Post Office launches top savings account

Published by Esther Armstrong on 22 October 2010.
Last updated on 25 October 2010

Savers can now get 2.9% on an instant access savings account with the Post Office, but should watch for the bonus rate running out after 12 months.

The account, which is online only, is available to customers with deposits from £1 to £2 million and savings can be accessed at any time. Additional deposits can also be made at any point.

However, savers should be aware that the rate includes a 1.25% bonus rate, which runs out after a year.

For more top savings rates, check our round-up.

Also keep in mind that although the Post Office states it is “committed to keeping savers informed about interest rates”, it will only update rates on its website and send one email to savers to let them know the offer period has come to an end.

There is a local rate phoneline which customers can use for technical support, but savings can’t be managed in-branch or over the phone.

Interest is paid either monthly or annually, but the top line rate only applies when it’s paid annually. Otherwise interest will be paid at a slightly lower 2.87% gross, which includes a bonus rate of 1.23%.

Another point to remember is that interest will be subject to tax (if you are a UK taxpayer). So for basic rate taxpayers, the interest rate will drop to 2.32% after tax.

If savers haven’t used their tax-free ISA allowance for the year (£5,100 in cash) the Halifax Direct Reward ISA offering 2.8% will be a better option.

This account comes with the option to manage it online or over the phone and has a minimum opening balance of £1. You are allowed unlimited withdrawals throughout the 12-month offer period, but should bear in mind the interest is variable.

From the 1 November the Post Office will fall under the Financial Services Compensation Scheme, which means savers will have up to £50,000 protected per institution. Currently it is protected by the Irish Deposit Guarantee Scheme, which covers 100,000 euros per institution, per saver.

After 31 December, under EU guidelines, savers will be protected for accounts within Ireland and the UK up to a maximum of 100,000 euros.

For more top ISA rates check out our ISA round-up.

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