Half of top savings accounts come with conditions

Sainsbury's Finance says that many of the best buy savings accounts are applying conditions on how they can be used, including limiting access to deposits. Its analysis of the top 50 instant/easy access savings accounts on balances of £1,000 reveals that 26 have one or more of these conditions.

Twelve of the top 50 instant access/easy access savings accounts today restrict the number of withdrawals that can be made, four apply a penalty for making a withdrawal and nine are only open to adults of certain ages.

Helen Cook, head of savings at Sainsbury's Finance said: "There is great choice within the savings market but as a condition for offering some of the most attractive rates, some instant/easy access accounts limit access to your savings. So before opening an account, you should not only consider the interest rate but also what type of access to your money you want. If you require easy access, you can still receive an attractive return that is above the Bank of England base rate."

The Sainsbury's Internet Saver pays an attractive rate of 5.5%, but unlike many other top paying accounts, customers are not restricted from accessing their savings. The research found that the Internet Saver account was one of only three accounts to appear in the top 50 best buy instant/easy access savings table in January 2005 and still in June 2008 without applying any restrictions.

Sainsbury's Finance research found that on some of the best-buy instant/easy access savings accounts, making a withdrawal would mean that you would not receive any interest for your entire balance for that month. If someone had £10,000 in such an account paying 6.5% AER interest but made one withdrawal a month over four months, their annual equivalent rate of interest (AER) would fall to 4.33%. This would mean that they would lose £216 in gross interest.

There is now greater use of some of these terms and conditions among the top savings accounts than there was three years ago. For example, nine of the top 50 instant/easy access accounts had restrictions on withdrawals as opposed to 12 today.

Since its launch in January 2005 Sainsbury's Internet Saver has consistently paid a competitive rate, and was ranked number one savings account by Moneyfacts in its new 36-month consistency rankings, which tracks the rates paid by savings accounts for the past three-years.

This award is backed up by analysis by Defaqto that reveals that Sainsbury's Internet Saver is the only instant or easy access savings account generally available to adults that has consistently paid a gross AER interest rate on a balance of £1 that is equal to or above the Bank of England base rate in each and every month since January 2005.