What are Notice Savings Accounts?
Notice savings accounts are provided by most UK banks and building societies and provide customers with generally better rates of interest than what is on offer from instant access savings accounts. With a notice account you are required to give notice before you can withdraw money from your account and that notice period will range from anything from 7 days to 180 days. If you withdraw money earlier than the prescribed notice period interest penalty charges will normally apply. Notice of intention to withdraw money depending on the provider may need to be given in writing, telephone, or at the branch depending on the account terms.
Benefits of Notice Savings Accounts for 2013
Notice Accounts for savers provide a useful home for money that is not required for immediate needs, but at the same time you are not able to tie up the capital for the longer term. A wide range of notice account periods are available from the very short term of 7 to 25 or 30 days to longer term notice periods ranging from 90,120 days to 180 days. This allows savers to plan their finances accordingly. Examples of where notice accounts can come in useful is where money is known to be needed at some fixed point in the future e.g. to pay for a summer holiday or for a building project or a family wedding. They are not suited for situations where money might be needed in a hurry.
Different notice accounts have different interest payment terms ranging from monthly, quarterly, half yearly to annual. Interest rates on notice accounts are usually variable so interest rates can fluctuate up or down. It is important you keep an eye on the interest you are earning to ensure you are maximising the return on your money. For non taxpayers interest can usually be paid gross by completing the relevant HMRC tax form R85.
For most notice accounts you are covered by the financial Services Compensation scheme (FSCS); the current limits of the scheme protect deposits for individuals up to £85,000 and £170,000 for money held in joint names.
Types of Notice Account
Notice savings account with bonus interest
With these accounts the headline interest rate includes a special bonus paid at the end of a set period normally 12 months. With these notice accounts the bonus rate may change or end after the anniversary making the account less competitive in relation to the rest of the savings market. Non bonus interest may be paid monthly, quarterly half yearly or annually.
Notice savings account without bonus interest
No special bonus interest is included in the headline rate. Interest may be paid monthly, quarterly, half yearly or annually.
Other Savings Accounts to Consider
While notice accounts provide good rates of interest better generally than those offered by instant access savings accounts, you can often get more interest if you can afford to tie up capital for longer. Fixed rate savings bonds which range from 6 month to 5 year terms offer an option for deposits where there is no need for capital in the short or medium term.
For those wanting to get returns better than cash, structured deposit plans provide investors with the potential of better returns by linking performance to the stockmarket. These plans are normally for deposit terms of 3 to 6 years and while capital is protected returns are not guaranteed.