There are a range of savings options available – from easy access accounts to fixed rate bonds which tie in your money for a set period of time – but what are you looking to get from your savings? Here, we take a look at the options available.
Easy Access Accounts
What is an Easy Access Account? With Easy Access accounts withdrawals may be made at any time and without notice. These accounts can usually be opened with small balances and do not require a set amount to be deposited monthly – so they are a great option for setting aside money for a rainy day – that you might need to access immediately. Many easy access accounts pay interest on an annual basis although you should thoroughly check all terms and conditions when setting up your account.
Things to look out for - There may be a maximum and minimum investment limit for your easy access account, these will vary with each savings provider. If your money falls below the minimum limit your interest rate may drop.
Personal Savings Allowance - Since the introduction of the new Personal Savings Allowance (PSA) in April 2016, basic-rate taxpayers can earn £1,000 of savings interest without being tax on it, and higher rate taxpayers can earn £500 - so you can save money in your easy access account and accrue interest up to these amounts without paying tax.
Fixed Rate Bonds
What is a Fixed Rate Bond? Fixed rate bonds, also sometimes called fixed rate savings bonds or fixed rate savings accounts, usually offer a higher interest rate than easy access savings accounts but in return for a higher rate your investment will be locked away for a set period, usually between one and five years.
These bonds can be an attractive option for those looking to get more interest on their savings and do not need access to the money in the near future.
Things to look out for - There may be a maximum and minimum investment limit for your fixed rate bond, these will vary with each savings provider. If you money falls below the minimum limit your interest rate may drop.
Generally, with a fixed rate bond, you cannot make any withdrawals or remove your money early before the set period is over. It’s important to fully understand whether you have any access to your funds before the set period is over – this will be laid out the terms and conditions of the account.
Personal Savings Allowance - Interest earned in a Fixed Rate Bond will count towards your personal tax allowance.
What is a Cash ISA? A Cash ISA (Individual Savings Account) works in a similar way to an ordinary savings account in that you can put money in, take money out (sometimes there are withdrawal limits) and you earn interest on the money invested - however, you do not pay tax on the interest you earn and there is an annual limit on how much you can invest.
You must be a UK resident and aged 16 or over to get an ISA, although Junior ISAs are available for younger children.
Things to look out for: The amount you can invest between April 6 2017 and April 5 2018 is £20,000. If you deposit the full amount into an ISA one year, you can open a new ISA the following year. Every year you can invest your funds up to April 5 – any money invested after this date will move into the following tax year’s limit.
There are other types of ISAs available including Help to Buy and Lifetime ISAs and there are different rules for these, e.g. you cannot open a new Help To Buy ISA every year, and you may be able to split your ISA allowance between a Cash ISA and a Lifetime ISA – it’s best to speak to your ISA provider if you have questions. You can visit the Government website for more information on ISAs: https://www.gov.uk/individual-savings-accounts.
Personal Savings Allowance: Any interest accrued is tax-free and does not count towards your personal savings allowance.
What is a Notice Account? A notice account requires the saver to ‘notify’ the savings provider in advance, if they would like to make a withdrawal.
The notification period required by the savings lender will vary for different accounts – but is usually a minimum of 30 days.
Things to look out for: Like Fixed Rate Bonds, notice accounts often provide higher interest rates than easy access accounts and can be a good option if you want to get a higher rate for your savings – but you can’t access any funds immediately. You may not be able to make any withdrawals without notice, or there may be penalties if you do so.
If you balance falls below a certain rate, your interest rate may fall. It’s important to read all the terms and conditions of your account.
Personal Savings Allowance - Interest earned in a Notice Account will go towards your personal tax allowance of £1,000 of savings interest.
Teachers Building Society has a range of savings products available which can be viewed online here or you can speak to a friendly advisor on 0800 783 2367.