Money Outlet

A savings account is a deposit-based account which pays out a higher interest rate than any current account and is a low-risk investment for a short to medium-term savings plan. Most high street banks along with building societies offer a wide range of savings accounts and you can also open an account through National Savings and Investments (NS&I). The majority of saving plan companies are regulated by the Financial Services Compensation Scheme, FSA, which means you are protected against any loss should the firm collapse.

The main types of savings accounts are:

Deposit Account – This type of account allows instant or easy access to your money and offers a higher interest rate than a current account.

Fixed Notice Account – Again this type of account offers a higher interest rate than a current account although access can require anywhere between 30-90 days according to the set terms and conditions of the account. Often a penalty fee is charged for any withdrawal made without sufficient notice.

Cash ISA – Interest with cash ISA increases with the balance. A maximum deposit of £3000 can be made in any one tax year and any interest earned is absolutely tax-free. Access is generally instant although some ISAs may require notice. Once a withdrawal has been made you are not entitled to top up with any further deposit if you have already reached your £3000 limit. (Learn more about ISAs here)

Fixed Rate Bonds – Bonds offer an even higher interest rate and are a good option for long term savings, however, these rates do tend to be fixed. Once a sum of money is deposited into a bond you agree for it to be held for a specified period of time. Further deposits or any withdrawals cannot be made and the standard term is anything ranging from 6 months to 5 years. The minimum deposit is usually £1000.