Banking

Best buy notice savings accounts: Are they a good spot for your money?

Rate starved savers hunting for a return while retaining instant access to their cash may feel there is little incentive to move their money right now.

Easy-access accounts typically pay a record low of 0.17 per cent on average, with some of the high street banks paying as little as 0.01 per cent.

But despite this, lockdown savers have piled into these accounts since the pandemic started.  

Savers may be keen to explore notice accounts if they are not comfortable with locking their money into a fixed rate deal.

According to Paragon Bank, total savings on CACI’s database – which captures data from more than 30 providers – has grown by 8 per cent since March 2020, from £903billion to £975billion.

The majority of this growth has been driven by easy-access accounts, which swelled by more than 16 per cent over the course of the pandemic.

In March 2020, CACI’s easy-access accounts amounted to a value of £505billion and now stands at £589billion.

Derek Sprawling, savings director at Paragon Bank said: ‘We are seeing that people are saving at a slower pace since pandemic restrictions lifted, which is to be expected. 

‘However, saving stock continues to increase more consistently month-by-month.

‘This makes it clear that saving remains a priority for many and this could be an indication that people are still feeling cautious and prioritising building contingencies and an emergency fund while the economy still feels uncertain.’

The average easy-access balance now stands at £11,603, according to Paragon Bank, a rise of more than £1,300 since March 2020 when it stood at £10,246.

For someone with £11,603 stashed in the average easy-access account paying just 0.17 per cent they could expect to earn less than £20 over the course of a year.

Fixed-rate deals offer better returns, with the average one year fixed-rate deal paying 0.79 per cent and the best available deal by Gatehouse Bank paying 1.51 per cent.

But these deals also mean locking away savings for a year or more, which some people may be unwilling to risk in case they need to access the money. 

One lesser-known product, the notice account, may offer savers the perfect alternative to an easy-access or fixed-rate deal – it is sort of a halfway house between the two.

And while easy-access rates remain at record lows, notice accounts rates have risen – now typically paying three times’ the interest.  

They enable savers to withdraw their funds following a notice period, typically ranging between 30 and 120 days, but can offer savers a better return than they might otherwise achieve with an easy-access account. 

Rachel Springall, finance expert at Moneyfacts, said: ‘Consumers comparing different savings accounts may appreciate that most notice accounts will allow them to deposit funds little and often, unlike fixed bonds which typically require an upfront lump sum at the point of application. 

‘There are many notice accounts that pay better variable rates than easy access accounts too if savers are happy to give notice to access their cash.’  

The average notice account rate has risen to its highest point during 2021, with the average deal now paying 0.54 per cent, according to Moneyfacts, up from 0.37 per cent six months ago. 

The top paying notice account offered by Recognise Bank currently pays 1.1 per cent with a 95 day notice period, which is 0.45 per cent more than the best easy-access deal. 

For someone with £10,000 in the best paying easy access account (0.65 per cent), this means they could earn an extra £45 over the course of a year by switching to the best paying notice account.

Should you consider a Notice Account?

Notice accounts are essentially a halfway house for those fed-up of rock bottom easy-access rates but wary of locking their money away for a fixed amount of time.

James Blower, founder of the Savings Guru said: ‘Notice accounts are growing in popularity with more savings providers offering them. 

‘They appeal to savers who have enough money to survive on for a few months, but don’t want to have to wait too long for their money if their circumstances change.

‘Therefore, they don’t want to lock away the rest of their savings for a fixed period but are happy not to be able to access it for up to three to four months.’

The fact that notice accounts mean your money is not instantly accessible will be a stumbling block for some.

Blower said: ‘The main drawback with notice accounts is that, like fixed rate bonds, they can’t be accessed earlier so savers should only lock up money they really don’t need to access for that notice term, or keep some in an easy access account to see them through until notice has been served.’

But savers can also forego some interest in exchange for a shorter notice period. 

For those seeking quicker access, Investec are offering a rate of 0.8 per cent with a 32 day notice period, whilst Secure Trust and Charter Savings are both paying 0.7 per cent with a 30 Day notice period, which still beats all easy-access accounts.  

Those who opt for the Investec account can do so via the savings platform Raisin and in doing so secure a £50 welcome bonus on top of the headline rate.

Raisin does not charge a fee for using its platform service but the bonus only applies to your first savings account with Raisin and requires a minimum deposit of £10,000 to qualify.

This means were someone to save £10,000 in the Investec 32 day Notice account they could earn a total of £130 in the first year – the equivalent of a 1.3 per cent interest rate, while also being able to access their cash after 32 days notice – although you must withdraw the full deposit amount if you do so.

It is also worth mentioning that some easy-access accounts come with their own restrictions.

For example, Family Building Society which currently offers the best buy-easy access deal of 0.65 per cent requires a minimum deposit of £10,000 and only allows customers to add money to the account until 5 November 2021.

Aldermore, which offers the second best easy-access deal paying 0.60 per cent limits savers to two withdrawals a year – for those that make more the rate drops to 0.1 per cent.

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