TSB ups Monthly Saver rate to 5%
TSB has increased the rate it pays on its Monthly Saver account from 2% gross/AER to 5%.
Savers must have a TSB current account to open the Monthly Saver and the most they can deposit each month is £250. The minimum contribution is £25.
After tax, the rate received by basic-rate taxpayers is 4% and higher-rate taxpayers is 3%.
First Direct's Regular Saver - also only available to its current account customers - pays 6% gross/AER and also has a minimum contribution of £25 a month, but its maximum limit is £300.
For new customers not wanting to move their current account, the best rate available on a regular saver is 4% from Kent Reliance.
TSB has also improved the rate on its 2 Year Fixed Bond from 1.35% gross/AER to 1.5%.
Basic-rate taxpayers with £2,000 to put away will receive a rate of 1.08% after tax, while high-rate payers will earn just 0.81%.
However, the best rate on a similar bond currently available on the market - according to Moneywise.co.uk/compare - is 2.3% gross/AER on Punjab National Bank (International)'s 2 Year - < 3 Year Fxd Rate Deposit.
The rate is fixed for 24 months. The minimum deposit is £500 but can only be opened in branch or by post.
TSB has also increased the rate on its 2 Year Fixed Rate Cash ISA to 1.5% AER, up from 1.4%. The minimum opening balance is £3,000 and transfers in are allowed. Withdrawals made within the fixed rate period will incur a charge of 180 days' tax-free interest on the amount taken out.
The best-buy two-year fixed cash Isa available is currently Kent Reliance's Flexible Fixed Rate NISA Two Year Issue 17, paying 1.85% AER. The minimum opening deposit is £1,000 and transfers in are allowed.
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.
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.
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.