Regular savings accounts offer a compelling opportunity for savers who can commit to depositing money each month. These accounts often provide higher interest rates compared to standard savings accounts, with top rates reaching up to 7.5%. However, they come with specific terms, such as monthly deposit requirements and limits on withdrawals. This guide, originally crafted by Martin Lewis and updated by the MSE Money Team, explores the best regular savings accounts, explains how they work, and provides strategies to maximize your returns.
Understanding Regular Savings Accounts
Regular savings accounts are designed for individuals who can save a set amount each month. Unlike traditional fixed or easy-access savings accounts, these accounts typically offer higher interest rates but impose stricter conditions. For example, you may be required to deposit a minimum amount monthly, face restrictions on withdrawals, or have a cap on the total amount you can save. The high interest rate usually applies for a fixed term, often one year, after which the rate may drop significantly.
The key feature of regular savings accounts is the monthly deposit requirement. This structure suits those who can allocate a portion of their regular income to savings, such as salaried workers or those with predictable cash flow. However, the accounts often limit flexibility, so it’s essential to understand the terms before committing.
How Interest Works in Regular Savings Accounts
One common source of confusion with regular savings accounts is the interest earned. The headline interest rate, such as 7.5%, does not translate directly to the total interest you’ll receive. Instead, because you’re depositing money incrementally each month, the effective interest earned is roughly half the advertised rate.
For example, consider a saver, Jane, who deposits £250 per month into a regular savings account with a 10% annual interest rate. Over a year, Jane saves a total of £3,000 (£250 x 12). A simple calculation might suggest she’d earn £300 in interest (10% of £3,000). However, this overlooks the fact that the full £3,000 is only in the account by the final month. In the first month, she earns interest on just £250, in the second month on £500, and so on. On average, her balance over the year is approximately £1,500, so she earns about 10% of £1,500, which is £150 in interest.
This structure doesn’t make regular savings accounts less valuable. The high interest rates often make them more lucrative than other savings options, especially for new money from regular income. However, if you’re transferring funds from another savings account, consider the interest you’re earning in the original account while waiting to move funds monthly.
Are Regular Savings Accounts Worth It?
Despite the lower effective interest compared to the headline rate, regular savings accounts remain highly competitive. Their high interest rates often outperform traditional savings accounts, making them an excellent choice for disciplined savers. For those moving money from lower-paying accounts, the overall return can still be significant when factoring in interest earned in both accounts. The key is to ensure the account’s terms align with your financial habits and goals.
Key Considerations for Regular Savings Accounts
To make the most of a regular savings account, consider the following:
- Monthly Deposits Are Mandatory: Most accounts require a minimum monthly deposit, often between £25 and £400. Missing a deposit may result in penalties, such as a reduced interest rate or account closure.
- Limited Term for High Rates: The attractive headline rate typically lasts for 12 months (or six months in some cases). After this, the rate often drops, so plan to switch to a new account to maintain high returns.
- Multiple Accounts Are Allowed: You can open regular savings accounts with different providers to increase your savings capacity, provided you meet each account’s requirements.
- Drip-Feeding Strategy: To maximize interest, consider transferring funds monthly from a high-interest easy-access savings account into the regular saver. This way, your money continues earning interest in the easy-access account until it’s moved.
- Safety of Savings: Up to £85,000 per person is protected in UK-regulated financial institutions under the Financial Services Compensation Scheme (FSCS), ensuring your savings are secure.
- Special Accounts for Specific Groups: If you’re saving for children or have a low income, look into specialized accounts like children’s savings or Help to Save accounts, which may offer enhanced rates or bonuses.
Top Existing-Customer Regular Savings Accounts
Many of the best regular savings accounts are available only to customers who hold another product, typically a current account, with the same provider. These accounts often offer competitive rates and can be funded via standing order from the linked current account. Below are the top picks, along with key details.
Zopa Regular Saver (7.1% Variable)
- Rate: 7.1% AER (variable)
- Maximum Monthly Deposit: £300
- Estimated Annual Interest: £137 (if maxed out)
- Can You Skip Months?: Yes
- Penalty-Free Withdrawals?: Yes
- How to Open: Via the Zopa app (requires a Zopa ‘Biscuit’ current account)
Zopa’s regular saver is the top pick for flexibility and rate. You can deposit up to £300 per month, and the account allows you to skip deposits or withdraw funds without penalty. The rate is variable, meaning it could change during the 12-month term, so monitor it closely. To access this account, you’ll need to open Zopa’s ‘Biscuit’ current account, which is straightforward to set up via their app.
