FAQs Savings Account

Some accounts pay interest monthly and others pay annually. Which is better?

When it comes to comparing different saving accounts it is best to use the Annual Equivalent Rate (AER), this allows you to compare like with like, giving you a good idea of the best rate. Accounts do vary on the frequency of interest paid, it can be paid monthly, annually or at the end of the term. If the interest is paid monthly this could be advantageous. It allows the interest paid on the account one month to start earning interest the next month. This is known as compound interest.

Does every bank guarantee the full sum of money deposited?

All banks and building Societies who are authorised by the Financial Services Authority are covered for up to £50,000 per account holder. This means that if the account is in joint names each person is covered for up to £50,000. For further details on who is authorised by the FSA take a look at their online register at; http://www.fsa.gov.uk/Pages/consumerinformation/uk_groups/index.shtml

What is meant by Gross Interest?

Banks and Building Societies show their interest rates in a variety of ways, gross interest is one of these. It refers to how much interest is paid before tax is applied. Tax is payable at a rate of 20% for basic tax rate payers and 40% for those people who pay tax at the higher rate.

FAQ Saving Accounts

Apart from the rate of interest what else should be considered when choosing a savings account?

Savings accounts are very personal and different people require different features from their accounts. Some points to consider before applying for an account;

I am on a low income and do not want tax to be deducted from my account. Should I inform the tax office?

If you are on a low income, a form known as R85 should be completed. This form is available from all Banks and Building Societies. If you are entitled to receive interest tax free the holder of the account is notified and no tax deductions are made.