Opening a savings account: key things to consider

When you deposit funds with a regulated institution, your money is safe in the bank up to an established limit because it benefits from statutory protection. In the UK, savings accounts registered with regulated institutions are protected by the Financial Services Compensation Scheme (FSCS) up to £120,000 per eligible person, per banking group. This statutory protection gives you peace of mind when managing your money across different banks, knowing that a safety net is in place in the unlikely situation that a reputable financial institution fails. Always look for the FSCS or European DGS logo next to the name of the bank or savings account you’re interested in.

Spreading your savings across multiple institutions with separate banking licences is a practical way to manage your funds. If you have a large balance, keeping all your money in one bank could mean a portion of it falls outside the FSCS protection cap. By splitting your funds across different banking groups, you can effectively diversify your deposits while keeping them within the protected limits.

Using a savings platform simplifies this process significantly. Instead of opening and managing multiple accounts directly with different banks, you can use one central hub to distribute your funds. It is important to monitor your total balances, including any interest you earn, to ensure they do not exceed the £120,000 limit. This approach allows you to confidently build your savings portfolio while relying on clear statutory protections.

When you save through Raisin UK, the Financial Services Compensation Scheme protects eligible deposits up to £120,000 per bank and per depositor. This statutory protection gives you peace of mind when managing your money across multiple partner institutions. Raisin UK complies with strict UK financial rules and is authorised and regulated by the FCA (FRN: 813894).

Finding the right account depends on your individual financial goals. Many customers use fixed-term savings accounts to lock in an interest rate for a set period. Alternatively, an easy access account might suit you if you want more flexibility to withdraw your funds. Consider how long you want to put your money away and whether you will need regular access to it. Always check the term length, the specific interest rate, and all terms and conditions before you make a decision. You should also consider inflation risk, as fixed interest rates may not keep pace with rising living costs over time.

Here are the steps to take when opening a savings account:

1. Define your goals. What are you saving for, and how long do you want to put your money away? If you are saving for a particular event or milestone, identify an account that aligns with your timescale. 
2. Decide how much you want to save. Review your budget to see how much you can comfortably deposit. Some accounts require a minimum initial lump sum, while others allow you to start with a smaller amount and add to it over time. You may also want to automate your savings with an account that allows automatic transfers on a set schedule. 
3. Compare account types. Look at the various options available across the market. Pay close attention to the specific interest rates and check whether they are fixed or variable.
4. Read the terms and conditions. Before you apply, always review the details. Make sure you clearly understand any withdrawal restrictions, notice periods, or potential penalties for accessing your money early.
5. Apply and fund your account. Once you select an account, gather your required identification and personal details to complete the application. You can often apply for your chosen account online, but it may also be an option to send an application by post, or complete one in a bank branch. After your application is approved, you can transfer your deposit and begin managing your savings.

Here’s a checklist of the key details you generally need to open a savings account:

• A valid UK residential address.
• Your National Insurance number.
• A linked UK bank account in your name to transfer funds.
• Your personal contact details, including your email and phone number.
• A valid form of identification, if requested during the registration process.

The majority of UK savers won’t pay tax on the savings interest they earn. Thanks to the personal savings allowance (PSA), basic rate taxpayers can earn up to £1,000 per year tax-free. For higher rate (40%) taxpayers, it’s £500. As additional rate taxpayers aren’t eligible for a PSA, all of the interest they earn on their savings is taxable.

However, with UK interest rates rising over recent months, more people could soon find themselves earning enough interest to generate a tax bill. It’s therefore important to review your savings strategy regularly and, if appropriate, consider utilising tax-free savings options like ISAs.

Yes, savings can affect your entitlement to certain means-tested benefits if you have over a certain amount saved. The main benefits that are affected by income and savings include:

• Universal Credit
• Working Tax Credits
• Child Tax Credits
• Council Tax Support
• Jobseekers’ Allowance
• Income Support
• Housing Benefit
• Pension Credit.

If you have less than £6,000 in savings, you’ll be eligible for your full benefit amount. However, if you have savings of between £6,000 and £16,000, you stand to lose some of your benefits. Anyone with more than £16,000 in savings won’t be eligible for any means-tested benefits.

Working out how your savings may affect your benefits isn’t always easy. You can learn more about the savings and benefits rules here or visit gov.uk for further help and advice.

If you do decide to grow your savings, visit the Raisin marketplace to compare competitive online savings accounts from a range of partner banks.

The short answer is no, savings accounts don’t affect your credit score. Because consumer credit reports don’t include savings accounts and no borrowing or debt is involved, savings accounts have no impact on your credit rating. Applying for and opening a savings account will not show up on your credit report, and neither will any deposits or withdrawals you make. However, opening multiple new accounts with separate banks or building societies in a short period of time can affect your credit score.

