Notice-based savings accounts
March 2009
At one time, notice-based savings account were the only way to get a decent rate.
If you know that you definitely won't need your money straight away, then do your homework as you may well get a better rate of interest.
As the name suggests, you will have to give a certain amount of notice before withdrawing your money. Typical notice periods are 30, 60 and 90 days, although some are as short as 7 days.
If you don't give sufficient notice, you're likely to pay a penalty equal to the interest payable during the notice period (so don't forget to read the small print). Some accounts do allow you a limited number of penalty-free withdrawals a year - perhaps two or three - but you usually have to keep a minimum amount in your account in order to take advantage of this facility.
Others offer you an annual bonus if you make no withdrawals at all, although you might be allowed to withdraw the bonus payment without losing the following year's bonus.
In theory, giving up the right to get at your money quickly gives the bank or building society more flexibility, meaning that they can afford to give you a slightly better rate of interest. However, the rates aren't always as high as you'd expect, and the often-complicated restrictions can prove tiresome.
