Alliance & Leicester offers savers 10%

A new savings account paying an interest rate of 10% will be launched by Alliance & Leicester next week.

The premier regular saver account will be available to customers who open one of the bank's premier or premier direct current accounts between October 31 and November 30.

It will be available to new customers only and the 10% rate, which is subject to tax, will be paid only to those who make fixed monthly payments for a year and don't make any withdrawals.

Monthly payments into the account can be between £10 and £250 a month, and a customer who pays in the full amount will save £3,000 over the course of the year and earn £150 in interest, before tax.

Existing Alliance & Leicester customers can also sign up for the account, but they will receive a rate of just 4.5%.

"This will be a great way for people to kick-start a savings habit and at the end of the 12-month period, they will have saved up a nice little nest egg - there has never been a better time to switch," said Simon Ripton, current accounts manager at Alliance & Leicester.

The savings account is similar to fixed-interest accounts launched by other high-street banks including HSBC and Halifax, and offers a better rate than any of its rivals.

However it is unusual in that it is not available to the bank's existing customers, a point seized upon by Abbey, which currently pays 6% on its offering.

Abbey's head of banking, Reza Attar-Zadeh, said: "So far, our 6% current and savings account offer has been very well received and both new and existing Abbey customers have been able to benefit.

"Unlike Alliance and Leicester's 10% savings account, our fixed rate monthly saver is available to existing banking customers.

"Alliance and Leicester's 10% savings account is a good headline rate but customers should still look at what the rate is at the end of the 12-month offer."

At that time, Alliance & Leicester customers will have their savings and interest swept back into their current accounts.

The premier direct account currently pays a rate of 4.89%, while the premier account offers 1.49% gross interest.

Mr Attar-Zadeh added: "Making people take note of the interest rates on their current and savings account is a positive step. "Over two-thirds (68%) of current account customers bank with the big four and most of these people will be earning as little as 0.1% interest."