Easy access accounts pay higher rate

Last Modified: 27 Aug 2008
Source: PA News

The number of instant access savings accounts paying more than the Bank of England base rate has tripled in the past two years, figures have shown.

Just over 28% of instant or easy access accounts currently pay at least 5% to people who deposit £5,000, up from 20.9% that paid at least the base rate last year, and just 8.1% that matched it in 2006, according to market analyst Defaqto.

But the group warned people putting money into instant and easy access accounts that they may not be able to get their hands on their cash as easily as they thought.

Analysis of the 50 instant and easy accounts paying the top rates showed that 30% of them limit the number of withdrawals consumers can make or impose penalties on some withdrawals.

A further 22% also have minimum withdrawal restrictions, under which consumers have to take out at least £100 every time they access their money.

Around 36% of the accounts also include an introductory bonus in their rates, meaning returns may not be so competitive once this has expired, nine accounts are also restricted to older age groups, such as the over 50s. Overall, the group found that just 19 instant or easy access accounts currently have neither withdrawal restrictions or introductory bonuses.

The leading instant access account is currently offered by Kaupthing Edge, which offers returns of 6.55% on £5,000 and does not have an introductory bonus or limits on withdrawals.

David Black, principal consultant of banking at Defaqto, said: "It's encouraging to see so many accounts offering attractive headline rates but savers need to keep their wits about them to avoid choosing an unsuitable account.

"There's been quite a vogue amongst banks and building societies to launch instant/easy access savings accounts which restrict the number of withdrawals permissible, or worse still impose a penalty on all withdrawals.

"These accounts may suit some but will also result in many savers not achieving the advertised rate if they fall foul of the withdrawal restrictions."

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