Focus on: Earn 8% on your savings

With inflation climbing to 3.2% in October and the base rate stubbornly sticking at 0.5%, the outlook for savers is looking bleaker than ever.

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But at least the recent launch of First Direct’s Regular Saver account, paying an impressive 8.00% annual interest, has shed a little light on the gloom. So how does the account work and who is eligible to open one?

How much interest can I earn?

First Direct’s Regular Saver account pays a fixed rate of 8.00% for 12 months, so long as savers make monthly payments of between £25 and £300. The maximum amount you could have paid into the account by the end of its term is £3,600. This would generate £156 gross interest, or £124 after basic rate tax is deducted. You must have a First Direct current account to be able to open a Regular Saver account, so if you bank elsewhere, you will need to switch your current account over to First Direct.

Can I change the amount I pay in?

Yes – so if you are feeling stretched one month, you can reduce your monthly payments, and increase them again when you have enough funds to do so. You can do this at any time, although any changes have to be in minimum increments of £5 each month.

How is interest calculated and paid?

Interest is calculated daily and paid on the 12-month anniversary of the account being opened. Then the money you’ve saved, alongside the interest earned, will be transferred to either an Everyday e-Saver or Savings Account in your name. The Everyday e-Saver Account pays just 0.25% annual interest, while the Savings account pays a paltry 0.05%, so you will need to be prepared to move your money once the Regular Saver account’s one-year term is finished.

Any catches?

There’s a couple. The first is that payments must be received by standing order from a First Direct current account which has at least £1,500 credited to it every month. If your current account does not have this amount of cash running through it, it will cost you £10 a month to run which will wipe out the benefit of the Regular Saver interest. Alternatively, to avoid the charge, you will need another product with First Direct, such as a mortgage or savings account.

Secondly, if you make any full or part withdrawals, you will have to close the account and will only receive the bank’s standard saving rate that applied at the time of opening. This is currently just 0.05%.

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Who is the account good for?

Savers who can wholeheartedly commit to paying a given amount every month and don’t need regular access to their cash; if one or both of these doesn’t apply, the headline rate of 8.00% becomes irrelevant and you would be better off with a competitive easy access savings account.

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

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