Money: Savers get back to the good times

The 8 per cent savings account is back. In the wake of the latest hike in base rates, and with the expectation of further rises in coming months, accounts paying interest of 8 per cent are finally returning. Rates of 7 per cent-plus now dominate the "best buy" tables.

The last time 8 per cent was available on savings accounts other than tax-free Tessas or special fixed-rate bonds was 1992, which is also the last time base interest rates, at 7.25 per cent, were this high.

Northern Rock presently stands alone among high street banks and building societies in paying more than 8 per cent on a mainstream savings account, albeit on very high balances. Select 90, its 90-day notice account, now pays 8.05 per cent before tax on pounds 100,000 or more. Select 90 rates start at 7.75 per cent on pounds 10,000, which is still highly competitive.

Another account effectively paying 8 per cent, but on just pounds 5,000 and without any notice period, is being promoted by the David Aaron Partnership, an independent financial adviser based in Milton Keynes. Called the Flexible Access Bond (FAB), it works like a normal postal account and is run by GE Financial Assurance, part of GE Capital, a huge US conglomerate. The 6.1 per cent net interest rate paid by the FAB account, if bought through David Aaron, is equivalent to a gross rate of 7.9 per cent for a basic- rate taxpayer or 8.4 per cent for a higher-rate taxpayer; for the latter, this beats even Northern Rock's rate.

The difference in the gross rates on the FAB account reflects a quirk in life insurance taxation, and the effective rate is also boosted because the IFA rebates part of its commission.

The only "catch", says the company, is that non-taxpayers cannot reclaim the tax on the interest, and so would be better off elsewhere. GE is not a mutual so there is no prospect of a windfall, but in simple interest- rate terms just about any taxpayer would stand to benefit, and all savers are protected by the Policyholders' Protection Act, which is an even stronger safety net than that protecting bank and building society savers.

At present, it is virtually impossible to find any other accounts paying 8 per cent, although the combination of further base-rate rises and ever intensifying competition could change this. More institutions are likely to enter the savings market in the new year, including Standard Life, the insurer.

However Ian Millward, investment marketing manager at Chase de Vere, a major firm of financial advisers based in Bath, said he doubted that 8 per cent would become widely available and said rates were probably approaching their peak.

Legal & General, one of the insurers already already offering savings accounts through its banking arm, is one of the few institutions to have increased its rates since the latest base-rate rise. It now pays 7.15 per cent on pounds 2,500 in its Direct Access postal account, or 7.65 per cent for money on 60 days' notice.

Among the main lenders, only Abbey National and Northern Rock have increased their mortgage rates so far to take account of the latest base-rate rise, and until more lenders move, savers are unlikely to see rates rise across the board.

Nationwide, the biggest remaining society, is holding its base mortgage rate of 8.1 per cent until the new year (which compares with the 8.7 per cent now being charged by Abbey and Northern Rock), and says that in the meantime it has no plans to touch its savings rates. The society already offers 7.5 per cent to people who are prepared to save as little as pounds 20 a month. New savers must agree to assign their rights to any future windfall to charity, although there is a question mark over whether this condition would survive a legal challenge.

Elsewhere, Tesco continues to offer 6.5 per cent on as little as pounds 1, and if you open an account this year and keep at least pounds 500 in it for the first three months, you will also get a bonus of 1,000 Clubcard points. The points are worth pounds 10 of shopping at Tesco and are equivalent to an extra 2 per cent return on a balance of pounds 500.

For our best savings rates table, see page 12. The David Aaron Partnership; tel: 01908 281544; Legal & General Bank; 0500 111200: Tesco Savings; 0345 10 40 10.

Suggested Topics
News
scienceExcitement from alien hunters at 'evidence' of extraterrestrial life
Life and Style
Customers can get their caffeine fix on the move
food + drink
Sport
sport
Sport
David Moyes gets soaked
sport Moyes becomes latest manager to take part in the ALS challenge
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
Life and Style
techCould new invention save millions in healthcare bills?
News
peopleEnglishman managed quintessential Hollywood restaurant Chasen's
Life and Style
food + drinkHarrods launches gourmet food qualification for staff
Voices
Mosul dam was retaken with the help of the US
voicesRobert Fisk: Barack Obama is following the jihadists’ script
Arts and Entertainment
Michael Flatley prepares to bid farewell to the West End stage
danceMichael Flatley hits West End for last time alongside Team GB World champion Alice Upcott
News
Members and supporters of the lesbian, gay, bisexual, transgender (LGBT) community walk with a rainbow flag during a rally in July
i100
Life and Style
Black Ivory Coffee is made using beans plucked from elephants' waste after ingested by the animals
food + drinkFirm says it has created the "rarest" coffee in the world
Arts and Entertainment
Loaded weapon: drugs have surprise side effects for Scarlett Johansson in Luc Besson’s ‘Lucy’
filmReview: Lucy, Luc Besson's complex thriller
Arts and Entertainment
Jamie T plays live in 2007 before going on hiatus from 2010
arts + entsSinger-songwriter will perform on the Festival Republic Stage
Life and Style
food + drinkThese simple recipes will have you refreshed within minutes
News
Jermain Defoe got loads of custard
i100
Finacial products from our partners
Property search
Love but not marriage: property is one area where cohabiting couples are in danger of losing out

How couples can protect their financial interests when cohabiting

People who simply live together cannot assume they have the same rights to each other's assets as spouses or civil partners. Michelle McGagh sees how they can protect their financial interests

India could be jewel in the crown for investors

With a new government and an ambitious prime minister, the country offers the prospect of strong returns. But there may be hiccups ahead, warns Simon Read

Child Maintenance Service to replace Child Support Agency - but is it better?

