12:34 28 January 2013
Savers looking for a home for their cash have had a difficult time of late. Paltry interest rates have resulted in limited options and many will feel frustrated that their money isn't working as hard as it could be.
However, things are looking up. BM Savings has just launched a one-year fixed rate bond which pays a market-leading annual equivalent rate (AER) of 2.75%, which is head and shoulders above the majority of current offerings.
Here, we take a closer look...
What's the deal?
BM Savings' one-year fixed rate bond allows savers to earn 2.75% on their cash, so long as they have £50,000 to invest.
Even if you have less cash than this to invest you can still expect market-leading rates. For a minimum deposit of £25,000 you can earn a fixed AER of 2.55% with the same one-year bond, while depositing £10,000 will bag you fixed interest of 2.35% on your savings.
In any case, you will need to be prepared to lock your money away for the 12-month duration of the bond, but with easy access options wilting on the vine, this is a good way of getting a relatively strong rate without having to part with your cash for too long and miss out on potentially rising rates.
Whatever amount you open the account with, you must ensure that when you deposit your money into the bond it is for the full amount you want to save as further deposits are not allowed, and you will not be permitted to touch your cash during the term.
BM savings will contact you at least 14 days before the account matures and, unless you tell it otherwise, your money will be transferred into an easy access variable rate savings account with the bank - which is likely to offer poor returns, so watch out at that point and move your money fast.
While the rates of BM's one-year bond are impressive, clearly not everyone is going to have even the lowest required deposit of £10,000 to stash away.
But that's not to say you can't earn a competitive rate of interest on your savings. The Baroda Max one year fixed rate bond which is exclusive to MoneySupermarket, will allow you to earn an AER of 2.30%. And, as this account only requires a more manageable £500 to open, it's the leading in its field.
Like the BM one-year bond, the Bank of Baroda account has a fixed term of 12 months, so only open it if you won't need access to your cash during that timeframe. And this isn't the best option for those looking to supplement their income as interest is paid on maturity.
Again, you should ensure you pay in the maximum you can afford as further deposits are not allowed over the 12 months. You can invest up to £200,000 in to the bond, although bear in mind that only £85,000 will be protected under the Financial Services Compensation Scheme.
What's the verdict?
The BM Savings one-year bond is a welcome addition to the savings market and will give the best returns to those looking to lock their money away for a year. However, those with less than £10,000 would be better off putting their money into the Bank of Baroda Bond.
If you are unable to lock your money away for a year, shop around on MoneySupermarket for the best-paying easy access accounts.
Savers who can lock their money away for longer than 12 months will have access to the better rates of interest still. Be wary though that, as when the base rate eventually starts to rise, these accounts may not seem quite as impressive.
Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.
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