency league across notice savings accounts.
The bank’s Extra Income Saver comes third over an 18-month period. However, topping the table is Chesham Building Society, followed by the Dunfernline Building Society.
Principality, meanwhile, achieved good consistency with its monthly income savings account over 18 and 36 months. However, it is the Teachers Building Society that comes out top over 36 months, along with National Counties Building Society and Skipton Building Society.
Building societies do well when it comes to consistency, but how do they fare in the best-buy tables today?
Nationwide’s three-month fixed-rate ISA paying 3.5% is a best-buy at the moment, but is not as competitive as Halifax’s new range of ISAs paying up to 4.1% AER.
However, when it comes to variable-rate ISAs, Newcastle Building Society, Yorkshire Building Society, Harpenden and National Counties all offer best-buy deals.
Yorkshire Building Society and Barnsley Building Society currently offer top online savings rate, with their online deals both paying 3.75% AER on deposit from £1.
Elsewhere, Tesco is paying 3.6% on its internet saver, while the AA is offering 3.59%.
From 1 February, Scarborough Building Society is re-launching its Balance Builder instant access account with a rate of 3.5%. Loughborough Building Society also offers a best-buy rate in this category, with its postal account that pays 2.5% AER.
However, you could get a bigger return by opting for Tesco’s no-notice 2.85% account or Birmingham Midshires’ 2.75% telephone account.
From 2 February the Progressive Building Society is launching a seven-day notice postal account paying 3.25% AER. However, you could get a better deal with FirstSave’s 90-day notice account paying 4.25% AER or its 30-day 3.75% deal.
Fixed-rate deals don’t feature in Moneyfacts’ consistency league tables, simply because the interest rate will remain stable for the term of the deal.
Chelsea Building Society is the only mutual to offer a best-buy fixed-rate account at the moment, with its one-year winter bond paying 3.6% AER.
ICICI Bank’s 12-month HiSave comes out top paying 4.3%, followed by FirstSave’s 4.25% fixed-rate bond.
A savings account on which the account holder is required to give a period of notice before making a withdrawal or face a penalty, usually a loss of a specific number of days’ interest or pay a fee. Notice periods of 30, 60 or 90 days are common. These accounts usually pay higher than average interest rates and require large initial deposits (£1,000 minimum) so the notice period and penalties are there to discourage withdrawals. Some of these accounts will only allow a certain number of withdrawals a year.
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.
This is a mutual organisation owned by its members and not by shareholders. These societies offer a range of financial services but have historically concentrated on taking deposits from savers and lending the money to borrowers as mortgages, hence the name. In the mid-1990s many societies “demutualised” and became banks. One academic study (Heffernan, 2003) found demutualised societies’ pricing on deposits and mortgages was more favourable to shareholders than to customers, with the remaining mutual building societies offering consistently better rates. In 1900, there were 2,286 building societies in the UK; in 2011, there are just 51.
Where APR is the rate charged for money borrowed, Annual equivalent rate is how interest is calculated on money saved. The AER takes into account the frequency the product pays interest and how that interest compounds. So, if two savings products pay the same rate of interest but one pays interest more frequently, that account compounds the interest more frequently and will have a higher AER.