2. Notice Period Savings Account

As their name suggests, a notice period savings account requires the customer to give notice in order to gain access to their savings. In fact, this is not strictly true. Customers can still gain immediate access to their savings account, but in such an event the customer will be charged a penalty for such (commonly called a “brakeage fee”).
The different notice periods are generally 7 days, 30 days, 60 days, 90 days and 120 days.

As you might expect, each of these refers to the time period you are required to give notice in order to make a withdrawal. Normally one would expect to be paid a higher interest rate for a longer fixed period; however, this is not always the case as UK banks can, generally, calculate interest fluctuations more accurately over periods of 60 and 90 days than 120 days.

As such, strange as it may seem, it is not uncommon to see better interest rate returns offered on 60 and 90 day notice period savings accounts than is the case with 120-day accounts. Consequently, you should check this carefully.
Also, to encourage savers to use fixed notice period savings accounts, some UK banks now offer customers the opportunity to make one or two withdrawals without having to pay a penalty fee.

Again, if you think there is even a remote chance this may apply to you, check this out. But, importantly, make sure this “benefit” is not at the cost of a lower interest rate return.

3. Regular Savings Accounts

Although this may sound like it is a normal savings account, what is actually meant by the phrase/term “regular savings account” is that you agree to put aside a regular fixed sum of money each month into the account.

Beside this sum, normally you are prohibited from investing one-off and lump sum deposits. The fixed period of this account is usually x number of years (3, 5 and 10 being popular). In essence, although termed a regular savings account, the operate in much the same way as mutual funds do – which is, essentially, what they are.

4. Bond / Term Accounts

Bond / Term accounts operate by means of a customer investing a one-off lump sum into account which is then used to purchase a bond. The customer agrees to leave the money deposited for the term of the bond (usually 1 to 5 years).

The great advantage of this type of account is that it pays a fixed high rate of interest. The downside is that the customer cannot gain access to the deposit without having to pay very high penalty fees.

5. Tax-free Accounts

One of the great aspects of a good savings plan is to ensure that you keep as much of the interest payable on your savings as you possible can. In other words, you are looking for the highest return possible on your deposit.

Unlike any of the savings accounts mentioned above, the tax-free accounts allow you to do this by eliminating one of the biggest costs on your savings, namely tax!

The downside of this type of savings account is two-fold:

(a) if you break the period and withdraw the money early, not only do you have to pay a penalty, but also the back tax; and

(b) wisely the government puts a ceiling on the amount you can save in this manner each year (currently this amount is 7,000 Pounds if you utilise all the available savings accounts methods). Nonetheless, tax-free savings accounts are a very useful savings vehicle if you know you are not going to need the money during the duration of the time the account operates for.

10 Questions To Ask Yourself Before Opening A Savings Account

Having looked at the various savings accounts on offer to customers of UK banks, the following are 10 questions you should be asking of yourself when comparing UK bank savings accounts before proceeding to open the account:

1. IMPORTANTLY: will I need to access the savings account; either now or in the future?
2. What is the minimum amount I need to open the savings account with?
3. What rate of interest will I be given and is this the best rate of return I can expect to get on this money (for example, would buying a Promissory Note, Debenture, Shares or other investment vehicle give you, potentially, higher returns)?
4. Will I be charged if I need access to the account ahead of the fixed period of the savings account?
5. If I do have to pay penalties, are this deducted from the deposited sum or am I expected to pay these fees ahead of time (upon request to break the fixed period)?
6. When will the interest be payable – monthly, quarterly, annually, upon maturity of the account?
7. If the interest is payable periodically, as opposed to on maturity of the account, can the interest be compounded to the principal or must it be paid into a separate account?
8. Am I allowed to add to the initial deposit at any time, or must this sum remain fixed at the initial deposited sum until maturity of the savings account?
9. Can I make the savings tax-free? and
10. WILL I NEED TO HAVE ACCESS TO THE SAVINGS ACCOUNT – EITHER NOW OR IN THE FUTURE!