Best regular savings accounts

Regular savings accounts
Earn over 10% on your savings

If you frequently set aside small amounts regularly, a regular savings account might provide exceptional interest rates, sometimes exceeding 10%, for consistent monthly contributions. In this guide, we’ve compiled the best options along with tips to help you maximize your interest earnings.

Top-pick regular savers

• Top existing-customer accounts, including
  • Virgin Money – 10.38% fixed
  • First Direct – 7% fixed
• Top open-to-all accounts
  • Principality BS – 8% fixed for six months
  • Progressive BS – 7% variable for a year

Other ExEconomics savings guides…

– Top savings accounts: The top-paying normal savings
– Cash ISAs: The likely winner if you pay tax on savings interest
– Current accounts: Earn up to 5.12% on smaller sums

What are regular savings accounts?

The clue lies in the name. Typically, regular savings accounts require you to deposit money each month, with interest generally paid annually (unless specified otherwise). These accounts provide higher interest rates compared to standard fixed or easy-access savings accounts, but they often come with strict terms and conditions. These may include restrictions on the number of withdrawals allowed, an obligation to make monthly deposits, and a limit on how much you can save. Additionally, the interest rate often applies for just one year.

Should I get a regular savings account?

To help you make the most of a regular savings account, it’s worth getting your head around the following need-to-knows…

1 – You need to deposit a certain amount every month

This is important. Regular savings accounts are designed for depositing set amounts monthly, with some accounts being quite strict about this. If you miss the minimum deposit, you could forfeit the interest or even have your account closed by the provider.

Although some regular savings accounts allow for the occasional missed payment, it’s best to avoid this if you can. You might not be able to compensate for the missed payment later, which means losing out on the interest.

If you’re struggling to make a scheduled payment into your regular savings account, it’s advisable to contact your provider to explore possible solutions and see if they can offer any assistance.

2 – The headline rate usually only lasts a year – so ditch and switch after

Most regular savings accounts are typically short-term, lasting only one or two years. Once this period ends, your accumulated savings are often transferred to a standard account with a significantly lower interest rate. Therefore, it’s important to monitor your savings and seek out better rates once your regular saver matures.

Be cautious, though! Some regular savings accounts have variable interest rates, meaning the provider can adjust the rate at any time. Keep an eye on these rates, and be prepared to switch accounts if the rate drops.

3 – You can open more than one account across different banks

Regular savers are designed for setting aside smaller sums on a monthly basis. However, if you have a larger amount to save, there’s no rule against using multiple regular savers. For instance, by combining our top three recommendations below, which are accessible to everyone, you could save up to £800 per month, all while earning at least 5.5% interest.

It’s important to note that most providers allow you to hold only one regular saver account with them at a time.

4 – Maximise interest by drip-feeding cash from easy-access savings

Although standard savings accounts might offer higher interest rates, the challenge lies in the time required to accumulate a substantial balance. However, if you already possess a significant amount of money, there are still ways to optimize its growth and maximize your earnings.

• Put the lump sum in the top-paying easy-access account.

You’ll then start earning interest on the full sum straightaway (see Top savings accounts).

• Then, pay in to the regular saver from the easy-access account each month.

To maximize the interest on your savings, aim to deposit as much as possible into your regular savings account each month, up to the account’s limit.

This approach, known as ‘drip-feeding,’ involves gradually transferring your money month by month. This ensures that every penny you want to save is earning the highest possible interest at any given time. Here’s how it can be applied…

Imagine you have £3,000 in savings. Start by placing this amount in a top easy-access account that allows unlimited withdrawals. In the first month, transfer £250 to a high-interest regular savings account. Now, £2,750 will continue to earn interest at the easy-access rate (e.g., 4.1%), while £250 earns a higher rate in the regular savings account (e.g., 6%).

This strategy allows you to earn interest on the larger sum while benefiting from the higher rate on the regular savings contributions. After 12 months of payments, the entire amount will be in the regular savings account. You can then move all the money to the best available account at that time and begin the process again with a new regular savings account if one is available.

To maximize your returns, contribute as much as possible in the initial months, but always leave enough to meet the account’s minimum payment requirements throughout its term. This way, you earn the highest interest possible while complying with the account’s terms and conditions.

5 – You’ll earn what looks like half the headline interest rate

When it comes to regular savings accounts, the interest you earn will be roughly half of the account’s stated interest rate. However, this isn’t a trick—it’s simply the result of how the calculations are done. The key factor is that the money is deposited gradually each month, rather than as a single lump sum.

This situation has led to confusion and frustration for some people, who have felt disappointed when they received less interest than anticipated. However, the issue isn’t that they’ve been shortchanged, but rather that their expectations were misaligned with how the interest is actually calculated.

Here’s an example (though for ease we’ve used an unrealistic interest rate)…

Mr. John E and His £3,000 Savings

John has accumulated £3,000 in a standard savings account that offers a 10% annual interest rate.

