Life is getting more interesting for savers

Savers have not had the most welcome news in the past few weeks, with most banks and building societies either delaying putting rates up following the Bank of England rate rise at the beginning of the month, or passing on far less than the full quarter point.

However, there is some good news for regular savers. The Yorkshire building society is launching an account on Tuesday which will pay 6.5 per cent interest before tax for those who make consistent monthly deposits. The Yorkshire's Regular Saver works by paying all savers a variable interest rate (it will move up or down roughly in line with the Bank of England base rate) of 3 per cent and a further bonus of 3.5 per cent so long as regular monthly deposits are made.

Deposits can be as little as £10 a month up to £500, and this can be varied month by month, so if you're feeling flush you can pay nearer the higher limit one month, but switch to paying £10 when your finances have taken a hammering. If you don't pay in regularly you still get the 3 per cent interest and both this and the bonus rate are paid 12 months from the opening date of the account. One withdrawal is permitted per year and the account can be run indefinitely up to a maximum balance of £20,000.

There are a couple of other regular savings accounts which pay higher rates of interest than the Yorkshire's, but these only last for a year. Halifax has an account that pays 7 per cent after one year for deposits of between £25 and £250 paid each month by standing order and Alliance & Leicester's Premier Regular Saver account pays a whopping 10 per cent interest for the first year for fixed monthly payments of between £10 and £250.

After a year in the Halifax account, money will shift to one of the banks' other savings accounts, which currently pay between 2.4 and 4.5 per cent interest. With the A&L, savers have to open either a Premier or a Premier Direct current account with the bank first, and the savings will be transferred to this at the end of a year. This is when savers need to watch out, as the bank's Premier account pays just 1.5 per cent on balances up to £2,500 and only 0.10 per cent on anything above this.

Someone paying in £250 a month over three years would at the end of year one be £57 better off with A&L than with the Yorkshire. However, after year three, if they kept the money in A&L's Premier account, they would be £760 worse off than if they had kept the money in the Yorkshire's Regular Saver the whole time, where three years on £9,000 invested would have netted them £936 in interest before tax (assuming the rate stays at 6.5 per cent).

Meanwhile, for those who really want to keep their money on deposit for the long term, fixed-rate bonds are now paying the highest rates seen in years. Halifax is paying 5.65 per cent on its Web Saver account for those who keep their money in it for five years, or 5.4 per cent for two years. A minimum deposit of £500 is required.