First Direct Regular Saver (7% Fixed)
- Rate: 7% AER (fixed for one year)
- Maximum Monthly Deposit: £300
- Estimated Annual Interest: £135 (if maxed out)
- Can You Skip Months?: No (minimum £25/month)
- Penalty-Free Withdrawals?: No (early closure results in 1.75% interest)
- How to Open: Online or via the First Direct app (requires a First Direct current account)
First Direct offers a fixed 7% rate, providing certainty for the 12-month term. You must deposit at least £25 each month, and withdrawals or early closure are penalized with a reduced interest rate of 1.75%. This account is ideal for those who can commit to consistent deposits and don’t need access to the funds during the term.
Co-operative Bank Regular Saver (7% Variable)
- Rate: 7% AER (variable for one year)
- Maximum Monthly Deposit: £250
- Estimated Annual Interest: £113 (if maxed out)
- Can You Skip Months?: Yes
- Penalty-Free Withdrawals?: Yes
- How to Open: Online or in-branch (requires a Co-operative Bank current account)
The Co-operative Bank’s regular saver offers a competitive 7% variable rate with flexibility. You can skip deposits and make withdrawals without penalty, making it suitable for those who may need occasional access to their savings. The maximum deposit is slightly lower at £250 per month, but it remains a strong option.
Other Notable Existing-Customer Accounts
- Nationwide (6.5% Variable): Allows up to £200/month, with an estimated £84 annual interest. You can skip months and make up to three penalty-free withdrawals per year. Requires a Nationwide current account.
- Lloyds Bank Club Lloyds (6.25% Fixed): Offers a fixed 6.25% rate on up to £400/month, yielding approximately £161 annually. Skipping months and withdrawals are allowed. Requires a Club Lloyds account.
- Skipton BS (6.25% Variable): Tracks 2% above the Bank of England Base Rate, with a maximum deposit of £250/month (£101 annual interest). Withdrawals are not allowed, but early closure is permitted. Available only to members since before January 20, 2025 .
Choosing an Existing-Customer Account
If you don’t already bank with these providers, you can open a current account to access their regular savers. Some banks, like First Direct, offer switching bonuses of up to £200, adding extra value. Zopa’s 7.1% variable rate is the top choice for flexibility and deposit size, while First Direct’s 7% fixed rate suits those prioritizing certainty. Always check the current account’s features and fees (e.g., Lloyds’ Club Lloyds has a monthly fee unless you meet specific criteria) before committing.
Top Open-to-All Regular Savings Accounts
For those who prefer not to open a new current account, open-to-all regular savings accounts offer competitive rates without requiring additional products. These accounts can be paired with existing-customer accounts to maximize monthly savings.
Principality Building Society (7.5% Fixed)
- Rate: 7.5% AER (fixed for six months)
- Maximum Monthly Deposit: £200
- Estimated Interest: £26 (after six months)
- Can You Skip Months?: Yes
- Penalty-Free Withdrawals?: No (early closure permitted)
- How to Open: Online, by post, or in-branch
Principality Building Society offers the highest rate at 7.5%, fixed for six months. You can deposit up to £200 per month and skip deposits if needed, but withdrawals are not allowed during the term. If you need access, you can close the account early. This account is ideal for short-term savers who can commit to keeping funds locked away.
Progressive Building Society (5.5% Variable)
- Rate: 5.5% AER (variable for 12 months)
- Maximum Monthly Deposit: £300
- Estimated Annual Interest: £106
- Can You Skip Months?: Yes
- Penalty-Free Withdrawals?: Yes (one per day)
- How to Open: Online
Progressive BS offers a 5.5% variable rate with excellent flexibility. You can deposit up to £300 per month, skip deposits, and make unlimited withdrawals (one per day). This makes it a great option for those who may need access to their savings. However, the variable rate could decrease, so monitor it and be prepared to switch if necessary.
