Earn 12 per cent on your savings

Alliance & Leicester (A&L) is launching a regular savings account paying 12% on Monday as it strives to encourage people to switch current account.

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Its new 12% Premier Regular Saver will be available to anyone who opens a Premier Current account. This replaces the current offer which gives new Premier customers access to a cash Isa paying 10%.

A&L is one of the banks actively trying to increase its share of the current account market. Most consumers have never switched bank and still have their current account with one of the big four – Barclays, HSBC, Lloyds TSB and Royal Bank of Scotland, which owns Natwest – despite the fact that their standard current accounts pay just 0.1% interest on balances in credit. So is A&L’s new Premier account offer likely to get people moving?

What’s the deal?
If you open a Premier account you will get access to the Regular Saver, which guarantees to pay 12% interest for a year. You can pay between £10 and £250 a month into the account – you must decide how much you want to pay in when the account is opened as you can’t alter the amount during the 12-month term.

In addition to the highly competitive savings rate, the Premier current account is also an attractive deal. It pays 1.5% on balances in credit and it offers an interest-free overdraft for the first 12 months. Thereafter, A&L differs from most other current account providers in that, rather than charging interest if you go overdrawn, it levies a daily fee: you pay 50p a day up to a maximum of £5 a month.

Premier customers also receive free European annual travel insurance and access to the PlusSaver savings account, which pays 5.5%. Unlike the Regular Saver, this is an easy access account which does not require monthly deposits.

A&L’s Premier account is an attractive all-round offer. However, if you are looking for a regular savings account and do not want to switch your current account, or want a current account that pays a higher rate of interest on balances in credit, there are alternatives.

Alternative regular savings accounts
A number of other providers offer high-paying regular savings accounts linked to their current accounts.

HSBC Premier, Plus or Passport current account customers have access to a regular savings account paying 10%. HSBC also offers a regular savings account to those with its standard current account or basic account, although the interest rate is lower at 8%.

First Direct and Norwich & Peterborough building society are also offering rates of 8% on their regular savings accounts.

One of the drawbacks of regular savings accounts is that the maximum investments are relatively low. Of the accounts mentioned above, First Direct permits the largest deposits, but even then the most you can pay in is £300 a month.

However, West Bromwich building society has a very competitive deal if you’ve got more to put away. Its Magic 8 account pays 7.35%. This includes a bonus of 2.60 percentage points which is dependent on you making 12 monthly deposits and no more than two withdrawals during the year. However, while the rate on this account is slightly lower than those on the accounts mentioned above, you can pay in up to £1,000 a month. Also, it is not linked to a current account.

What about current accounts?
If you are one of the millions of people who have never switched their current account, there are some great deals available which you should be looking to take advantage of.

In addition to the Premier account, A&L offers another highly competitive current account. Its Premier Direct account pays 8.5% on balances up to £2,500 – you earn just 0.1% on anything above that. This rate is available for the first 12-months, after which it drops to one percentage point below Bank rate – this means the current go-to rate is 4.0%.

The Premier Direct account is aimed at a different type of customer to the Premier account – it is an online account, so no good if you want branch access. However, while you earn a great rate of interest, it does not offer the free insurance or access to the 12% Regular Saver that you get with the Premier account.

Abbey’s Preferred in-credit account is another good deal. It requires customers to deposit at least £1,000 a month and pays 8.0% for the first year on balances up to £2,500. The rate drops to 2.5% on anything above that.

If you are a high earner or tend to run a larger balance on your current account, the Coventry First account from Coventry building society could be a good option. You must deposit at least £1,000 a month but the interest rate is 5.85% on balances up to £250,000. This includes a 12-month bonus of 0.85 percentage points.

There are some great current account and savings account deals available at the moment. Given that many households are grappling with increasing costs of living, it’s time to make sure that you’re maximising the interest you are earning on any savings you do have.

Have your say: please visit our community forum and tell us about your tips for finding a great savings or current account.

Disclaimer: Please note that any rates or deals mentioned in this article were available at the time of writing.

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