Lloyds ups regular saver rate to 3%

Jar of pennies

Lloyds Bank has increased the rate on its Monthly Saver account from 2% to 3%, but critics claim the rate rise is more about achieving positive publicity for the re-launched bank than offering customers an attractive rate.

The headline figure is a "teaser rate" - fixed for just 12 months - while the instant-access account is also only available for Lloyds current account customers.

Teaser rates are the headline-grabbing rates used by banks and building societies to lure customers in before switching them to an inferior rate after 12 months.

At the end of the first year, the Lloyds account – which has no withdrawal charges – will revert to an Easy Saver Account (with bonus), which currently pays 0.75% gross/AER variable and includes a fixed bonus of 0.55% also for the first 12 months.

The Monthly Saver's minimum regular deposit is £25 a month by standing order, and the most you can pay in is £250 a month or just £3,000 a year. Money withdrawn cannot be replaced and interest is paid on maturity.

HSBC and First Direct have similar accounts for current account customers paying more interest but no withdrawals are allowed.

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Positive publicity

Andrew Hagger of Moneycomms.co.uk said: "3% is around double the rate you'll earn on an instant-access account without withdrawal restrictions, but the account doesn't really help those looking to put away a lump sum."

He also pointed out the Lloyds Classic current account with Vantage pays 3% on balances from £3,000 to £5,000 but nothing over that amount, whereas Santander 123 pays 3% on balances from £3,000 right up to £20,000.

"I think the timing of the interest rate increase suggests it's about making the overall Lloyds current account proposition more attractive. Increased awareness around current account switching is keeping the banks on their toes and they are making moves to ensure they gain rather than lose market share," he added.