Lloyds Bank has introduced a new savings account that pays 12 months' worth of interest upfront. The Lloyds Upfront Interest 1 Year Online Fixed Bond offers a fixed rate of 4% AER in the first month, meaning savers would earn £400 on a £10,000 deposit.
Account details and eligibility
Customers can open the account with £500 and pay in up to £9 million within 10 days of opening. After that, no more money can be added or withdrawn. Although the interest is paid near the start of the fixed term, customers cannot withdraw any funds until the 12 months are complete.
A slightly boosted rate is available to customers with a Lloyds Premier current account that has been open for at least eight days, earning an extra 0.20% AER.
Customer choice and rationale
Lloyds said this new way of offering interest was shaped by customer research, particularly among long-term savers who said they would welcome a straightforward new option for managing their money and accessing their interest.
Simon Caddick, savings director at Lloyds, said: "One thing that can stop people putting money away for a fixed period is the wait to benefit from the interest it earns. Our new Upfront Interest changes that.
"We know savers value choice when managing their money and Upfront Interest gives them the opportunity to receive their interest at the beginning of their savings term, helping them benefit from that money sooner, while still having the certainty of a fixed-rate bond.
"This is a fresh approach to fixed-rate savings and reflects our commitment to offering savings that reflect the ways customers tell us they want to save and manage their money."
Interest payment options and comparison
When opening the one-year Online Fixed Bond, customers can choose to receive all the interest shortly after the account's funding window closes, or have it paid at bond maturity. The interest is paid into a nominated account, which customers can specify when opening the bond.
Lloyds said it is the first UK bank to offer interest upfront. However, other banks are offering higher rates on one-year fixed accounts. The Union Bank of India (UK) Ltd is offering 5.12% on its Fixed Rate Deposit for one year. GB Bank is paying 5.11% on its 1 Year Fixed Rate Bond. The thisbank Fixed-Term Savings Account is paying 5.10% on its one-year option.
