Safeway's new Direct Savings Account pays 6.75 per cent on pounds 500, 7.3 per cent on pounds 1,000 and 7.4 per cent on pounds 2,500: rates that beat pretty much anything else available on such levels of "instant access" savings. Halifax is paying from 7.3 per cent, although the minimum balance on its new Premium Savings Direct account is pounds 10,000.
Neither account requires any notice on withdrawals, but it effectively takes two or three working days to get hold of your money. Both are run via the telephone and withdrawals are made by transferring money electronically into a normal bank account.
The Safeway account has wider appeal given that it can be opened with as little as pounds 50 and its excellent rates on "normal" savings levels. The high minimum balance on the Halifax account and its limit of two withdrawals a year will make it unsuitable for many savers. But the Halifax move is noteworthy in that the recently-converted bank is also the UK's biggest provider of traditional branch-based savings accounts, which will continue, but which offer noticeably lower rates. Telephone and other new-style accounts are increasingly putting branch-based deals and even many postal accounts into the shade. Even with so-called instant access postal accounts it takes a week or more actually to encash funds.
As well as this kind of "tele-bank" offer, supermarkets such as Tesco and Sainsbury's offer competitive accounts operable via a combination of phone, cashpoint and shop till.
Even the remaining building societies, which claim to be able to offer better rates than non-mutual savings institutions, appear to be unable to keep up with the new accounts. Nationwide last week raised rates on its InvestDirect postal account very slightly, but the society says it has "no immediate plans" to allow telephone operation of the account. Savers can make cashpoint withdrawals but these cost 50p a time. And new savers are required to sign a waiver of their rights to any windfall should the society convert into a bank, although there is some doubt that this would be legally enforceable.
The attractions of the accounts are highlighted by the general narrowing of the interest-rate differential between instant access and longer-term deposits. Because interest rates generally have been rising but are expected to fall again, savers are being offered a diminishing interest rate benefit for tying up money in fixed-rate bonds or longer-term notice accounts. Best buy savings rates of 8 per cent-plus are set to become more widespread, and tele-bank and other new-style accounts may well be among them.
q Contacts: Safeway, 0800 995 995; Halifax, 0345 26 36 46; Standard Life, 0345 555657; C&G, 0800 742437; Tesco, 0345 10 40 10; Sainsbury's 0500 40 50 60; Direct Line Financial Services, 0181-667 1121; Nationwide BS, 0500 30 20 10; Alliance & Leicester, 0845 608 8860; Coventry BS, 0345 66 55 22.
THE NEW DEALS
Tele-bank and new-style 'instant access' savings accounts ...
Account Interest rate Savings required
Safeway Direct Savings 7.4 pounds 2,500 (7.3%
on pounds 1,000)
Halifax Premium Savings Direct 7.3 pounds 10,000
Standard Life Direct Access 6.9 pounds 1,000 (7.26% on pounds 10,000)
C&G Instant Transfer 7.25 pounds 1,000
Tesco Savings 6.5 pounds 1+
Sainsbury's Instant Access Saving 6.5 pounds 1+
Direct Line Instant Savings 5.8 pounds 1
Nationwide BS InvestDirect 6.8 pounds 1 (6.95% on pounds 10,000)
Alliance & Leicester First Class 7.5 pounds 10,000
Coventry BS First Instant Postal 7.2 pounds 5,000