The best regular savings accounts

Regular savings accounts usually offer the highest rates across the savings market, but there is a limit to the amount you can deposit in each account. We outline the best accounts around.

When looking for a new savings account it can be easy to prioritise your options by best rate. For the most part it isn’t a bad idea, but when it comes to regular savings accounts there’s more to take into consideration.

Often their headline rates draw people in, but as illustrated below the best rate isn’t necessarily the provider which pays the most interest. You’ll also need to consider the restrictions on your deposits.

Below we explain:  

• What are regular savings accounts?
• The best regular savings accounts
• Who offers the best rate?
• Do I have to save each month?

Read more: Best savings accounts of 2024

What are regular savings accounts and how do they work?

A regular savings account is designed for those wanting to build and maintain a savings habit.

Unlike other options, you can’t make a once-off lump sum deposit and wait for your savings to grow. Instead, you’ll be required to contribute each month with the provider placing a cap to the amount you can add to your account.

This means while regular savings accounts typically offer some of the best rates around, you’ll be limited to the interest you can earn each month.

To illustrate how regular savings accounts work, imagine you paid £100 each month for a year into a regular savings account paying 6% interest:

Capital	Interest earned	Total balance
£100	£0.50	£100.50
£200	£1	£201.50
£300	£1.51	£303.01
£400	£2.02	£403.03
£500	£2.53	£507.55
£600	£3.04	£610.59
£700	£3.55	£714.14
£800	£4.07	£818.21
£900	£4.59	£922.80
£1,000	£5.11	£1,027.92
£1,100	£5.64	£1,133.56
£1,200	£6.17	£1,239.72

This only earns close to £40 in interest over the year. Now, if you had a lump sum of £1,200 at 4% in an easy access account, you’d earn almost £9 more in interest.

Read more: Best cash ISAs

Best regular savings accounts

Below are the top three regular savings accounts:

Who offers the best rate?

First Direct currently offers a regular savings account that pays 7% annual interest. However, it is a linked savings account, so you need to open its 1^st Account to qualify.

It allows you to add up to £300 each month to your balance – which works out to £135 in interest over the year.

This is less than Lloyds Bank, which is offering a lower rate of 6.25%.  

It does, however, allow you to invest £400 a month instead. This means if you pay the maximum you’ll earn £161 in interest over the same period.

Both providers aren’t the only banks which gives their existing customers better interest rates. For more information, check out the top linked regular savings accounts.

Read more: The downside to regular savings accounts

What alternatives are there to a regular savings account?

If you have a lump sum to save, then chances are you’ll likely earn more interest elsewhere.

An easy access or fixed rate bond might be preferable, and we list the best accounts on the market here.

Otherwise you might wish to save your money more tax-efficiently, in which case a fixed or variable cash ISA might be worth considering.

FAQs

Do I have to save each month?

Most providers require you to make at least a minimum contribution each month. If you fail to do so, then you won’t be paid your interest.

Can I have more than one regular savings account?

While you won’t be able to open more than one regular savings account with the same provider you can hold two regular savings accounts with different providers.

Are regular savings accounts taxed?

The interest you earn on a regular savings account does contribute towards your personal savings allowance. By itself, it won’t push you over your threshold if you’re a basic rate taxpayer.