Types of saving products
There are a number of different savings options available to you that will reflect what you want to do with your savings. So whether you're looking for an account where you have instant access or you'd prefer something where your savings are tied in for a longer period, it's important to choose the right home for your savings. Here we look at some of the things you might want to consider.
What do I need to consider when choosing a savings account?
If you are looking for a home for your savings (other than things like pension savings) there are a several options for you to consider. Each savings product has a number of features and benefits, and the following factors are worth considering:
- What's your attitude to risk?
While savings accounts don't carry any investment risk there is a risk the interest you earn doesn’t keep up with inflation so the real value of your savings decreases over time.
- Do you want fixed or variable interest from your savings?
Your savings accounts can have a fixed or variable interest rate.
- Do you need access to the money?
You have the choice between instant access savings account or savings accounts where you restrict your access for a period of time.
- What's your tax position?
It is possible to receive some or all of your savings interest without paying tax. Depending on your circumstances you may be able to use your Personal Allowance, Personal Savings Allowance and the starting rate of tax for savings.
What types of savings products are available?
This isn't an exhaustive list, but it covers some of the more commonly known savings products:
- National savings
National savings and investments offer a range of savings accounts, which are all backed by the government – making them completely secure.
- Individual Savings Accounts (ISAs)
There are different types of ISA available. ISA’s are a tax efficient savings vehicle.
- Lifetime ISAs
A version of the Individual Savings Account (ISA), a Lifetime ISA is available to those ages 18 to 40 from April 2017 onwards. You are allowed to save up to £4,000 a year in this specialised account, and you will receive a 25% bonus from the government meaning that for every £4 you save, the Government will contribute £1 too. This new type of ISA is designed to help people purchase a first home, and/or from age 60, to use in retirement. There are, however, some conditions of taking out a Lifetime ISA. Want more information? The Gov.uk website has a full section dedicated to explaining how the Lifetime ISA works
- Deposit accounts
Most banks and building societies have a range of cash savings accounts that offer varying rates of interest depending on the length of time you are able to leave your savings untouched. In general the longer you are happy not to access your savings to make any withdrawals, the higher the interest payable.
Should I save regularly or just put some money aside as a lump sum?
There is no right or wrong answer to this one, and it depends on whether you have funds that are readily available, or a retirement income that enables you to save small amounts regularly. Many of the savings products listed above let you do both.
How much will I earn on my savings?
Interest payable on different savings accounts varies greatly and will depend on the amount, the length of time and the provider that offers you the savings account. Money Advice Service offer a savings comparison calculator and you can always seek out the best rates in best buy tables online and in the financial sections of the press.