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Lloyds Bank offers a one-year savings deal paying 1% with a huge catch

Savers used to low rates from Britain’s biggest banks appear to have a chink of light today, at first glance anyway.

Lloyds Bank has unveiled a one-year fixed-rate savings deal which pays one per cent, the first time a deal of this length from Britain’s big four open to non-customers has paid that much since December 2018.

As well as the – in current market conditions – heady interest rate, its new bond also allows applicants to make additional deposits for the first 10 days after opening one.

However, in return for the one per cent rate, Lloyds’ offer comes with an enormous, six-figure catch.

Locked out: Lloyds Bank has unveiled a 1-year savings deal which pays 1% interest… on balances of £100,000

This is because the bond can only be opened with a minimum deposit of £100,000. After a year, savers would receive £1,000 in interest.

The sum is also £15,000 more than the £85,000 deposit protection limit under the Financial Services Compensation Scheme.

This means if solo savers deposited the minimum amount in the account, £15,000 of their money would not be protected in the unlikely event that Lloyds Bank went bust in the next 12 months.

The account can only be opened online and those who can’t meet the strict opening requirements would have to make do with a two-year fixed-rate bond or Isa from Lloyds paying a lower rate of 0.75 per cent.

The cash Isa can be opened with £3,000 and accepts transfers, and the bond £2,000. 

The Isa can be opened online, in branch, in app or by phone, while both online and in-branch versions of the two-year bond are available.

That Lloyds has such a high deposit requirement on an account which still pays 0.65 percentage points – or £650 a year in interest on balances of £100,000 – less than the top one-year fixed-rate account offered by Atom Bank, highlights how hard it is for savers to obtain a decent rate from the UK’s biggest high street banks.

NatWest was the last of the big four, which also includes Barclays and HSBC, to offer an account open to everyone which paid 1 per cent, when its one-year fixed-term savings account paid 1 per cent on balances between £500 and £50,000 and 1.1 per cent above that.

That was available between 14 November and 18 December 2018.

Last year, between 10 January and 6 March, HSBC offered a one-year fixed-term account paying 1.6 per cent, but it was only open to customers who held a current account or non-Isa savings account with HSBC.

While that account would be near the top of the best buy tables now, at the time the best fixed-rate bonds were still paying upwards of 2 per cent interest.

Currently, HSBC offers a one-year fixed-rate savings deal paying 0.85 per cent on balances above £1,000, a two-year paying 1 per cent, and a three-year paying 1.1 per cent.

Those accounts are open only to HSBC’s current account customers, and can be opened online, in branch or by phone.

One-year savings deals from the big banks 
Bank  Best 1-year deal available   Minimum deposit requirement Interest on £100,000 
Lloyds 1% £100,000  £1,000 
Barclays  0.75%  £1  £750 
HSBC  0.85%  £2,000  £850 
NatWest  0.65% (0.85% on deposits
over £50,000) 
£500  £850 
Atom Bank
(best available rate) 
1.65%  £50  £1,650 

NatWest’s 130th issue of its one-year fixed-rate savings account currently pays 0.65 per cent on balances below £50,000, and 0.85 per cent above that. 

Issue 131 of its two-year deal pays 0.7 per cent on deposits of £50,000 or less, and 0.85 per cent above £50,000.

Both accounts can be opened online, in branch or app, and NatWest’s fixed-rate Isas pay the same rate.

Finally, Barclays’ one-year fixed-rate savings deal pays 0.65 per cent on balances of £500 or more, while its one-year flexible Isa pays a slightly higher 0.75 per cent, and lets you make three withdrawals of up to 10 per cent of your opening balances over the 12 month term.

It can be opened with £1 and accepts transfers, and both can be opened online, in branch or by phone.

According to This is Money’s tables, there are currently 18 one-year deals which pay at least 1.5 per cent, higher than the latest inflation figures and a third more than Lloyds’ deal.

And not one of them requires you to stump up nearly half the price of an average UK house in order to open an account.


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