Savings account offering 8% launched

Savers can now get an inflation-beating 8% interest with the Regular Saver Account from First Direct. The rate is fixed for 12 months and is payable as long as savers make monthly payments between £25 and £300.

Each month the maximum balance is increased by £300. So in your second month the upper limit is £600 and in the third £900, up to a maximum deposit of £3,600 at the end of the year long period. 

This means if you only put £100 away in the first month (instead of the maximum of £300) you can put £500 away in the second. You can only make one payment each month, but the payment amount can be changed at any time to suit your circumstances. 

If you saved the full £300 per month for 12 months you would receive approximately £156 gross interest, which would be subject to any tax you are required to pay. Non-taxpayers should request an R85 form to ensure their interest is not taxed.

The account doesn’t allow partial withdrawals and if you need to access your money within the first 12 months you will have to close it – gaining interest at First Direct’s standard saving account rate for the time the account was open.

Another condition is that you must make payments using a standing order from a First Direct current account (or 1st account). So if you don’t currently bank with First Direct you will have to switch.

The good news is, switching is easier than ever and First Direct is well know for its customer service – at the 2010 Moneywise Customer Service Awards it swept the floor with the competition and gained the accolade of Most Trusted Overall Provider.

Also, First Direct gives you the added incentive of £100 to switch and is so confident you will be happy with the product and its service that if you decide to leave the bank after a minimum period of six months you get another £100.

However, you should bear in mind that First Direct offers online telephone banking only. So if you prefer the option of in-branch service you will have to look elsewhere. Those who earn less than £1,500 a month, or who don’t want to pay their monthly salary into their 1st account might also want to think again as First Direct will charge £10 per month to run your 1st account if a minimum of £1,500 is not paid into it each month.

The Regular Saver Account has no bonus interest rate included, but on the anniversary of the account opening it will be converted into a standard First Direct savings account and you’ll receive the interest payable to that product. So after 12 months you may want to consider finding a new home for your savings.

A similar account is available from HSBC (First Direct's parent company) - although it's confined to customers with a fee-charging account (HSBC Premier, HSBC Advance, HSBC Graduate Advance and HSBC Passport). Like First Direct the account pays 8% but the maximum investment is lower at £250 a month or £3,000 in total. Those HSBC customers with a free account  are only eligible  for a regular saver that pays 4%.

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Not actually 8% though is it? Not on the final balance .... it is only 8/12 in the first month of £300.

I suspect that the actual, true, rate in the final analysis will be nearer - 3% ... not bad, but awful if you have a lump sum you can invest!

Really only any good for those who have no savings bar what the deposit each month.

But, please, 8% is grossly misleading and you should highlight that fact!

This is another misleading interest rate, You will actually only be getting 4% over a 12 month period. This should have been said in your article.

Thanks Moneywise, Just set up this savings account now as I already have a First Direct Account so this was a great way of me getting some good interest on my savings.

I subscribe to Moneywise bc I want all possible information to help with the finances. On several occasions I have eagerly read about a new account offering better rates of interest, only to get to the end of the section and find that I would need min £1500 month to deposit, or some other wonderful figure. Now if I had that sort of income, I would not be needing the same financial help. Please can I put in a plea for a heading to these sections, indicating the money bracket to which they refer? Then I won't have to keep reading these things, getting hopeful, only to be very disappointed and annoyed. Thank you for considering this.

can I take this offer on. I do have a credit card with these people

it is not for me as i am retired and have no income that comes in monthly

very misleading as the actual interest will only be 4.33% less tax
your money is better off in a fix ISA account.

better then what market is offering but not worth it for such a less amount
why are they allowed to advertise it as 8%???

i'm about to open a FD account - and on the back of that, i was considering the regular saver mentioned above. i've just under £2.5k in premium bonds that i'm thinking about moving - more than likely into an ISA now i've read the comments.

i still might put £50/mo aside into this 8% account though - any thoughts?

thanks in advance.

(ps - i don't qualify for the £100 FD offer - as i held an account with them 9 years ago. they say 'i've already experienced the FD service' so don't qualify - bit harsh, as they were only a telephone bank at the time)