What Is a Savings Account?
A savings account is an account held with a bank or building society that pays interest on the money you put into it. Unlike a current account, which is built around everyday spending, a savings account is designed for money you want to set aside and grow over time. You pay money in, it earns interest at an agreed rate, and depending on the type of account you choose, you can either dip into it when you need to or lock it away for a fixed period.
This guide explains what a savings account is, how one works, the main types available in the UK, and what to weigh up before opening one.
What is a Savings Accounts
A savings account is an account held with a bank or building society that pays interest on the money you put into it. Unlike a current account, which is built around everyday spending, a savings account is designed for money you want to set aside and grow over time. You pay money in, it earns interest at an agreed rate, and depending on the type of account you choose, you can either dip into it when you need to or lock it away for a fixed period.
This guide explains what a savings account is, how one works, the main types available in the UK, and what to weigh up before opening one.
What is a Savings Accounts? A Closer Look
A savings account is a cash-based product. Your money is not invested in the stock market, so the balance does not rise and fall with market movements the way an investment can. The provider sets out the interest rate, how often interest is paid, and the rules around paying in and taking money out before you open the account.
Eligible deposits with UK-authorised banks and building societies are protected by the Financial Services Compensation Scheme (FSCS). This means that if a authorised firm fails and cannot return customers’ money, the FSCS will compensate eligible customers up to £120,000 per person, per authorised firm. The limit applies to the total eligible deposits held with that authorised firm, not to each account separately
How Does a Savings Account Work?
The rate a savings account pays may be variable, meaning it can go up or down over time, or fixed, meaning it stays the same for a set period.
Interest is usually calculated daily on the balance in the account and then paid at set intervals, commonly monthly or annually, or at the end of a fixed term. Once interest is added to the account, it becomes part of the balance that future interest is calculated on, which is known as compounding.
Rates are normally shown as AER (Annual Equivalent Rate), which reflects what the rate would be over a year once compounding is taken into account. AER is designed to let you compare accounts on a like-for-like basis, even when they pay interest at different times. How much you can pay in and how easily you can take money out depends on the type of account.
Types of Savings Accounts
There is no single type of savings account. Different accounts are built around different needs, balancing how much access you have to your money against the rate on offer. The main types available in the UK are outlined below.
Easy Access Savings Accounts
Easy access, or instant access, accounts let you pay in and withdraw money without giving noticehenever you need to. They tend to offer a variable rate, and the flexibility can make them a sensible choice for an emergency fund or money you may need at short notice. The trade-off is that the rate may be lower than accounts that ask you to give notice or lock your money away. You can compare our instant access savings accounts to see what is currently on offer.
Limited Access Savings Accounts
Limited access accounts work in a similar way to easy access accounts, but cap the number of withdrawals you can make in a year. In return for that restriction, they often pay a slightly higher rate. They can suit savers who don’t need to dip in regularly and are happy to plan their withdrawals
Notice Accounts
A notice account requires you to give a set period of notice, such as 30, 60 or 90 days, before you can withdraw your money. Because the provider knows in advance when funds may be needed, notice accounts often offer a competitive variable rate. They can work well for savers who can plan ahead but still want some access to their money.
Fixed Term Savings Accounts
Fixed term savings accounts, often called fixed rate bonds, ask you to leave a lump sum untouched for a set period in exchange for a guaranteed rate. Access is usually limited until the term ends. We look at these in more detail in the next section.
Regular Saver Accounts
Regular saver accounts are built around paying in a set amount each month, within limits. They can be a useful way to build a savings habit and are oftencan be offered at an attractive rate, though there is usually a cap on how much you can deposit each month.
Our Regular Saver is designed for customers who want to save regularly each month. Remember to check the mMinimum and maximum monthly deposit limits before applying, as well as anynd eligibility criteria must be met. Please refer to the account Summary Box and Terms and Conditions for full details.
Our Regular Saver works on this basis, letting you pay in a set amount monthly over the term.
Cash ISAs
A Cash ISA is a savings account with a tax-free wrapper. Any interest you earn is exempt from Income Tax, subject to ISA rules and the annual allowance. Cash ISAs come in easy access and fixed rate forms, much like standard savings accounts. You can explore our Cash ISAs if tax-free saving is a priority.
|
Account type |
Access |
Might suit |
|
Easy access |
Withdraw whenever you need to |
An emergency fund or money you may need at short notice |
|
Limited access |
A set number of withdrawals a year |
A higher rate when you don’t need regular access |
|
Notice account |
Withdraw aAfter a set notice period |
Planning ahead while keeping a competitive variable rate |
|
Fixed term bond |
Locked until the term ends |
A lump sum you can leave untouched for a guaranteed rate |
|
Regular saver |
Monthly deposits within set limits; check the product terms for withdrawal conditionsFlexible, within monthly limits |
Building a habit of saving smaller amounts each month |
|
Cash ISA |
Varies (easy access or fixed) |
Earning interest tax-free within the ISA allowance |
What Is a Fixed Term Savings Account?
