Savings Account Terms

There are many different types of Savings accounts, not all will be the right type for you. Savings accounts most commonly fall into one of the five types of accounts listed below:

Easy Access/ No Notice accounts

These types of accounts offer instant access to your money without having to give any notice or pay any penalty. Due to the flexibility of these accounts the interest rates offered are normally slightly lower than other types of accounts. Most Easy Access accounts can be opened with as little as £1, which make them a good type of investment for people who are starting to save but may need the money at short notice. Some Providers have bonus and incentive schemes tied into the account in order to offer a higher interest rate. This could mean the number of withdrawals or amount you deposit is restricted. Interest rates are variable and may change regularly to reflect the Bank of England base rate.

Notice Accounts

These types of accounts offer a good rate of interest in return for notice being given when a withdrawal is required. Providers can require any amount of notice from 7 days' upto and including 120 days'. However, the most common notice period is 30 to 60 days' notice to make a withdrawal penalty-free. Instant access to your savings can sometimes be given subject to an interest penalty on the account. This is normally the loss of interest for the period of notice, which was required to make a penalty-free withdrawal. For example, an account requires you to provide 60 days' notice before you make a withdrawal. You make an instant access withdrawal on the account; the penalty will most likely be 60 days' loss of interest on the amount withdrawn.

Bonds or Term Accounts

Bonds or Term accounts are high interest savings accounts offering the most competitive interest rates. These accounts require money to be tied up for a specific period of time. Once a bond has been opened you are not usually allowed to add to your initial deposit. The money in the account is tied up for a specific length of time, usually 1 to 5 years. Most Providers do not permit any type of withdrawal before the maturity date. If withdrawals are allowed then a penalty will normally be incurred. The interest rate on most accounts is fixed from opening the account until the maturity date.

Regular Savings Accounts

These accounts require you to save money on a regular basis. You are required to invest money, usually a set amount, into the account each month. Most accounts do not allow lump sums to be invested upon opening or while the account is open. Providers normally set down a minimum and maximum deposit limit when you open the account. Access to these accounts may vary from Provider to Provider. Most common accounts are instant access; however notice and fixed term accounts are available.
Regular Savings accounts normally have far more restrictions put on them than any other type of account. The interest rate advertised for most accounts include a large bonus, which is received on the condition ‘X' amount of deposits is made and/or ‘X' amount of withdrawals or no withdrawals are made. If these conditions are not met the interest rate received is far lower.

Tax-Free Accounts

Mini Cash ISAs, Maxi ISAs and TESSA only ISAs are all tax-free and a good way to invest your money. There are, however, limits set down by the Government to how much can be invested each year. For Mini and Maxi ISAs, the maximum amount of money you can invest in a cash component of each account is £3,000 per year. Once this limit has been reached no more can be invested until the next tax year (April 6th - April 5th). This limit reduces after the tax year 2005/2006 to £1,000 per year.

A TESSA only ISA can only be opened with the capital from a maturing TESSA. After which, the maximum amount permitted to be deposited into the account is £9,000 per year. Interest earned from the TESSA cannot be added to a TESSA only ISA. This must be paid into a different account when the TESSA matures.

Children's Savings Accounts

With the rising costs of living and children's education, it is important to start savings as soon as possible for your child. With over 167 child savings accounts around at the moment it is important to look around and make sure you are getting the most back from your child's savings.

Children's savings accounts work in a similar to adult savings accounts. There are different types of account:

• Easy Access
• Notice
• Bonds or Term

Most children's savings accounts are easy access allowing money to be withdrawn without notice or penalty. Some accounts require notice to be given before a withdrawal, to allow a penalty-free withdrawal. These accounts normally offer a higher level of interest than easy access accounts. Bond accounts offer the highest interest but to receive this, the money invested normally has to be left in the account for a specific period. This could vary from 1 year, up to 5 years or some providers require money to be left until the child has reached a certain age.
There is no minimum age for a children's account to be opened, however most Providers require a Parent or Guardian to open and run the account until the child is between 7 - 11 years old. Most accounts run until the child is 18 years old when, if not specified at the time, will be transferred over into an adult savings account.

To encourage a child to save their money most Providers offer incentives when an account is opened. This can range from posters to vouchers to naming the account themselves. The idea behind this is to start to encourage children to take an interest in saving money.


Related Links:
- Banking Guides
- Current Accounts Guide
- Savings Accounts Guide