Santander launches 2.5% savings account

Santander has announced a new savings account this week with a 2.5% interest rate, a significant increase on their existing offer of 0.5%.

The new 123 Regular e-Saver can be opened online or via the Santander mobile app, and is allows any 123 current account owner (whether on Lite, Private or Select level) to open a savings account and pay in up to £200 per month for 12 months to a maximum total of £2,400.

Significant interest increase

Any funds paid into the new e-Saver accounts must be paid by standing order from an existing Santander 123 Select, World or Private account, and any money paid in will count towards the £200 limit, even if it is later withdrawn, preventing customers from gaming the account to boost their earnings.

If customers deposit the maximum £2,400 over the course of the 12 months of the account, they’ll earn up to £32.26 in interest. Previously the e-Saver account offered just 0.5% interest which would result in only £6.50 earned, a boost of over £25 for the year.

It comes just a month after Santander announced that it was boosting its in-credit interest rate on its 123, Select and Private current accounts too. Customers with a positive balance on those accounts will now earn 0.5% AER/gross compared to the previous 0.3%, which could see customers earn up to £100 on their current account balance within a year instead of the previous maximum of £60.

Customers who make the most of both the increased current account rate and new savings account could therefore earn over £65 more than they did on their money compared to last year, for a total of £132.26.

The new e-Saver rate only applies to new savings accounts opened, and will be applied to anyone holding a savings account with the bank currently when their 12 month period ends. The bank has confirmed that customers can close their old savings account early if they wish via the bank’s chat service, and then apply for a new one, so that they get the new 2.5% rate sooner.

Comparison to the market

The new savings rate is competitive against other banks – it matches that of the Nationwide Flex Regular Saver which also offers 2.5% for £200 per month deposits, also allowing customers to make four penalty-free withdrawals throughout the year.

NatWest and RBS do offer a higher percentage interested at 3.04% but deposits are limited to a maximum of £150 per month. Interest is paid monthly on this account, rather than on the 12 month anniversary.

We understand saving for the future remains important to many customers, and following the recent increase to the interest rate on our 123 Current Account, we’re pleased to offer 123 World customers even more value with our new Regular e-Saver.

Hetal Parmar, head of banking and savings at Santander UK