Look behind the headlines for best deal

A STRING of new accounts paying top rates of interest of more than 5 pc before tax are on offer to savers. But you need to look behind the headline rates to work out whether they are good value for you.

Cahoot Bonus Savings, which replaces the bank’s original internetbased savings account, comes with a variable headline rate of 5.25 pc before tax — worth an attractive 4.2 pc after 20 pc savings tax or 3.15 pc to higher-rate payers.

But to earn this you need £15,000 in the account. And Cahoot pays it for six months only — after which it drops to 4.75pc before tax for three months. Then it goes down again to 4.5 pc — worth 3.6 pc and 2.7 pc respectively to basic rate and higher rate taxpayers.

These rates assume that the Bank of England base rate remains at its current 4.5 pc — if it goes down, your return is likely to fall.

The 4.5pc rate from Cahoot is less than you can earn on top- paying internet accounts.

These include Bradford & Bingley at 4.85 pc (3.88 pc after 20 pc savings tax) on £1,000 or more, Halifax Web Saver 4.65 pc ( 3.72 pc) on £ 1 plus, Yorkshire Building Society 4.7 pc ( 3.76 pc) on minimum £ 1 and ING Direct ( telephone and internet account) and Sainsbury’s Bank Internet Saver, both at 4.75 pc (3.8pc). On balances of between £1 and £ 15,000 the Cahoot account pays just 4.25 pc (3.4 pc). AA Savings Telephone Bonus Account comes with a variable headline rate of 5.25 pc before tax.

But this rate includes a 0.65 pc bonus payable for the first six months. After this the rate falls to a much less impressive 4.6 pc before tax — or 3.68pc after 20pc savings tax and 2.57pc for higher rate tax payers. And you can only take money out of the account six times a year.

Portman Building Society Branch Bonus Saver Issue 2 pays 5.1 pc before tax ( 4.08 pc) But the seemingly star return includes a huge 0.8 pc before tax bonus. Once it drops away after the first six months,

you earn 4.5pc before tax.

This is an attractive rate,

comparable with top returns on

easy access accounts. But with

the Portman account you do not

have easy access.

Each time you want to take

money out, you have to give the

building society 90 days’ warning

of your intentions.

The account does come with a

health guarantee that it will at

least match base rate until March

2007. But so do some easy access

accounts. A nasty sting in the tail

with the Portman account comes

at the end of the guarantee. The building society no longer has an obligation to you to move your rate in line with base rate, but you still have to give it three months’ warning if you want to take your money out.

Portman’s 50+ Savings Account, open to those age 50 or over, pays 5 pc before tax (4 pc) with interest paid monthly.

But this includes a 0.5pc bonus payable for nine months. It pledges to pay at least base rate for 21 months.

But, once again, when the guarantee disappears you still have to give 75 days’ notice to withdraw any money. Better deals include Northern Rock Silver Savings postal or branch account with easy access to your money at 4.74 pc ( 3.79 pc), minimum £5,000, or for the over 60s the Stroud & Swindon Diamond Account at 4.85 pc ( 3.88 pc) — available through branches or the post.

Nationwide Monthly Income 65+ pays 4.5pc (3.6pc) to the over 65s who are prepared to pay their monthly pension into a current account with the society.

sy.morris@dailymail.co.uk