What’s the best fixed-rate account that pays monthly?

Published by Ruth Jackson on 22 May 2018.
Last updated on 22 May 2018

Q

In May 2015, I invested £10,000 in the National Savings & Investments (NS&I) Pensioner Bond, paying 4%. I know that my three-year bond will mature soon, but I’m not sure what I should do with the money. I need an account that pays a monthly income. Where can I get the best possible interest rate?

From:
PT/York

A

NS&I’s 65+ Guaranteed Growth Bonds (also known as the Pensioner Bond) were one of the most successful savings accounts ever launched with almost 900,000 people investing more than £8.9 billion during the five months the accounts were on sale.

These accounts are now maturing, and all that money needs a new home. Unfortunately, it is impossible to match the 4% interest rate those accounts offered. NS&I is offering account holders a three-year account paying 2.2% that they can roll the contents of their Pensioner Bond into. But you can get a better rate elsewhere.

If you want another three-year fixed rate account, then the best rate you can get, with the option of monthly income, is 2.31% from RCI Bank.

But before you lock your money away for another three years, take the time to consider if a long-term fixed-rate account is still the best option for you. Might you need to access your cash before then? Metro Bank has an 18-month bond with an option to have the interest paid monthly. It pays 1.9%.

Also, what about tax? The personal savings allowance means you probably aren’t paying tax on the income you take from your savings (you can receive up to £1,000 a year before tax is due if you are a basic-rate taxpayer). But if you are paying income tax on your savings interest, consider moving your money into a Cash Isa, where it will be tax-free.

Aldermore has the best three-year fixed-rate Cash Isa, paying 1.8% interest, which can be paid monthly. Alternatively, you could opt for the Kent Reliance one-year Isa that pays 1.48% interest, which again can be paid monthly.

The best regular interest-paying accounts

Account type Provider Interest rate Notes
180-day notice account Secure Trust Bank 1.66% Interest is paid quarterly
One Year Fixed Saver Atom Bank 1.8% Interest can be paid monthly. Open in-app only.
Three Year Fixed Rate Cash Isa Aldermore 1.85% Interest can be paid monthly.
Three-year bond RCI Bank 2.31% French compensation scheme

Ruth Jackson is a personal fincance journalist. Find out who our experts are on the Ask the Experts homepage.

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