Savings accounts offering higher returns

29 August 2008

Savers are benefiting from the rising number of savings accounts that offer interest returns above the current base rate.

According to analysts Defaqto, two years ago only 8 per cent of easy access accounts promised returns equal to or higher than the base rate. Now that figure has risen to almost a third of accounts.

The improvement is explained by the eagerness of banks to attract savings during the credit crunch.

The study found that currently 28 per cent of savings accounts have rates of 5 per cent or more for deposits in excess of £5,000.

A year ago, only 21 per cent of accounts matched or trumped the base rate. For the same period in 2006, just 8 per cent of savings accounts were outdoing the base rate.

However, the survey also revealed that many of the 50 easy access accounts included in the study imposed various restrictions on withdrawals and, in some cases, charged penalties.

Others enticed savers with introductory offers that then saw a fall in interest returns after a set period had elapsed.

David Black, Defaqto’s banking consultant, said: “It is 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.”