Savings Explained
Regular
saver accounts
Regular saver accounts
are relatively recent addition to the savings market that will appeal to those looking
to save on a monthly basis – such an account could be the ideal savings vehicle
if you are putting money away for a specific purpose, maybe a holiday, car, wedding
or Christmas.
The interest rates on accounts of this kind are often significantly higher than
those on easy access, notice accounts and fixed rate bonds. They are usually fixed,
rather than variable, and run for a set term – typically 12 months.
Most accounts require you to deposit money every month and many do not allow you
to change the amount you pay in during the term. You therefore need to decide how
much you can afford to save at the time of opening.
There is usually an upper limit on the amount you can pay in each month – often
£250 or £300. The minimum deposits tend to be set quite low, between £10 and £25
a month, so even if you do not have much money to spare, you can still take advantage
of a great rate and get into the habit of saving regularly.
Individual
savings accounts (ISA)
The interest rates on accounts of this kind are often significantly higher than
those on easy access, notice accounts and fixed rate bonds
Cash ISAs
work like any other savings account, the only difference being that the interest
you earn is not taxed. Savings interest is normally subject to income tax (see
How is interest paid?
for further detail).
Savers under the age of 50 can invest up to £3,600 a year into a cash ISA.
The annual allowance for the over-50s is £5,100 - all savers will benefit from this higher limit from April 6th 2010.
There are different types of
account – easy access, fixed rate and notice accounts – and interest rates vary.
It is therefore worth comparing rates to ensure you get the best deal.
While you cannot pay more than the annual allowance into a cash ISA in any one tax year
– £3,600 or £5,100 depending on your age – you can
move money invested in previous tax years without losing the tax break.
Cash ISAs work like any other savings account, the only difference being that the
interest you earn is not taxed
However, if you withdraw money from a cash ISA you cannot reinvest it. If you want
to switch cash ISA provider, you therefore need to make sure you arrange a transfer.
If you close your existing account and withdraw the money you will lose the tax-free
status and will not be able to pay the money into your new ISA account. Read our
ISA guide
for more information.
Continue to Page 4 to Over 50s accounts >>
