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.

Start your day with The Independent, sign up for daily news emails
Suggested Topics
Have you tried new the Independent Digital Edition apps?
Finacial products from our partners
Property search
Don't count your retirement money yet: employers will stop receiving a pension rebate next year and their staff may lose out

Defined-benefit pension schemes: Rebate change in 2016 may leave you out of pocket

Employees in defined-benefit schemes are held up as the lucky ones, but the state pension scheme will be overhauled in April 2016
Labour will raise the national minimum wage to more than £8 an hour by October 2019 (EPA)

Barclays new Blue Rewards hands cash to customers. What’s the catch?

Joining Barclays Blue Rewards costs £3 a month but then lets customers in for handouts of up to £15 a month

New research reveals that despite the recovering economy, four out of five low-income households have seen no sign of their financial situation improving

Hard-up families could be eligible for financial help

A charity is urging anyone struggling financially to see if they could get help from the state

When is the best time to buy foreign currency?

Video: With an election looming, a hung parliament could hit sterling

General Election 2015: Vote for the party that will boost your finances

Experts warn that the general election is unlikely to lead to stable markets. Simon Read talks to two investment managers who are advising caution

Make the most of your money in 2015-16: The end of the tax year is the beginning of the next...

The new tax year brings with it a raft of new rules and regulations

General Election 2015: Will pension reform be a major factor?

Video: Tom McPhail, head of pensions at Hargreaves Lansdown, says May's outcome could alter your pension

General election 2015: David Cameron's promise brings uncertainty to investors

Video: Simon Read talks to Fidelity's Tom Stevenson

Have you won one of the £1m Premium Bonds' jackpots?

Video: The Independent's Personal Finance Editor runs you through the key facts about Premium Bonds

Give me the money: but not all providers are ready for transfers to Junior Isas

Parents will be able to switch dormant child trust funds to more competitive Junior Isa

Millions of dormant junior savings accounts were yesterday given the go-ahead to swap to better deals as the Government agreed to allow switching. Samantha Downes reports
Hard labour: a woman bears the load in a factory. But equal treatment is causing pension problems

Women to lose benefits from contracted-out pension scheme

Workers were promised that the state would pay inflation increases on parts of their pensions. But now the DWP disagrees
The Budget, says one critic, should have done more to encourage construction of affordable homes

Help for buyers but where are the homes?

A vote-winning Budget promised less tax, greater savings flexibility, and government handouts for first-time housebuyers
  • Get to the point
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

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...

    Ashdown Group: IT Manager / Development Manager - NW London - £58k + 15% bonus

    £50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...

    Recruitment Genius: Sales Consultant / Telemarketer - OTE £20,000

    £13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

    Ashdown Group: Training Programme Manager - City, London

    £40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...

    Day In a Page

    Where the spooks get their coffee fix: The busiest Starbucks in the US is also the most secretive

    The secret CIA Starbucks

    The coffee shop is deep inside the agency's forested Virginia compound
    Revealed: How the Establishment closed ranks over fallout from Loch Ness Monster 'sighting'

    How the Establishment closed ranks over fallout from Nessie 'sighting'

    The Natural History Museum's chief scientist was dismissed for declaring he had found the monster
    One million Britons using food banks, according to Trussell Trust

    One million Britons using food banks

    Huge surge in number of families dependent on emergency food aid
    Excavation at Italian cafe to fix rising damp unearths 2,500 years of history in 3,000 amazing objects

    2,500 years of history in 3,000 amazing objects

    Excavation at Italian cafe to fix rising damp unearths trove
    The Hubble Space Telescope's amazing journey, 25 years on

    The Hubble Space Telescope's amazing journey 25 years on

    The space telescope was seen as a costly flop on its first release
    Did Conservative peer Lord Ashcroft quit the House of Lords to become a non-dom?

    Did Lord Ashcroft quit the House of Lords to become a non-dom?

    A document seen by The Independent shows that a week after he resigned from the Lords he sold 350,000 shares in an American company - netting him $11.2m
    Apple's ethnic emojis are being used to make racist comments on social media

    Ethnic emojis used in racist comments

    They were intended to promote harmony, but have achieved the opposite
    Sir Kenneth Branagh interview: 'My bones are in the theatre'

    Sir Kenneth Branagh: 'My bones are in the theatre'

    The actor-turned-director’s new company will stage five plays from October – including works by Shakespeare and John Osborne
    The sloth is now the face (and furry body) of three big advertising campaigns

    The sloth is the face of three ad campaigns

    Priya Elan discovers why slow and sleepy wins the race for brands in need of a new image
    How to run a restaurant: As two newbies discovered, there's more to it than good food

    How to run a restaurant

    As two newbies discovered, there's more to it than good food
    Record Store Day: Remembering an era when buying and selling discs were labours of love

    Record Store Day: The vinyl countdown

    For Lois Pryce, working in a record shop was a dream job - until the bean counters ruined it
    Usher, Mary J Blige and Will.i.am to give free concert as part of the Global Poverty Project

    Mary J Blige and Will.i.am to give free concert

    The concert in Washington is part of the Global Citizen project, which aims to encourage young people to donate to charity
    10 best tote bags

    Accessorise with a stylish shopper this spring: 10 best tote bags

    We find carriers with room for all your essentials (and a bit more)
    Paul Scholes column: I hear Manchester City are closing on Pep Guardiola for next summer – but I'd also love to see Jürgen Klopp managing in England

    Paul Scholes column

    I hear Manchester City are closing on Pep Guardiola for next summer – but I'd also love to see Jürgen Klopp managing in England
    Jessica Ennis-Hill: 'I just want to give it my best shot'

    Jessica Ennis-Hill: 'I just want to give it my best shot'

    The heptathlete has gone from the toast of the nation to being a sleep-deprived mum - but she’s ready to compete again. She just doesn't know how well she'll do...