A new savings account for over-50s has been launched, offering a rate of 4 per cent.
Saga, the later life insurance and travel company, says the account will “deliver front-end propositions for customers that meet the specific needs of those over 50.”
There are just a handful of over-50s branded accounts currently on the UK market – and all at modest rates – so how does Saga’s offering stack up?
What does the new deal offer?
The easy-access savings account is the first new product of Saga’s partnership with NatWest Boxed – the bank’s finance platform – and offers a variable rate of 4 per cent, which includes a bonus rate of 1.25 per cent fixed for 12 months.
It will allow customers to top up and withdraw funds without any penalties and with no minimum deposits required.
Easy-access accounts are the most popular choice for saving amongst the over 50s, it said, with people over the age of 55 having on average £27,949 in savings, often held in easy-access savings accounts, according to its own research.
What other accounts are out there?
It is not the only provider to offer accounts specifically for the over-50s.
Many offer specific perks designed for retirees or those nearing retirement, which differ from standard bank accounts, such as an elimination of fees, reduced minimum balance requirements and discounts on other products like insurance or safe-deposit boxes.
One appeal is that many offer in-branch service, something older customers often look for when banking.
Other accounts available include one from Earl Shilton Building Society, which offers a Heritage account with a rate of 3.5 per cent – including a bonus of 2.5 per cent.
Newbury Building Society’s senior saver account has a variable interest rate of 3.14 per cent for balances of £50 or more, with a lower rate of 1.5 per cent if the balance drops below £50.
Interest is calculated daily and paid monthly or on closure.
Chorley Building Society’s over 60s easy-access offers the lowest of them all at 1.85 to 2.05 per cent, rising with the more money deposited in the account.
Rates are also scheduled to reduce in the next couple of days, on Friday 16 January, to between 1.7 and 1.9 per cent.
This account allows unlimited withdrawals and is open to UK residents aged 60 and over.
What are the pros?
The rate is 0.25 per cent above the Bank of England’s current base rate of 3.75 per cent and the inflation figure, which stands at 3.2 per cent. It beats many on the market, James Blower, founder of The Savings Guru, said.
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“All in all, this is a very good offer from Saga and NatWest, but there are some better options out there which savers should consider as well.”Rachel Springall, finance expert at Moneyfactscompare.co.uk, agrees.
She said it’s good to see more competition in the market and turning to one brand is “handy to save time”.
But she also said customers need to make sure this does not come at a cost to them.
She said: “A savings account does not just need to pay a decent return, but its accessibility is a key point for many savers who do not bank online, such as retirees who are unable to do so.
“Exclusive savings rates for older customers have gradually faded away over the years, and really, the best returns on the market are from challenger banks.
“However, if savers want the option to bank in branch, many of the top rate deals are only available to manage online, as many new brands prefer to digitise their offers to streamline retail banking.”
A return of 4 per cent is “highly attractive”, she said, particularly if it provides unlimited access to funds. But this rate can be beaten.
What are the cons?
It is worth considering whether a bonus is worth switching for, Sarah Coles, head of personal finance at Hargreaves Lansdown (HL), said.
She explained: “If you don’t tend to switch savings accounts very often, ask yourself if you’re likely to move when the bonus expires.
“If you are a committed switcher, you can make up to 4.5 per cent with Chase. For those looking for an easy-access account without a bonus, you can get 4.12 per cent from Kent Reliance.”
This comes after HL found that a big chunk of people aged 55 are “sticky savers”, with 38 per cent saying they haven’t switched savings accounts for at least five years – far more than any other age group, Coles said.
But there’s also a section of switched-on older savers, because those aged 55 and over were much more likely than any other age group to say they have made a switch within the last three months, it found.
Blower said Saga will be “hoping that many customers forget to look around at the expiration of” the bonus rate, which makes up almost a third of it, and then “stay stuck on a lower rate that isn’t competitive”.
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He also suggested the Chase account, although highlighted that this too does have a large – 2 per cent – bonus element for 12 months.
For savers with smaller balances, Cahoot pay 5 per cent on balances up to £3,000.
Not only do many of the suggested accounts offer a higher rate, but many of them can also see customers in person, which may suit older savers better.
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