SAVVY savers can get access to a new market-leading savings account, paying 6.65% on deposits.
Virgin Money has introduced a competitive rate on its fixed savings account available to both new and existing customers.
Typically, the 1 Year Fixed Rate E-Bond Exclusive from Virgin Money offers a 4.65% AER savings rate.
However, this rate can now be boosted by two percentage points for customers who also hold a stocks and shares ISA with the bank, bringing the total rate to an impressive 6.65% – currently the highest in the market.
To take advantage of this offer, customers must meet certain conditions, and the enhanced rate is only available until September 30, so prompt action is required.
Customers must deposit at least £5,000 into a new or existing Virgin Money stocks and shares ISA by September 30.
This can be done via debit card or ISA transfer.
You’ll then need to open a Virgin Money 1 Year Fixed Rate E-Bond Exclusive savings account by October 7.
While this account typically offers a 4.65% rate, following the above steps will unlock the 6.65% rate.
It is crucial to note that the bonus rate applies only to the amount deposited into the stocks and shares ISA before the September 30 deadline.
So, if you invest £5,000 into your stocks and shares ISA and £10,000 into your savings account, the 6.65% rate will only apply to £5,000 of your savings.
That means you earn £333.50 in interest on the first £5,000 of savings and another £232.50 on the remaining £5,000.
In total, and after 12 months, you’d gain £566.
The remaining £5,000 will earn the standard 4.65% rate.
Additionally, to benefit from the extra two percentage points, the ISA investment must be maintained until the savings account matures one year after opening.
If the ISA funds are withdrawn earlier, the bonus rate will not apply, and the savings will revert to the 4.65% rate.
INDIVIDUAL savings accounts, also known as ISAs allow individuals to save up to £20,000 a year tax free.
Unlike with a conventional savings account, any income or gains you make in an ISA are shielded from tax.
Historically, only higher earners have been hit with tax bills for saving their cash.
However, in recent years, the personal savings allowance – the amount you can earn in savings interest before paying tax – has been frozen, and at the same time, interest rates on savings have remained high.
This means even some lower earners have been stung with tax bills for saving their pennies.
The two factors combined have seen lots more savers than usual being dragged above the personal savings allowance threshold.
This is currently set at £1,000 for basic rate taxpayers or £500 for high rate taxpayers.
By saving into an ISA, you’ll avoid this tax entirely, as long as you’re saving less than £20,000 a year.
There are a number of different types of ISAs, including cash ISAs, stocks and shares ISAs, lifetime ISAs and Junior ISAs.
However, while the headline rate may look appealing, you’d need more than £5,000 in cash savings to take advantage of the deal.
Plus, it’s important to recognise that Virgin Money’s stocks and shares ISA come with an annual charge which can depreciate the true value of the interest paid in your savings account.
Andrew Hagger, personal finance expert and founder of MoneyComms, said: “The 6.65% rate looks attractive against the best one year deal in the market of 5.15% with MBNA savings – but there are many hoops to jump through to get the 6.65% rate.
“You can only benefit from the extra 2% if you also pay in to the one year bond as well as the ISA – so if you pay £5,000 into the ISA you can get an extra 2% if you pay £5,000 into the fixed rate bond
“The problem is stocks and shares ISAs are an investment and rates can go up or down, so there is an element of risk involved – plus there are annual charges of 0.75% with the ISA so immediately your 2% bonus rate is really only 1.25% after charges.”
“It’s a big carrot trying to tempt people to open a stocks and shares ISA but the benefit isn’t as great as it may first appear.”
However, consumer rights expert Martin James, says: “This new offer from Virgin proves, there are still some inflation-busting savings rates that can really help you make the most out of your money – if you can live with the T&Cs.”
While fixed bond savings accounts like this one do open doors to some of the best interest rates on the market, these accounts come with a lot of restrictions.
You aren’t usually able to withdraw your cash within the agreed term.
However, some providers do allow for withdrawals, but you’ll be charged a hefty exit fee and will likely have to forfeit any interest gained.
The next best-paying fixed-term bond is Gatehouse Bank’s 6 Month Fixed Term Deposit which offers 5.25% returns on savings over £1,000.
However, if you do want more flexible access to your savings, there are other savings products to consider.
An easy-access account does what it says on the tin and usually allows unlimited cash withdrawals.
These accounts tend to offer lower returns, but they are a good option if you want the freedom to move your money without being charged a penalty fee.
For example, Principality Building Society is offering savers 5% interest bank with its Online Bonus Triple Access Issue 2 account.
However, it’s worth checking directly with your bank to see if they offer a linked product with higher rates.
Ulster Bank‘s Loyalty Saver can be linked to an existing customer’s current accounts.
It pays savers 5.20% back on deposits up to £5,000.
Notice accounts offer slightly higher rates in exchange for giving up fully flexible access to cash.
However, these accounts don’t lock your cash away for as long as a typical fixed bond account.
You’ll need to give advance notice to your bank – up to 180 days in some cases – before you can make a withdrawal or you’ll lose the interest.
For example, Investec’s 90-Day Notice Saver pays customers 5.25% back on deposits over £5,000.
These accounts pay some of the best returns as long as you pay in a set amount each month.
You’ll usually need to hold a current account with providers to access the best rates.
For example, First Direct offers customers a regular saver paying 7% in interest.
You’ll need to save between £25 and £300 a month, and up to £3,600 a year.
If you were to save £300 every month for 12 months with this account, you would earn approximately £136.50 in interest.
WITH your current savings rates in mind, don't waste time looking at individual banking sites to compare rates - it'll take you an eternity.
Research price comparison websites such as Compare the Market, Go Compare and MoneySupermarket.
These will help you save you time and show you the best rates available.
They also let you tailor your searches to an account type that suits you.
