Where to save £100 a month

Average monthly savings have shot through the £100 mark, according to the National Savings & Investments (NS&I) latest quarterly survey.

It shows that people are typically now saving more than 8% of their monthly incomes, equating to £101 or more than £1,200 a year. Question is; are they choosing the accounts that will make their money work the hardest?

Typical interest rates remain low on savings accounts, but there are still some great offers around. And the difference in the returns on offer between the best and the worst deals is huge.

That’s why we’ve rounded up the top savings accounts for your cash.

Cash ISAs

It always makes sense to avoid paying tax on as much of your savings income as possible by maxing out your ISA allowance.

And for small, regular savers, the best ISA on the market at the moment is the Nationwide Regular Saver ISA paying 2.50% (variable) on balances between £1 and £15,000.

As the name suggests, the account is designed for people saving on a monthly basis.

You can pay much more than £100 a month into this account though. In fact, it allows monthly payments of £1,250 which, if you started paying, would take you a long way towards the New ISA annual allowance of £15,000 which kicks in from July 1.

There is no minimum monthly payment on the account, which can be opened online if you are already a Nationwide customer or in branch if you are not. It does not accept transfers in from other ISA providers.

It is also worth noting that the account terms only run until the end of March 2015, meaning that you will have to find a new home for your ISA savings in less than a year. You can read more about the account with our Focus On article.

For savers of larger amounts, other options include the BM Savings ISA Extra. This easy access, postal account pays 1.65% (variable) and does allow transfers in.

The bad news, however, is that the headline rate includes a 12-month 1.15% bonus and is only paid on £20,000 upwards – the rate paid on smaller amounts is 1.40% (including a 12-month bonus of 0.90%).

Anyone with less than £20,000 to invest would therefore be better off with Halifax’s ISA Saver Online, an internet-only account at 1.55% (including a 12-month 1.30% bonus) on £1 and above.

Current accounts

If you have already used up your ISA allowance, you might well think that an easy access or notice savings account will offer the best return on your regular savings.

But a shift in the market means that the best interest rates can actually be earned in current accounts.

The Santander 123 Current Account, for example, pays a generous 3.00% on balances between £3,000 and £20,000.

The flipside is that the account comes with a £2 monthly fee and requires minimum funding of £500 a month, as well as at least two monthly direct debit instructions (the aim being to ensure that people use it as their main current account).

For smaller savers, there is also the Nationwide FlexDirect account. It pays a massive 5.00% for the first 12 months on balances between £1 and £2,500 (after which the rate falls to 1.00%), and requires monthly funding of at least £1,000.

TSB’s relatively new Plus account also offers 5.00% but only on balances up to £2,000. However, this rate is ongoing and the account only requires funding of £500 a month.

Easy access accounts

What with short-term introductory bonuses and withdrawal restrictions, savings accounts have become increasingly complicated over recent years.

So the Sainsbury’s Extra Saver account, which pays a bonus-free 1.20% (variable) on anything from £1 to £100,000 and can be managed online or over the phone, is refreshingly simple and straightforward.

Other easy access options include the West Brom WeBSaveR 2, also at 1.20% AER. This internet account accepts balances of up to £250,000. However, you will need to pay in at least £1,000 to benefit from this rate.

Notice accounts

If ISAs are out and you are not prepared to use a current account to boost your savings returns, one way to earn a higher interest rate is to agree to wait for access to your money.

Shawbrook Bank, for example, has a 120 Day Notice Personal Savings Account that pays 1.85% on between £1,000 and £500,000 and can be managed online, by post or over the phone.

And GE Capital Direct has an online account paying 1.55% on balances between £500 and £250,000. The only downside is that you will have to give the bank 100 days' notice if you want to make a withdrawal.

Please note: any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.

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