Notice served on inflexible savings deals

In an age where we want everything now and can move money online at the click of a button, there is something terribly old-fashioned about holding your hard-earnt money in a savings account that makes you wait up to four months to get your hands on your cash.

But balk as you might at the idea, this is exactly what is required if you open a notice account, as your money is locked away for anything up to 120 days - a third of a year.

Until last week, customers with money saved in the Investment account with National Savings & Investments (NS&I) had to give one month's notice to make withdrawals, or face a penalty equal to 30 days' interest.

This is a price that has been paid by nearly two-thirds of Investment account holders who have needed at some point to take out money at short notice, according to NS&I's own research.

But last Thursday, the government-backed savings provider caved in to growing competition from the instant access savings market, and removed the one-month notice period and penalty on the account.

It has now become an easy access variable savings account offering tiered rates of interest up to 3.8 per cent. Customers can get their hands on their money in a few days by applying to NS&I through the post.

Traditionally, you would expect to be rewarded with a higher rate of interest for locking up your money in a notice account. However, this is no longer the case, says Rachel Thrussell of financial analyst Moneyfacts.

"There is still a market for these accounts, especially for the more mature saver who is used to having an instant access deal separate from a notice account for longer-term saving," she explains.

"But [they] are a relic from the past and there are better rates to be had elsewhere - especially on postal, phone and internet accounts."

That said, there are still some competitive notice accounts available - such as a 90-day deal from Portman building society paying 5 per cent on a mini- mum balance of £1,000, with no bonuses.

Ms Thrussell also picks out two accounts from Manchester building society: the Premier Ninety (90 days) and the Premier Notice (60 days) paying 5.06 per cent and 4.9 per cent respectively on a minimum of £2,500, again with no bonuses.

For savers after simple accounts, she recommends Bradford & Bingley bank, which is paying 4.85 per cent on £1,000 on its eSavings2 account.

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