The new account offers greater flexibility than other regular savers on the market
Coventry Building Society has launched a new inflation-busting regular saver account at 2.5%.
Savers can deposit up to £500 each month, meaning a maximum £6,000 can be saved in the first year.
After 12 months, the account transfers to an easy access saver account which pays an interest rate of 1.05%.
The new accounts can be opened at a branch, over the phone, online or by post.
There is a penalty charge of thirty days’ worth of interest for any withdrawals in the first twelve months – the equivalent of around 21p for every £100 withdrawn.
After a year, savers can take money out of the account as often as they like without charge.
Matthew Carter, head of savings and mortgages at Coventry Building Society, says: “The regular savings market is unnecessarily complex and people’s good financial intentions risk being stifled by the number of strings attached to many accounts.
“The regular saver offers an attractive rate that will encourage people to start saving, along with simple terms and conditions that make it straightforward to put money aside.”
Regular savings accounts
A regular savings account requires you to put aside money each month and can pay up to 5% interest – considerably more than the average easy-access account.
Offering some of the best rates on the market, they are ideal for someone looking to start saving.
However, some only offer the headline rate for a year or require you to be an existing customer.
Another downside is the low maximum deposit amount – usually around £250 every month - while there are penalties if you fail to make a monthly payment.
With falling interest rates savers are having a tough time at the moment. Taking out a regular savings account is a good way of beating inflation.
While the Coventry regular saver does not have the best interest rate on the market the maximum £500 you can deposit each month is the joint highest you can put in.
The minimum deposit you can make each month is £1 and there is no limit on the number of times savers can put money in, giving you greater flexibility than some its rivals.
Another advantage of the account is that is open to new customers. While First Direct, HSBC and M&S all offer higher paying regular savings accounts, you have to be a current account holder with them.
James Blower, industry expert and founder of the Savings Guru, says: “Current account holders of HSBC, First Direct and M&S Bank can all earn double this with their 5% regular savings accounts and Virgin Money, Kent Reliance offer 3% to savers. So, while the rate is inflation beating and competitive, there are better options for savers which I’d recommend ahead of this new account from Coventry.
“I am a big fan of regular savings accounts – they pay some of the best rates on the market, allow savers to set up their contribution on pay day - so savings contributions can go out before any spending plans - and are a great way to start saving if you don’t have a lump sum of money to open an account.”
First Direct Regular Saver - 5%
For deposits between £25 and £300 per month. The rate is fixed for 12 months and is only available to current account customers. Can be opened online or by phone.
HSBC Regular Saver - 5%
For deposits between £25 and £250 per month. The rate is fixed for 12 months and available to current account customers. Can be opened in branch or by phone.
M&S Bank Monthly Saver - 5%
Rate available on deposits between £25 and £250 to its current account holders. The interest is paid annually, and the rate is fixed for 12 months. Can be opened online, by post, over the phone or in branch.
Best open-to-all regular savers
Virgin Money Regular Saver Issue 18 - 3%
This account pays 3% on deposits of from £1 to £250 per month. This account can only be opened in branch and the 3% AER is fixed for 12 months.
Kent Reliance Regular Saver - 3%
The Kent Reliance regular saver pays 3% for deposits between £25 and £500 every month. At the end of 12 months you are transferred over Kent Reliance’s easy access account which has a rate of 1.30%. You have to open the account at one of its nine branches.
Coventry Building Society launches 2.5% regular savings account
I'm sorry but I feel your article is a bit misleading as it concentrates on the headline interest rate of 2.5% with no mention being made of the effective annual rate of approximately 1.35% I accept that this is a good deal if the saver can only afford the £500 per month but if they had the full £6k available they would be better off depositing in say a Marcus instant accessaccount at 1.45% ... and this rate could be improved further if the money was tied up for 12 months.
Hi James, Not sure I understand your maths. If you have £6,000 to invest you only put £500 per month into the Coventry Account and the rest could be earning 1.45% in a Marcus account or similar? So I work that out as an average rate of 2.02% or £121 in interest in total compares to £87/ 1.45% with Marcus alone. The effective rate on the Coventry account (based on the average amount invested of £3000 in the first year is still 2.5% If you have £6000 to invest up front you might be better off with a 12month bond - although the withdrawal penalties might be harsher.
I have a Regular Saver with First Direct. Even saving £300 a month for 12 months only gives around £97 pounds interest.
Misleading by omission
It sadly always seems to be the case that articles about regular savers headline a rate above inflation but fail to point out that the effective overall rate is approx. half that, because month 1 you only have £500, month 2 £1000 etc. One solution, as Joe points out above - if you have the lump sum - is to keep that in an interest bearing easy access savings account and transfer over each month into the Regular Saver.
This method has been publicised by Martin Lewis for many years and that's my problem with this article. It shouldn't require people to flesh it out in the comments to render it of best value to the reader - coming from a supposed knowledgeable source, all that info should be in the original article.