A slight tease: Natwest's new savings accounts
NATWEST have launched two new savings accounts, the Savings Builder and the Premium Saver, offering "bonus" rates for meeting certain conditions.
The Savings Builder rewards customers whose balance grows by at least £100 per month with an interest rate of 1.5% AER / gross p.a. (variable).
The Premium Saver is aimed at those with at least £25,000 in savings, on which they'll receive up to 1.0% AER / gross p.a. (variable) for the months in which they don't make any withdrawals.
But failing to meet the bonus conditions for either account will see the balances earning just 0.1% AER/gross p.a (variable) - lower than the rates offered on some of the basic easy access accounts from their high street rivals.
The Savings Builder is aimed at people who can afford to put aside at least £100 every month, although the account can be opened with as little as £1; interest is calculated daily and applied monthly.
The account is instant access, and savers won't be penalised for making withdrawals - unless we count possibly losing the bonus rate for that month.
|Balance||AER / gross p.a. (variable)|
|Balance grew by less than £100 this month||Balance grew by at least £100 this month|
|£1 - £5,000||0.1%||1.5% (includes 1.4% bonus)|
|£5,001 - £10,000||0.1%||1% (includes 0.9% bonus)|
|More than £10,001||0.1%||0.2% (includes 0.1% bonus)|
That's because the bonus rate depends on the overall balance growing, not on the size of the deposit we make: if we don't want to miss out on the bonus rate, we need to replace anything we withdraw before the end of that month.
To confuse things further, Natwest consider the business month to run from close of play on the second last business day of one calendar month to close of play on the second last business day of the next.
Say we opened an account tomorrow - Friday April 8th - with £50. The last business day this month is Friday April 29th - so we'd have until the end of business on Thursday April 28th to get the other £50 deposited.
There's no such calendar confusion with the Premium Saver - because we forfeit the bonus rate for any month in which we make a withdrawal.
|Balance||AER / gross p.a. (variable)|
|I made a withdrawal||I didn't make any withdrawals|
|£1 - £24,999||0.1%||0.1% (no bonus is paid)|
|£25,000 - £49,999||0.1%||0.75% (includes 0.65% bonus)|
|£50,000 - £1 million||0.2%||1% (includes 0.8% bonus)|
|More than £1 million||0.2%||0.2% (no bonus is paid)|
There's also very little incentive to go for this account if we've less than £25,000 lying around - even with an average balance of £24,000 the account would only earn £24 interest over the year.
In fact, most people wanting to put money aside will find there are various better options available, even given the rather flat savings environment right now.
Those who don't mind not having access to their money for a set period of time can find fixed accounts offering up to 2% AER - which is what the newest bank on the block, Atom, is offering.
And while instant access accounts almost always come with lower returns, there are some well publicised exceptions in the form of the current accounts offered by the likes of TSB and Santander.
Admittedly they require a certain amount of juggling - because they're current accounts they all demand a minimum monthly deposit that would usually be covered by a salary or other regular form of income, and most require us to set up direct debits as well.
But after the initial effort involved, there are two accounts offering 5% AER p.a. (variable) on the kind of balances best rewarded by the Savings Builder; TSB's Classic Plus account (more details) pays interest on the first £2,000, while Nationwide's FlexDirect (more details) pays out on savings of up to £2,500.
People with higher balances can still get better returns than Natwest can offer - for example, Santander's 123 Account (more details) pays 3% AER/2.96% gross (variable) on balances ranging from £3,000 to £20,000.
Then there are the banks that offer higher interest rates on their regular savings accounts for existing customers - First Direct, for instance, offer people with their 1st Account (more details) 6% AER/gross p.a with their Regular Saver account; the monthly deposit can be as little as £25 and up to £300.
Teasers and convenience
So what's the appeal of Natwest's accounts?
The simplest answer is convenience: the convenience of using a high street name that's also available online, over the phone, and via mobile banking; the convenience of being instant access, and the convenience of an account that once set up will look after itself.
Allied to that is the "fairer" approach that Natwest / RBS take regarding teaser rates - that is, they don't offer them. The same rates apply to both new and existing customers, no matter how long they've had the account.
The Nationwide and First Direct accounts above, for example, only offer high rates for the first 12 months of having the account; after that they offer much lower returns.
Then there's the fact that with the Savings Builder, the bonus interest rate is among the highest around currently for easy access savings accounts; the best rates offered elsewhere are between 1.25% and 1.4% AER p.a.
But considering that Natwest / RBS don't do teaser rates, there's a danger that customers will apply with every intention of triggering the bonus rate every month, but then miss out somehow - and be rewarded with much poorer returns.