What does John anticipate earning? His quick calculation is that since he’s invested £3,000 at 10%, he should receive £300 in interest.

Why is this incorrect? John only had the full £3,000 in his account during the last month of the year; it took him the entire year to save up that amount. Interest is only earned on the money actually present in the account. So, after the first month, he was earning 10% on just £250, and halfway through the year, he was earning interest on £1,500.

How should John calculate it? Throughout the year, his average balance was approximately half of £3,000, which is £1,500. Therefore, John should expect to earn around 10% of £1,500 over the year, which comes to £150.

It’s important to mention that the interest earned from standard savings accounts is now tax-free because of the personal savings allowance. Basic-rate taxpayers can earn up to £1,000 without paying tax, while higher-rate taxpayers are allowed £500 tax-free. However, additional-rate taxpayers are not eligible for this allowance.

6 – Up to £85,000 per person is protected in UK-regulated financial institutions

The safety of your funds here mirrors that of traditional savings. If your money is deposited in a UK-regulated bank or building society account, it benefits from the safeguards of the Financial Services Compensation Scheme. The key principle to remember is…

The first £85,000 per person, per financial institution is protected.

Although it may seem straightforward, the specifics are actually quite intricate. There are particular regulations concerning the registration of various banks and the definition of a financial institution. For comprehensive details, consult our complete guide on “Are My Savings Safe?”

How to maximise safety

For the majority of everyday savers, the cap on deposit amounts typically keeps their balance well below £85,000, so there’s usually no issue.

However, if you hold savings in multiple accounts with the same bank, it’s wise not to exceed £85,000 in any single institution. Distribute your funds across different banks to ensure full protection. Discover how to achieve complete safety for your savings.

7 – Got kids or on a low income? You can boost returns via special accounts

Children’s regular savers

If you’ve a child aged 17 or under, you can get 5.8% AER fixed for a year with the Saffron BS Children’s Regular Saver. You can save between £5 and £100 a month with this account, but it must be opened either by mail or in a branch. If you prefer an online option, consider the Halifax Kids’ Monthly Saver, available for children aged 15 or younger, with a minimum deposit of £10 and a maximum of £100 per month. For additional information on these and other children’s savings accounts, check out our Kids’ Savings Guide.

Help to Save for those on low incomes

The Government’s Help to Save program aims to motivate individuals receiving universal credit or working tax credit to set aside money. Eligible participants can contribute between £1 and £50 each month and receive a 50% bonus on their savings, with a maximum bonus of £1,200 available over four years.

For comprehensive details on the Help to Save scheme, including when it is beneficial or not, refer to our detailed guide.

Top existing-customer accounts

The highest-paying regular saver accounts often come with a significant caveat: you need to have an additional product with the same provider, typically a current account. To fund your regular saver, you’ll need to set up a standing order from this linked account. Below, we’ve outlined the essential details for the top offers available.

If you’re considering opening a regular saver with a provider you aren’t already banking with, your first step will usually be to set up a current account with them. Once that’s in place, you’ll be eligible to open the regular saver account. For more information on the specific bank accounts, be sure to check out the Best Bank Accounts guide. Some banks even offer up to £175 in cash as an incentive to switch.

Virgin Money’s 10.38% on up to £250/month is by far the top rate, plus you can withdraw cash whenever you like and you don’t have to pay in every month, so it’s flexible.

Alternatively, First Direct’s 7% lets you pay in a slightly higher £300/month, though here you must pay in every month and you can’t make any withdrawals or close the account during the 12 months (you’ll get a much lower rate if you do).

Top open-to-all accounts

The leading open-to-all accounts can match or even surpass the benefits of some of the existing-customer accounts listed earlier. Therefore, you might consider opening one (or more) of the accounts mentioned above and pairing them with one of these options to maximize your monthly savings.

Regular savers open to all – what we’d go for

Principality BS offers the top rate overall at 8% fixed for six months on up to £200/month. You don’t have to pay in every month, though you can’t make withdrawals unless you’re closing the account early.

For a longer term with a bit more flexibility, Progressive BS offers a regular saver at a lower 7% variable for a year on up to £300/month. You can make unlimited withdrawals, though you must pay in at least £20 each month.

Principality BS – 8% fixed for six months

Progressive BS – 7% variable for a year

My building society or bank has a better rate than accounts here. Why isn’t it featured?

ExEconomics.com is a UK-wide platform catering to England, Scotland, Wales, and Northern Ireland. We aim to highlight accounts that are accessible to everyone, so it’s important that these accounts can be opened online, by phone, or via mail.

Accounts requiring branch visits pose a challenge, particularly if they aren’t provided by major banks. For instance, a resident of Carlisle would face difficulties accessing branch-based accounts from Suffolk Building Society due to the absence of a nearby branch.

It’s always worth looking at local building societies and banks as they can occasionally have a corking branch-based account. But because we’re a nationwide site, we can’t feature them all.