Top returns on regular savers

Regular saver accounts can be useful for maximising interest on money that you may want to draw on in the next year, such as emergency cash or provision for your next tax bill.

Most regular savers run for a year. They allow you to pay in a low maximum amount each month – typically about £250, although some are higher. They pay a fairly high headline rate (the best now is 7%, and 5% is typical). But while you can pay in a total of £3,000 over the year, your average balance will be half that, because only £250 goes in each month. So if you just have the rest of the money sitting around waiting to be paid in, your total interest won’t be 5% × £3,000 but approximately 5% × £1,500.

There are two steps to raise your return. First, money that hasn’t yet been paid in should be kept in a top easy-access account, earning 3% rather than peanuts and lifting your overall return. Second, you can have multiple regular savers – the only hassle is that you can typically have just one per bank at a time and you usually need to open a current account as well. So you have a series of accounts maturing in a different month. As each one matures, the proceeds are used to fund the next few contributions into the others.

Since some savers allow withdrawals or early closure without penalty, a series of four well-spaced accounts lets you carry a cash balance of more than £7,500 with an effective rate of around 4.5%. The Lloyds, Halifax, Bank of Scotland and TSB regular savers are fairly flexible and make a good starting point.