Savings account offering 8% launched

Published by Esther Armstrong on 04 November 2010.
Last updated on 19 November 2010

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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