- Newcastle Building Society (5.25% Variable)
- Rate: 5.25% AER (variable for 12 months)
- Maximum Monthly Deposit: £200
- Estimated Annual Interest: £68
- Can You Skip Months?: Yes
- Penalty-Free Withdrawals?: Yes
- How to Open: Online or in-branch
Choosing an Open-to-All Account
Principality’s 7.5% fixed rate is the standout choice for short-term savings, though its six-month term and withdrawal restrictions require commitment. Progressive BS’s 5.5% variable rate offers more flexibility and a higher monthly deposit limit, making it suitable for those who prioritize access. Combining an open-to-all account with an existing-customer account can help you save more each month at high rates.
Maximizing Your Returns
To get the most out of regular savings accounts, consider these strategies:
- Drip-Feed from Easy-Access Accounts: Keep your savings in a high-interest easy-access account and transfer the maximum monthly amount to your regular saver. This ensures your money earns interest in both accounts.
- Open Multiple Accounts: Since many providers allow only one regular saver per customer, open accounts with different banks to increase your total savings capacity. For example, you could save £300 with Zopa, £300 with First Direct, and £200 with Principality.
- Switch After the Term Ends: When the high-rate term (usually 12 or six months) expires, the interest rate often drops significantly. Move your savings to a new regular saver or another high-interest account to maintain strong returns.
- Use a Regular Savings Calculator: Tools like the MSE Regular Savings Calculator can help you estimate your earnings based on the rate and monthly deposits. They also show the benefits of drip-feeding from another account.
- Check FSCS Protection: Ensure your savings are with UK-regulated institutions covered by the FSCS, protecting up to £85,000 per person per institution.
- Explore Special Accounts: For children’s savings, look into accounts offering up to 5.8%. For low-income savers, Help to Save accounts provide a 50% government bonus on savings up to £50 per month.
Other Savings Options
If regular savings accounts don’t suit your needs, consider these alternatives:
- Top Savings Accounts: Easy-access or fixed-rate accounts may offer lower rates (e.g., 4-5%) but provide more flexibility or longer terms.
- Cash ISAs: Ideal for tax-payers, as interest is tax-free. Rates can reach up to 5% for easy-access or fixed ISAs.
- Children’s Savings: Accounts like junior ISAs or children’s savings accounts offer rates up to 5.8%.
- Current Accounts: Some current accounts pay up to 5.12% on smaller balances, often with additional perks like cashback or switching bonuses.
FAQ’s
What is a regular savings account, and how does it work?
A regular savings account requires you to deposit a set amount each month, typically offering higher interest rates (up to 7.5%) than standard savings accounts. You earn interest on the growing balance, but the effective interest is about half the advertised rate because deposits are made incrementally. Most accounts have a fixed term (e.g., 6 or 12 months) and may limit withdrawals or require consistent deposits.
Why do I earn less interest than the advertised rate?
The advertised rate, like 7%, applies to the average balance over the term. Since you deposit monthly, the full amount isn’t in the account all year. For example, saving £300 monthly for a year totals £3,600, but the average balance is around £1,800, so you earn interest on that amount, not the full £3,600.
Can I open multiple regular savings accounts?
Yes, you can open regular savings accounts with different providers to increase your savings capacity, as long as you meet each account’s requirements (e.g., holding a current account with the provider). For instance, you could save £300 with Zopa and £200 with Principality BS simultaneously.
What happens if I miss a monthly deposit or need to withdraw money?
Terms vary by provider. Some accounts, like Zopa’s, allow you to skip deposits or withdraw funds without penalty. Others, like First Direct’s, require monthly deposits and penalize withdrawals with a lower interest rate or account closure. Always check the account’s specific rules before signing up.
Are my savings safe in a regular savings account?
Yes, savings up to £85,000 per person are protected in UK-regulated financial institutions under the Financial Services Compensation Scheme (FSCS). Ensure your provider is FSCS-protected to safeguard your money in case of institutional failure.
Conclusion
Regular savings accounts are a powerful tool for savers who can commit to monthly deposits and navigate their strict terms. With top rates like 7.5% from Principality BS and 7.1% from Zopa, they offer unmatched returns for new money from regular income. By understanding how interest is calculated, choosing the right account, and using strategies like drip-feeding and opening multiple accounts, you can significantly boost your savings. Always monitor variable rates and plan to switch when the high-rate term ends to keep your money working hard. For the latest deals and tips, consider signing up for a free money-saving email newsletter to stay informed.
