Notice Accounts: How to Save
Notice accounts are savings accounts offered by banks that require advance notice before the day you want to withdraw.
If you’re an organised person and a bit of a planner, you might be able to make your money work harder than most. If you put some of your cash savings into a notice account, you could get a better interest rate. The trade-off is that you won’t be able to get your hands on your money straight away if you suddenly need it, so planning is everything.
What is a notice savings account?
A notice account is a type of savings account that requires you to notify your provider ahead of time if you want to make a withdrawal and specify the amount. How much notice is required will vary – you can typically expect periods of 30, 35, 45, 60, 90, 120 or 180 days — and as a rule of thumb, the longer the notice period, the better rate you will get.
Pros and cons of notice accounts
The main advantage is that you may get a better rate than you could earn on instantly accessible cash savings without locking your money up for too long a time.
Another advantage is that your savings are safe in an account run by a UK-regulated provider up to the value of £85,000, thanks to the Financial Services Compensation Scheme.
Minimum and maximum savings amounts will vary by provider, and different accounts will make interest payments at different intervals (monthly, half-yearly or yearly). Some will let you choose whether interest is paid away or compounded, meaning you withdraw the interest to boost your income, or you keep it in your account to earn more interest.
The trade-off, of course, is the lack of flexibility. You will need to plan for any withdrawals. Interest rates on notice accounts are usually variable rather than fixed, so you'll want to keep an eye on things and switch if your rate drops.
You may be able to get early access to your money, but there likely will be a penalty, such as a certain number of days of lost interest. There may also be limits on how many withdrawals you can make each year, so check the small print before you open an account. You can usually make further additions to your savings account once it is open.
A notice account could be a useful place to put cash you're saving toward a particular goal – for example, a house purchase or holiday, when you’ll know exactly when you’ll need the money and how much. If you’re using a notice account for general savings without a specific purpose, you should probably keep at least some cash in an easy-access account too for emergencies.
How to choose the best notice account
When choosing a notice account, think realistically about the length of notice period you are comfortable with and then find the best deal available in that range.
Consider how you will open and manage the account. Ask yourself:
- Can it be done online?
- How do you give notice to make a withdrawal, and is it an easy or lengthy process?
- How does the provider send you the money? Some providers still post you a cheque when you make a withdrawal, which will slow things down.
- Will you need the option to withdraw your money without notice? Are you willing to give up some interest to do this?
How to open a notice account
Some providers require you to open notice accounts in branch or by post, but plenty allow you to do it online.
Hannah is an award-winning journalist with a background in the trade press. She writes about finance, asset management and business for Shares, Citywire, FE Trustnet, and interactive investor. Read more