Notice Accounts

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Notice Accounts

Notice accounts are supposed to pay higher rates of interest if you're prepared to give your lender notice before making withdrawals.

Notice periods are normally 30, 60 or 90 days but can be as short as 7 days, or as long as 6 months.

Lenders normally pay more interest, the larger the sum invested, and the longer the notice period.

The accounts often require a higher opening balance, although a number start at £1.

Penalties

Early withdrawal, that is, before the end of the notice period, will mean penalties. Customers lose the interest they would have accrued during that time. Indeed, some providers drop the interest rate on all the funds in the account if you fail to give adequate warning. So if you think you may need to access funds in a hurry, make sure you put some money aside in a penalty-free easy access account. However, said fines can be a useful discipline to stop individuals saving for the long-term dipping into their funds.

Tricks of the trade

Beware some of the tricks of the savings account trade. For example, attention-grabbing high interest rates at launch, that subsequently drop to uncompetitive levels. Obsolete accounts, that is accounts closed to new customers, can pay particularly poor interest. Clearly, you won't necessarily know which rates will stay up, and which will plummet, at time of purchase. So keep an eye on whether your provider is keeping up. A few companies now offer products linked to the Bank of England base rate, to protect savers. Some "best buy" accounts aren't all they seem, as bonus rates only last for six months, after which interest drops down to a less attractive level.

Alternatives

Be aware that you may not have to tie up your money to get the best deals. Top paying easy access accounts - that is, no-notice accounts - reward customers with better interest than notice accounts. Some lenders' easy access accounts even beat their own notice products!