Lloyds Bank is offering people looking to get into a savings habit a competitive 5.25% interest rate on its regular saver.
Regular savings accounts typically require people to deposit a set amount each month and make minimal to no withdrawals. They work well for disciplined savers who want to build their savings over time and benefit from higher interest rates than standard accounts. Savers can launch Lloyds Bank’s Monthly Saver with just £25, and interest is paid after 12 months when the account matures.
The account allows you to save up to £250 per month, which means a maximum of £3,000 can be deposited over the term.
Based on the current interest rate, a £3,000 deposit is estimated to earn £78.75 over 12 months, bringing the total balance to £3,078.75.
To apply, savers must be UK residents aged 16 and over and already have a Lloyds Bank current account.
This account is more flexible than what’s typically expected from a ‘regular’ savings account, as withdrawals are allowed at any time without penalty. However, due to monthly deposit limits, you may not be able to replace what you withdraw.
How does the account compare?
Principality Building Society is still leading the table for regular savers with an Annual Equivalent Rate (AER) of 7.5%. The account runs for six months, and interest is paid on maturity.
Savers can invest up to £200 per month, which means the pot can grow to a total of £1,200, and withdrawals are not permitted until the account matures.
With a maximum monthly investment of £200, savers will end up with £1,227.53, including £27.53 in interest. So, while it may have a market-leading AER, its six-month term limits the total interest earned.
Zopa offers a 7.1% AER over 12 months with a higher limit of £300 per month, allowing savers to amass £3,600 in total savings. Interest is paid at the end of the term, with a full £3,600 deposit expected to earn around £136.50, bringing the total balance to approximately £3,736.50.
Although Zopa’s interest rate is lower, the longer term and higher deposit limit make it a potentially better option for larger savings. Savers are allowed to withdraw money from the Zopa savings account at any time without penalty. However, they can only replace the money within the monthly allowance of £300.
First Direct is just behind with a 7% AER over 12 months. The account allows a monthly deposit of £300, which can also total up to £3,600 in savings over a year. At the end of the term, First Direct says savers will amass around £3,736.50, including £136.50 in interest.
Other providers offering competitive interest rates on regular accounts include Nationwide Building Society with a 6.5% AER, and Lloyds Bank with a 6.25% AER on its Club Lloyds account.
