Egg, the Prudential's direct banking arm, has already got a two-tier interest rate, with its net-based account paying 5.75 per cent gross interest, 0.25 per cent more than the phone account (which is now shut for new phone business). Standard Life, another big phone banking player, is planning to launch a website although it does not yet plan differential interest rates. Halifax is also planning an internet launch next month, with online banking and access to its savings accounts.
Justin Modray, investment adviser at IFA Chase de Vere, says savers are increasingly conscious of the need to find the best interest rates for savings, and the higher the sums, the more important a higher rate becomes. "It is cheaper for a company to offer phone or internet banking. They can pass on these savings and offer more competitive rates. Some people will chase the best rates, and will not mind if it is on the internet, over the phone or through a branch."
Egg was not the first company to offer internet-only accounts. The Norwich & Peterborough Building Society has offered an internet account since June 1998. NetMaster Saver pays 5.75 per cent with a minimum investment of pounds 1.
First-e, a new entrant to the UK banking market, launched an internet- only savings ac-count last week. First-e des-cribes its initial account as a "money market" account, but it is an internet-only savings account, serviced by transfers to and from the investor's current account. First- e offers an annual equivalent rate of 5.65 per cent.
The company is a co-operative venture between Enba, a Dublin-based company, and Banque d'Escompte, a French private bank. As a result, the account is offshore, and interest is paid gross of tax to savers who are not residents of either France or Eire.
According to Xavier Azalbert, CEO of First-e, the company decided to bring forward its launch plans because of public demand.
Banks and building societies also see the net as a way to make their direct savings accounts more accessible, even if they stop short of making them internet-only. Bank instant access savings rates are rarely the most competitive, but banks such as Barclays, Lloyds-TSB and the Co-operative Bank have good websites that give customers control over both deposit and current accounts. This makes it easier to keep spare cash in a deposit account, where it will earn at least some interest, and move it to a current account when it is needed.
In the next few months, more banks and building societies will open up their postal or phone accounts to savers who prefer to manage their money on line. Nationwide has just relaunched its online banking service, and it now includes access to savings accounts previously only available by post and phone.
Contacts: Bristol & West, www.bristol-west.co.uk or 0117 979 2222; Egg, www.egg.com; First-e, www.first-e.com; Halifax, www.halifax.co.uk; Nationwide, www.nationwide.co.uk; Norwich and Peterborough, www.npbs.co.uk; Standard Life, www.standardlife.co.uk
ACCOUNTS FOR TECHNOPHOBES
Not everyone has access to the internet, and not everyone wants to run their finances by post and phone. But if you like the personal touch it is hard to find branch-based accounts paying decent interest rates.
Nationwide, for example, offers only 2.5 per cent gross on pounds 500 in its Cash Builder account in branches, while the InvestDirect post and net account pays 5 per cent on pounds 500. Queue-lovers should head for Bristol & West, which has just launched a top-paying account as a branch service. The Easy Life account pays 5.65 per cent, though there are a few restrictions: the minimum transaction is pounds 100 and savers are restricted to six withdrawals a year.
Paul Vinnicombe, savings manager at Bristol & West, points to research that suggests 90 per cent of people prefer dealing with their finances in a branch rather than over the phone or the net.