Reforms to the vexed question of child support payments by absent parents mean extra charges for both sides. Neasa Macerlean reports

Barclays's new life insurance heralds a revolution on the high street

The new product marks a shift towards 'clear, straightforward and standardised' banking products, says Simon Read

How to protect your assets if the stock markets begin to head south again

Are you worried about your portfolio? Nick Paler asks fund managers and investment insiders for advice
Fuel poverty campaigners united in criticising the delays in helping those in fuel poverty

Plans to tackle fuel poverty are slammed by campaigners

Charities and action groups believe that the Government's proposals are woefully inadequate
Sell it with flowers: competition is 'intense' for homes with outside spaces

Gardens add a tenth to the value of your home

A London estate agent yesterday put a price on having a garden. David Pollock of Greene & Co reckons it can increase a property's value by a tenth.

Spectators at the Isle of Wight music festival watch the World Cup on the big screen. Betting promotions were a feature of the tournament
Lenders have been accused of persuading vulnerable people to borrow expensive credit

Payday loan firms accused of bombarding vulnerable people with nuisance phone calls

Payday loan firms have been accused of bombarding financially vulnerable people with nuisance phone calls, after a debt charity reported that a third of its clients were plagued by the messages.

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Business Analyst - Banking - London - £550 - £650

    £550 - £650 per day: Orgtel: Business Analyst - Traded Credit Risk - Investmen...

    Data Centre Engineer - Linux, Redhat, Solaris, SAN, Puppet

    £55000 per annum: Harrington Starr: A financial software vendor at the forefro...

    .NET Developer

    £600 per day: Harrington Starr: .NET Developer C#, WPF,BLL, MSMQ, SQL, GIT, SQ...

    Data Centre Engineer - Linux / Redhat / Solaris / Puppet / SAN

    £65000 per annum: Harrington Starr: A financial software vendor at the forefro...

    Day In a Page

    Air strikes? Talk of God? Obama is following the jihadists’ script

    Air strikes? Talk of God? Obama is following the jihadists’ script

    The President came the nearest he has come yet to rivalling George W Bush’s gormless reaction to 9/11 , says Robert Fisk
    Ebola outbreak: Billy Graham’s son declares righteous war on the virus

    Billy Graham’s son declares righteous war on Ebola

    A Christian charity’s efforts to save missionaries trapped in Africa by the crisis have been justifiably praised. But doubts remain about its evangelical motives
    Jeremy Clarkson 'does not see a problem' with his racist language on Top Gear, says BBC

    Not even Jeremy Clarkson is bigger than the BBC, says TV boss

    Corporation’s head of television confirms ‘Top Gear’ host was warned about racist language
    Nick Clegg the movie: Channel 4 to air Coalition drama showing Lib Dem leader's rise

    Nick Clegg the movie

    Channel 4 to air Coalition drama showing Lib Dem leader's rise
    Philip Larkin: Misogynist, racist, miserable? Or caring, playful man who lived for others?

    Philip Larkin: What will survive of him?

    Larkin's reputation has taken a knocking. But a new book by James Booth argues that the poet was affectionate, witty, entertaining and kind, as hitherto unseen letters, sketches and 'selfies' reveal
    Madame Tussauds has shown off its Beyoncé waxwork in Regent's Park - but why is the tourist attraction still pulling in the crowds?

    Waxing lyrical

    Madame Tussauds has shown off its Beyoncé waxwork in Regent's Park - but why is the tourist attraction still pulling in the crowds?
    Texas forensic astronomer finally pinpoints the exact birth of impressionism

    Revealed (to the minute)

    The precise time when impressionism was born
    From slow-roasted to sugar-cured: how to make the most of the British tomato season

    Make the most of British tomatoes

    The British crop is at its tastiest and most abundant. Sudi Pigott shares her favourite recipes
    10 best men's skincare products

    Face it: 10 best men's skincare products

    Oscar Quine cleanses, tones and moisturises to find skin-savers blokes will be proud to display on the bathroom shelf
    Malky Mackay allegations: Malky Mackay, Iain Moody and another grim day for English football

    Mackay, Moody and another grim day for English football

    The latest shocking claims do nothing to dispel the image that some in the game on these shores exist in a time warp, laments Sam Wallace
    La Liga analysis: Will Barcelona's hopes go out of the window?

    Will Barcelona's hopes go out of the window?

    Pete Jenson starts his preview of the Spanish season, which begins on Saturday, by explaining how Fifa’s transfer ban will affect the Catalans
    Middle East crisis: We know all too much about the cruelty of Isis – but all too little about who they are

    We know all too much about the cruelty of Isis – but all too little about who they are

    Now Obama has seen the next US reporter to be threatened with beheading, will he blink, asks Robert Fisk
    Neanderthals lived alongside humans for centuries, latest study shows

    Final resting place of our Neanderthal neighbours revealed

    Bones dated to 40,000 years ago show species may have died out in Belgium species co-existed
    Scottish independence: The new Scots who hold fate of the UK in their hands

    The new Scots who hold fate of the UK in their hands

    Scotland’s immigrants are as passionate about the future of their adopted nation as anyone else
    Britain's ugliest buildings: Which monstrosities should be nominated for the Dead Prize?

    Blight club: Britain's ugliest buildings

    Following the architect Cameron Sinclair's introduction of the Dead Prize, an award for ugly buildings, John Rentoul reflects on some of the biggest blots on the UK landscape