Savings Watch: ICICI Bank UK's HiSave fixed-rate account
ICICI Bank UK's HiSave three-year fixed-rate account is paying 2.55% AER, currently the best rate on the market for three-year fixes. The account can be opened with a minimum of £1,000, with the interest paid monthly or annually. This is a no-access account, so you will be unable to make withdrawals or additional deposits.
For the over-50s, Saga's three-year fixed-rate savings account also offers 2.55% AER, and you can make withdrawals. But despite being able to open the postal-only account with just £1, the 2.55% rate applies only to those with savings of more than £50,000. On balances of between £1 and £9,999.99, savers will get 2.25% AER; balances of £10,000 to £24,999.99 offers 2.35% AER; and on balances of £25,000 to £49,999.99, savers will receive 2.45%.
But if you make withdrawals with the Saga account, you'll be hit with a charge subject to how long you have before the account matures - one year or less to go, and you'll pay the equivalent of 90 days' gross interest; two years left and you'll pay 180 days' gross interest.
There are two-year accounts which beat both these rates, such as FirstSave's two-year loyalty bond Issue M yearly interest, which pays 2.6% AER.
For further details, visit icicibank.co.uk, saga.co.uk and firstsave.co.uk.
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.
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.