COMMENT
Super Savings Accounts

By Alison Hunt (TMFAlly)
June 15, 2005

If your cash is currently squirreled away in one of Alliance and Leicester's (A&L) Direct ISA (mini-cash ISA) accounts, then I have some good news for you.

Not only is your money still earning a fantastic 5.4% AER, but those nice people at A&L have removed that pesky £25 transfer fee. So, should that rate drop you'll be able to transfer your A&L ISA product to another provider (should you wish to) with no penalty. Hurray!

And A&L has promised that the Direct ISA rate will continue to be at least 0.65% above the Bank of England Base rate until 31 December 2005.

Unfortunately, it's not all good news. A&L's Online Saver account, which topped the Best Buy tables for months, has dropped its rate from 5.35% to 5% (with rates guaranteed to continue to be at least 0.25% above the Bank of England Base rate until 31 December 2005). Boo!

A&L has now closed its Direct ISA and Online Saver accounts to new applications as it is planning to launch two new products (Direct ISA and Online Saver - Issue 2) in July.

To be honest, the rate drop for the Online Saver account has followed a familiar pattern exhibited by many new products; thus many account holders are likely to have been expecting it. However, it is significant, and savers must now decide whether to stay put, or move their cash.

So the question is: What should you do if the rate paid on your savings account suddenly drops?

In this case at least, the savings rate has dropped to a reasonably respectable 5%; there are certainly many savings accounts out there paying much lower rates of interest. And we all know that the Best Buy tables tend to be topped by accounts offering 'introductory bonuses', which, once expired, leave behind an unexciting rate.

However, a non-tax payer with a balance of £10,000 in the Online Saver account will be losing out on £35 interest each year – which may make moving an attractive option.

So to help you out, here is the current top five, Best Buy, instant access savings accounts for £1+ deposits, and for larger deposits of £1,000+:

Best Buy, Instant Access Savings Accounts for deposits of £1+

Account	Interest Rate / AER	Access	Introductory Bonus?	Min-Max Investment
AA – Internet Savings	5.31%	Internet	Includes 0.6% bonus for 12 months	£1-£5m
First Direct e-Savings	5.20%	Internet	None - but note that no interest is paid in any month that you make a withdrawal.	£1-£250k
AA – Telephone Savings	5.16%	Telephone	Includes 0.6% bonus for 12 months	£1-£5m
Cahoot – Savings (apply via the Fool)	5.10%	Internet	None	£1-£250k
Northern Rock – Tracker online	5.05%	Internet	Includes 0.71% bonus for 6 months	£1+

Source: Moneyfacts  

Best Buy, Instant Access Savings Accounts for deposits of £1,000+  

Account	Interest Rate / AER	Access	Introductory Bonus?	Min-Max Investment	Conditions
Stroud and Swindon Building Society – Branch Premier account	5.50%	Branch	None:	£100-£25k	3 free withdrawals per year. Further withdrawals incur a penalty of 30 days interest on amount withdrawn. Rate guaranteed to be 0.75% above Base Rate until 30.9.06, then equal to Base Rate until 30.9.08
AA – Internet Savings	5.31%	Internet	Includes 0.6% bonus for 12 months	£1-£5m
Bradford and Bingley - esavings	5.25%	Internet	None	£1k-£2m	Rate guaranteed to at least equal Base Rate until 31.12.05.
Chelsea Building Society – Rainy Day Savings	5.25%	Branch/Post	Includes 1% bonus for 12 months	£500-£25k	4 free withdrawals per year up to a £2k max, then £10 fee per withdrawal. All withdrawals by cheque.
First Direct e-Savings	5.20%	Internet	None	£1-£250k	No interest is paid in any month that you make a withdrawal.

Source: Moneyfacts  

Depending on the balance of your account you could use these tables to choose a suitable new home for your savings.  

Bear in mind that a number of these accounts have introductory bonuses, so you may need to be prepared to move again in as little as six months. And First Direct seems to be aiming its account at those who won't need  their money too often, with its interest penalty for any month you make a withdrawal. 

The AA's account offers penalty free access to your savings at any time; those that prefer to avoid introductory rates could choose the Cahoot account. And for larger savings, Stroud and Swindon's account offers a good rate (although, as you need to open your account in a branch, make sure you find out where the nearest one is).  

So, consider moving your savings if your rate has slipped out of the Best Buy tables to one of the current Best Buys – and remember to keep an eye on the rates your savings earn in the future. They have a habit of changing without you realising.  

You can apply for the Cahoot Savings account, or find a better ISA in our Savings Centre.