A credit rating or credit score is essentially a numerical expression based on your credit history which can determine your creditworthiness before a financial institution allows you to take on certain financial responsibilities.

Financial institutions develop your credit rating from consumer credit reports, considering any credit cards, loans (including Hire Purchase Agreements) and unpaid accounts or bankruptcy filings in your name.

The amount of money you should have in savings will depend on what it is you’re saving for and how much you can afford to put away. These are the average amounts for common savings goals:

• Retirement: If you want to enjoy a comfortable retirement, advisors sometimes suggest saving ten times your annual salary. For example, if you earn £28,000 per year, you’d be encouraged to save £280,000 for retirement. In addition to a pension, long-term savings accounts like fixed rate bonds may provide further benefits if you want to boost your retirement pot. You can learn more about saving for retirement here.

• Wedding: The average UK wedding costs close to £22,222*, which gives you a figure to work from depending on your budget and what you want from your special day. If you’d like the flexibility to access your savings at any time, an easy access account might be right for you. You could also consider a notice account, which combines the flexibility of easy access with the more competitive interest rates of a fixed rate bond. Alternatively, if you have a lump sum to invest and aren’t getting married any time soon, a fixed rate bond can be a great way to save for a wedding.
• House deposit: The larger the house deposit you put down, the less you’ll pay back in terms of your mortgage. Having a 15% deposit or more could help you secure the best bank rates. Again, notice accounts and fixed rate bonds pay competitive interest rates that can help you to grow your savings faster. If you’re a first-time buyer, you might also want to consider a Lifetime ISA. Learn more about saving for a mortgage.

Whether you’re saving for something specific or you simply want to build an emergency fund, the earlier you open a savings account the longer your money will have to grow. Discover how to compare savings here or visit the table at the top of this page to start your search.

*https://www.hitched.co.uk/wedding-planning/organising-and-planning/the-average-wedding-cost-in-the-uk-revealed/

You can have as many savings accounts as you like, and it’s something worth considering. For example, you could open a fixed rate bond for long-term savings and have an emergency pot in an easy access account that you can dip into as and when you need to. You might also consider a notice account if you’re saving for something like a big holiday or a new car.

FSCS or deposit-protected savings accounts will cover your money up to £120,000 per person, per banking group, so if you have more than this it’s advisable to spread your money over more than one savings account to ensure you’re covered by the limit.

If you do decide to open multiple accounts to meet different savings goals, using a savings platform can save you time. The application process to open a savings account can take a while, and when opening more than one, this can require you to fill out the same paperwork multiple times for different banks or providers. A savings platform like Raisin removes this hassle as with a single registration, you can fund multiple accounts across different partner banks. This allows you to split your money across verified, protected accounts, access competitive interest rates, and diversify your savings without the admin.

One of the best ways to save for your children or grandchildren is to open a Junior ISA, which will allow you to save up to £9,000 a year tax-free for them. Alternatively, you could choose premium bonds, where management of the account automatically transfers to the child when they turn 16, or you could open a children’s savings account.

Another type of savings account to consider is a fixed rate bond. Fixed rate bond savings accounts might be right for you if you have a lump sum to deposit that you won’t need to access for several years. This type of account might be ideal if you’re saving for your children’s or grandchildren’s education or perhaps a deposit on a house.

When you can withdraw money from your savings account depends on the type of account you have.

As the name suggests, easy access accounts allow you to take money out of your account whenever you want. Some do limit the number of withdrawals you can make in a year though, so it’s important to read the terms and conditions before you sign up.

Notice accounts also allow you access to your cash, but unlike easy access accounts, you can’t take money out whenever you want (at least not without incurring a penalty). Instead, you’ll need to tell the bank that you want to make a withdrawal and then wait for the notice period to pass. Notice periods can vary between 30 days and 90 days, depending on the account.

Fixed rate bonds don’t allow you to take money out of your account. They require you to make a full lump sum deposit when you open the account, which you won’t be able to access until the bond matures, so you should be sure you won’t need access to your funds for the duration of your chosen term. If you want the flexibility to withdraw your money, this probably isn’t the right type of account for you.

To quickly and easily open savings accounts with competitive interest rates, register for a Raisin UK Account today. It’s free to open a savings account through our marketplace and once your application has been approved, you just need to make your deposit and watch your savings grow. Learn how to open a savings account with Raisin.

For more information on how to open a savings account with Raisin UK, read our quick start guide or contact a member of our UK-based customer services team.