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BANK and BUILDING SOCIETY
An account which pays out interest monthly. The rate of interest depends on which type of account the money is invested in. Many societies allow monthly income based on any type of account. But it is best to use the ones which pay the highest interest which are currently or Bank and Building Society Fixed Term Account. If you need to spend your interest, a monthly income account is a convenient way to have it paid to you. Good interest rates are also available from some Bank and Building Society Postal or Phone Accounts.
Who can invest Anyone.
How worthwhile Convenient if you want a monthly income. Choose the society which gives the highest return. Compare the rates for monthly income which are usually lower than the equivalent yearly rates. Compare with National Savings Fixed Income Savings Bond.
Minimum Usually £5,000 but £1 or £1,000 or £2,500 also available. Often higher than the minimum for the particular type of account where interest is paid yearly or half-yearly.
Maximum None.
Suitable Lump sums.
Money back Same conditions as for yearly or half-yearly interest payments. With Bank and Building Society Instant Access Account or Bank and Building Society Postal Account usually 1 month's notice required to close account (i.e. give notice during January receive the money 1 March).
Interest Variable unless your monthly income is based on a Bank and Building Society Fixed Term Share or Bank and Building Society Escalator Bond with a fixed rate. Rate slightly less than for half-yearly or yearly interest. It should be worth the same because it is paid monthly but some societies pay less than an equivalent rate.
Interest paid Monthly by cheque, direct to a bank account or into another account at the society. Interest cannot be accumulated. Check the society you choose pays the interest where you want. Interest until the end of the first month is sent out with the following month's interest.
Tax 20% tax is deducted from the interest. Non-taxpayers can reclaim the tax from the Inland Revenue (or have interest paid with no deduction). Higher rate taxpayers have to pay extra tax; basic rate taxpayers don't.
Fees to pay None.
Passbook Or certificate issued. Some societies send statements half-yearly or yearly.
Children Unsuitable.
Risk 90% compensation scheme on the first £20,000 (100% on first £2,000, 90% on the next £33,000 from 1 December 2001) for each investor in each bank or building society licensed by the Financial Services Authority.
How to invest See surveys in the press. Subscribe to Money£acts which includes a table of rates updated each month. Check adverts for latest offers. Check that the company you choose stays in the list of best rates. Some have started to cut rates.
Where from Best rates at : Click here for rates and phone numbers.
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Last updated 24 November 2004