A fixed term savings account is one where you agree to leave your money in place for a defined period, known as the fixed term, in return for a fixed rate of interest. These accounts are also commonly referred to as fixed rate bonds.
The rate is set when you open the account and does not change during the term, even if rates elsewhere in the market rise or fall. Terms can vary, with one and two-year options being common and longer terms sometimes available. As a general rule,Usually the longer you are willing to commit your money, the more competitive the rate tends to be.
The main trade-off with a fixed term savings account is access. Access rules vary between products. Some fixed-term accounts do not allow withdrawals before the end of the term, while others may allow access subject to specific conditions or a loss of interestMost fixed term accounts either restrict withdrawals or apply a charge if you take money out before the term ends. , sBefore opening an account, make sure you are comfortable leaving your money untouched for the full termo they are best suited to a lump sum you are confident you won’t need during the term. When the account matures, you can usually withdraw the money, move it to another account, or open a new fixed term product. You can view our fixed rate bonds to see the terms we currently have available.
Savings Account vs Current Account
A current account and a savings account do different jobs. A current account handles day-to-day money -— wages in, bills and card payments out -— and usually pays little or no interest. A savings account is for money you set aside to earn interest, which you tend to access less often.
Plenty of people use both: a current account for everyday spending, and savings accounts to grow money towards their goals.
Do You Pay Tax on a Savings Account?
Interest earned on a standard savings account may beis taxable, but whether you actually pay anything depends on your Personal Savings Allowance (PSA). Basic-rate taxpayers can earn £1,000 in savings interest each tax year before paying tax, higher-rate taxpayers £500, and additional-rate taxpayers nothing. Interest is paid gross, meaning nothing is deducted at source, and anything earned above your allowance is taxed at your usual rate of Income Tax.
Cash ISAs work differently. Interest earned within a Ccash ISA is tax-free, subject to ISA rules and the annual allowance, which is £20,000 for the 2026/27 tax year across all the ISAs you hold. For savers whose interest is likely to exceed their PSA, a Cash ISA can be a useful way to shelter some of that interest from tax. Tax treatment depends on your individual circumstances, so it’s worth checking the GOV.UK guidance on tax on savings interest if you’re unsure.
How to Choose a Savings Account
The right savings account depends on your circumstances and what you’re trying to achieve. A few questions can help narrow it down:
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How soon might you need the money? Easy access suits short-notice needs, while a fixed term suits money you can leave alone.
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Are you saving a lump sum or paying in regularly? Bonds are built for lump sums, regular savers for monthly deposits.
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Do you want a fixed or variable rate? A fixed rate gives certainty, while a variable rate can move with the market.
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Is tax a consideration? A Ccash ISA shelters interest from tax within the annual allowance.
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What does the rate look like? Use the AER to compare accounts fairly, and check when interest is paid.
It’s always worth reading the account summary box and terms and conditions before applying, as these set out the rate, access rules, deposit limits and any charges.
Eligibility criteria, age restrictions, residency requirements and product-specific conditions may apply to Monmouthshire Building Society savings accounts. Please read the relevant Summary Box and Terms and Conditions before applying
Savings Accounts at Monmouthshire Building Society
At Monmouthshire Building Society, we offer a range of savings accounts designed to support different saving needs and goals. The availability of products, account features and eligibility requirements may vary. Please review the relevant product information, Summary Box and Terms and Conditions before applying.
At Monmouthshire Building Society, we offer a range of personal savings accounts to suit different goals. These include instant access options such as our Instant Saver and limited access accounts for savers who want a higher rate without daily access. For tax-free saving, we offer a range of Cash ISAs, and for savers with a lump sum to put away, our fixed rate bonds provide a guaranteed returnfixed rate of interest over a set term. We also offer children’s savings accounts for families saving for the next generation.
As a mutual building society, we don’t have shareholders. We’re owned by our members, which means any profit we make is reinvested into the Society to improve our products and service rather than paid out to investors. Established in Newport in 1869, we’ve been helping people save for the future for more than 150 years, and our personal savings accounts are protected by the FSCS up to the applicable limit. Each account has its own summary box and terms and conditions, so it’s worth reading these carefully before deciding which one fits. You can also learn more about us and how we work as a mutual.
Eligibility criteria, age restrictions, residency requirements and product-specific conditions apply to Monmouthshire Building Society savings accounts. Please read the relevant Summary Box and Terms and Conditions before applying
Summary
A savings account is an account held with a bank or building society that pays interest on money you set aside, rather than spend day to day. The main types differ in how much access you have to your money and the rate on offer, from easy access accounts for short-notice needs to fixed term bonds for money you can leave untouched. Interest is usuallycould be taxable through your Personal Savings Allowance, unless you save through a tax-free cash ISA.
To find out more about the savings accounts available at Monmouthshire Building Society, explore our personal savings accounts or our full range of savings products. You can also learn more about us and how we work as a mutual building society.
The information in this guide is intended for general information purposes only and does not constitute financial advice. The suitability of any savings account will depend on your individual circumstances and objectives. Product features, rates, eligibility criteria and tax treatment may change over time.