It is always better to work smart as opposed to hard. Were you aware that you will be able to earn a substantial of money when opening up a savings account? While most individuals already possess some type of checking or debiting service, savings accounts tend to be slightly overlooked. However, their benefits cannot be denied. This type of account is associated with a handful of impressive amenities and if you are looking to secure a "nest egg" for future requirements, such a service will prove to be a welcome addition to your current financial portfolio. Let's take a closer look.
The main idea behind any type of savings account is that you will earn a certain amount of interest in addition to your principle (the balance). One major difference is that as opposed to standard debit accounts, the interest is much more. This is normally expressed in terms of "APR" (annual percentage rate). This interest will be added to your balance and these profits can certainly add up over time. Now that we can appreciate the basic notion behind a savings account, we should address a handful of the most common variants as well as what each has to offer.
Also known as Individual Retirement Accounts, IRAs are quite common throughout the United Kingdom. The main benefit associated with this savings method is that you will not be obligated to pay any capital gains tax within a given year if the balance remains below a specific amount (this level changes from time to time). A IRA can also be used to invest funds into long-term yields so that the initial balance increases over time. This is normally accomplished through the use of a wealth manager. However, keep in mind that early withdrawals could result in substantial penalties.
As the name suggests, student savings accounts are essentially intended to provide students with a means to accrue profit over time by regularly depositing their funds. This type of account is often used in conjunction with a regular debit or checking account in order to offer an extra level of liquidity. Student savings accounts might offer additional benefits such as higher interest rates or more flexible withdrawal protocols.
Notice savings accounts will require the account holder to provide advanced notice in the event that he or she wishes to withdraw funds. While this is not as flexible as early access accounts, the main intention is to enjoy higher levels of interest. In other words, notice accounts are often employed for long-term desires (such as saving for a university education).
Early access accounts essentially allow the client to withdraw any funds at no additional fee. This is very advantageous in terms of liquidity, but the interest rates associated with this variant might be slightly lower than a standard savings account. Also, tax may need to be paid on any accrued interest.
Also known as individual savings accounts, ISAs are another extremely popular option. One of their primary benefits is that account holders will not be required to pay any capital gains tax if the funds are kept under a certain annual limit. In the same respect, there are numerous different types of ISAs available depending upon the needs of the individual in question. There are still two stipulations to keep in mind. First, you might be charged a nomial fee if you happen to withdraw funds from an ISA early. This depends upon the institution in question. Secondly, any funds exceeding the limit mentioned earlier will be subject to capital gains tax.
Interest rates are critical, as these will essentially dictate the efficiency and profitability of the account in question. This is why comparing and contrasting a host of popular providers is the best option when beginning the selection process.
Furthermore, be sure to examine any terms and conditions associated with the account. Early withdrawal fees, minimum balances and VAT obligations are arguably the most important concerns. Much like any other type of account, access to a customer service representative is critical if you have a question or problem. Multiple points of contact (such as an email address, a phone number and a live chat widget) should always be present.
It is also wise to take a look at what others have had to say about their experiences; word of mouth goers a long way towards making an informed decision.
Let's finally look at the most popular savings accounts within the United Kingdom: The top four include:
Feel free to browse these sites in greater detail in order to find the most appropriate plan for your requirements.