High savings rates - with no strings

The regular savings market is a crowded place at the moment, with a host of providers jostling to offer the best rate - currently going as high as 12.5 per cent.

HSBC was the latest to pitch in last week with a rate of 10 per cent on a regular savings account, where interest is paid on the total sum put in over the course of a year but calculated pro rata as the money comes in. As with many of these deals, you have to hold your current account with the same provider - in this case, HSBC's packaged account.

While regular savings accounts are a good way of getting into the savings habit, as they require you to make a monthly deposit, they often have a multitude of strings attached.

In many cases they last only for a year, and customers can be heavily penalised for missing payments or making withdrawals.

They may also have to pay in a hefty amount each month to qualify for the highest rate, and when the account is closed, the balance is often swept into an account paying a much lower rate.

But Nationwide building society recently broke the mould when it launched a product with far more flexibility.

Its regular savings account pays between 4.25 per cent and 6.25 per cent, depending on how much you put in. You earn the higher rate only if you pay in between £200 and £250 a month, and this drops to 4.25 per cent for those setting aside less than £100.

The big selling point, however, is that there are no penalties for missed payments or withdrawals, and you pay in only when you can. If you miss a monthly payment, you simply earn a flat rate of 4.25 per cent until you make your next deposit.

Sue Hannums from independent financial adviser AWD Chase de Vere says: "It's a fantastic deal: the account is available to new and existing customers and you don't have to open a current account to earn this rate."

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But for those who want to get into the habit of saving regularly, she prefers the Halifax regular saver account - paying 7 per cent on monthly deposits of between £25 and £250.

"This does have restrictions," adds Ms Hannums. "You cannot miss payments and there is no flexibility. But it is not linked to a current account, so it is open to everyone."

The highest regular savings rate available - 12.5 per cent - is currently being offered by Barclays bank. But to qualify you must open, or already have, a Barclays account in which you deposit £1,000 a month.