Alliance & Leicester launches 7% account
Alliance & Leicester has relaunched its one-year regular savings account paying 7% AER for a limited period.
The Premier Regular Saver account pays 7% AER to people who put aside between £10 and £250 each month for one year.
The rate of interest is fixed, so it won’t change during the 12-month term; however, withdrawals are not permitted and if you need access to your money your account will be closed.
But this account comes with a big catch – it isn’t available to everyone. Alliance & Leicester is only offering this savings rate to people who open a Premier Current Account. On the plus side, if you haven’t reviewed your current account recently then it is well worth doing so now.
Alliance & Leicester’s Premier Current Account could well be a contender for your money; for a start, there are no monthly fees to pay and you’ll receive £100 cashback within four months of opening it.
The account has a 0% overdraft facility for the first 12 months, after which point you’ll be charged 50p a day (or £5 a month. You’ll earn 0.5% AER, but you must pay in at least £500 in a month without your balance exceeding £2,500.
The account also comes with free annual multi-trip European travel insurance. Just remember though, you must be over 21 to qualify and anyone who already holds or has held a current account from Alliance & Leicester, Abbey, cahoots or Cater Allen in the past three months is not eligable to apply.
Gillian Almond, current accounts manager for Alliance & Leicester, says: "The Premier Regular Saver is a great way for people to kick-start a savings habit and in a year they will have saved up a nice little nest egg, and received an eye-popping rate of interest. We seem to have had years of spend, spend, spend, now it is time to save, save, save.”
Other great regular savings deals
* First Direct offers a Regular Saver ISA that pays 7% AER on monthly deposits of between £25 and £300. This rate is fixed for 12 months, and no withdrawals are permitted during this time. Transfers from previous ISAs are not accepted.
* Barclays continues to pay 6% AER on its 12-month fixed-rate Monthly Saver account. You must pay in between £20 and £250 each month and interest is paid monthly. If you make a withdrawal from this account then your AER will fall to 3.03% for that month.
* Abbey has just launched a new regular savings account that pays 4% AER on monthly deposits of between £20 and £250. The rate is fixed for 12 months, but will reduce to 3.67% when one withdrawal is made. This deal is available to new and existing customers.
* Scottish Building Society also pays 4% AER on its Regular Savings deal, as long as you pay in between £25 and £1,000 per month. This rate includes a 2% bonus. One withdrawal is permitted per year – any more and your rate will drop to 2%.
Other great (free) current accounts
* Bank of Scotland offers a Reward Current Account that pays you £5 a month rather than any interest. You can open this account with an initial deposit of £1, but you must pay in at least £1,000 each month.
While Bank of Scotland does offer you the option of arranging an overdraft, this will cost you £1 per day or £2 if you are more than £2,500 overdrawn. If you use your overdraft without permission you will be charged £5 a day.
* Lloyds TSB has a Classic current account with Vantage current account that pays 4% AER on initial deposits of £1. You must pay in at least £1,000 per month and maintain a balance of between £5,000 and £7,000 to achieve this rate of interest.
Lloyds TSB offers a Classic Plus current account that pays 2.5% AER on balances between £1,000 and £2,500.
An overdraft is an agreement with your bank that authorises you to withdraw more funds from your account than you have deposited in it. Many banks charge for this privilege either as a fixed fee or charge interest on the money overdrawn at a special high rate. Some banks charge a fee and interest. And other banks offer a free overdraft but impose very high charges for exceeding the agreed limit of your overdraft.
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.
An account opened with a clearing bank (few building societies offer current accounts) that provides the ability to draw cash (usually via a debit card) or cheques from the account. Some pay fairly minimal rates of interest if the account is in credit. Most current accounts insist your monthly income (salary or pension) is paid directly in each month and they offer a number of optional services – such as overdrafts and charge cards – which are negotiable but will incur fees.