NatWest is offering savers a competitive 5.25% interest rate on its Digital Regular Saver account, which can be opened with a minimum deposit of just £1. The full rate applies to deposits up to £5,000, with a reduced rate of 1% on any amount above that limit.
Inflation-busting returns
This comes as data shows a huge £502 billion is currently held in adult savings accounts earning 2.5% and under, failing to keep pace with the UK's current inflation rate of 2.6%. As a result, savers' deposits are losing value in real terms because interest rates are not keeping up with rising prices.
Derek Sprawling, head of money at savings app Spring, said: "More than 10 million savings accounts with balances of over £10,000 are earning less than the rate of inflation, paying an average return of just 1.43%. That excludes money sitting in current accounts, which often pays no interest at all. For many people, the real value of their hard-earned savings is being steadily eroded by rising prices."
Account details
To open NatWest's Digital Regular Saver, you must be aged 16 or over and hold a NatWest current account. You can pay in up to £150 per month, with interest calculated daily and paid on the first business day of the month. Based on a full monthly deposit of £150, savers would amass £1,851.14 after 12 months, including £51.14 in interest. Unlike most other regular savers, withdrawals are allowed without penalty.
Other top deals
Lloyds Bank and Santander are currently topping the list for regular savings accounts, offering 8% interest AER. Lloyds' new Monthly Saver is available to current account holders, allowing deposits between £25 and £250 per month. Savers who put away the maximum amount each month can earn around £120 interest after 12 months, with no withdrawal charges.
Santander's Regular Saver includes a 5% AER bonus for one year and allows customers to put up to £200 away per month. After 12 months, the interest reduces to 3.00% AER/gross. According to the bank's calculations, customers depositing the maximum each month could build up £2,504 in year one, £5,018 in year two, and £7,607 in year three, including interest. The account is available to all Santander current account customers, including those with Everyday, Edge, Edge Student, Edge Up, and Explorer accounts, and withdrawals are permitted.
Mr Sprawling added: "A competitive interest rate is important, but it should not be the only consideration. Savers should also think about how easily they can access their money when an unexpected bill or important life moment arises. The right account should offer a strong return while giving people the flexibility and reassurance that their savings are there when they need them."
