Santander is a big bank in the UK. Since starting its life over here from sunny Spain in 2004, when acquiring Abbey National, it went on to take over Bradford & Bingley in 2008 and Alliance & Leicester in 2009. Santander soared in popularity thanks to its 123 account and 123 Lite account. We detail the benefits and differences of those accounts below, either of which you will need to open one of Santander's savings accounts.
But before you open one of their current accounts to access these savings accounts, are Santander’s savings products actually any good? Can they help you build your wealth and make your retirement one that offers financial freedom? Knowing the answers to those questions will help you compare them to other types of savings accounts on the market.
Types of Santander savings accounts
Opening one of the below savings accounts should only ever be done when considering the benefits and drawbacks of each alongside your circumstances. So be aware of your needs, circumstances, and investment objectives to ensure that if you open one of these accounts, it helps you work towards your aim.
As of September 2021, Santander’s Regular eSaver account offers a fixed interest rate of 0.50% (gross) for 12 months. Account holders can transfer a maximum of £200 a month into their account from their Santander current account. It is possible to fund the account from another current account outside of Santander. However, Santander reserves the right to change your account into an Everyday Saver at any time should you choose to fund it this way.
Funds can also be withdrawn from a Regular eSaver back into a Santander current account when needed. You can do all that through Santader’s mobile banking app or their website. If you do not make any withdrawals and pay in the maximum amount of £200 a month for 12 months, you should earn £6.50 in interest, depending on the standing order date.
If you have stopped working or are nearing retirement, there are several pros and cons to the Regular eSaver. The main advantage is that it is low risk. Your funds are all but guaranteed not to lose their value. However, they also will not gain much value either. And, as you can only invest up to £2,400 a year, your wealth may not grow as required. That said, the low monthly amount you need to transfer means this product is at least an option for many. You may as well earn some interest rather than let funds languish in a current account not doing anything.
Santander’s eSaver account is similar to its regular eSaver, and you can manage it online or via the Santander app. And, while it only offers 0.05% for 12 months like the regular eSaver, you are not limited to how much you have to save each month. In fact, you can save anything from £1 to £2million in total in this savings account over the 12-month term. An eSaver account also allows you to access your funds instantly and with no penalty charges, which can occur with some savings products.
The pros and cons of this account are common ones characterising many savings accounts while the Bank of England base rate is so low. So even though Santander's eSaver is subsequently exceptionally low at 0.05%, it reflects many other savings rates available. You may find a higher rate of interest if you shop around, however.
That said, customers will undoubtedly be attracted to it as such a large or small amount can be saved within this account type. It means it is accessible for many different income ranges. You should always be able to open this account and save any nest egg you have put aside for the future. However, as of September 2021, inflation is higher than for years, far higher than this account's 0.05% interest rate, making it hard to outrun and thus weakening your purchasing power.
Santander's Everyday Saver could be worth considering if you want to manage your account through a branch or telephone. Managing accounts at a branch is slowly but surely becoming less common. As a result, those who are not tech-savvy may struggle to find accounts that aren’t managed online.
An Everyday Saver allows you to save up to £2million, which means it can appeal to many different people with various savings amounts. If you choose to open a Santander Everyday Saver, you can have instant and flexible access and earn 0.01% a year (gross).
And perhaps therein lies the problem. 0.01% is just a little better than nothing. So while you gain the ability to access or manage this account with the help of branch staff, it does come at a cost. And, with inflation really starting to take hold, making the most of your savings is critical - particularly at the end of your career or beginning of your retirement. Inflation can quickly eat into all your hard-earned money and investment returns. That said, it is good to see a savings account with penalty-free access and with such a high maximum amount.
Fixed Term Bonds
Fixed-term bonds are often a potential option for those happy to lock their money away for a set period. The payoff for that is a higher, agreed interest rate. As of September 2021, Santander offers between 0.1% and 0.2% (gross), depending on the term. The rate you receive will also depend on whether you are a Santander Select customer or a 1|2|3 customer. These bonds allow you to save from £500 to £2million. However, funds cannot be drip-fed into a bond, and no withdrawals or account closures are permitted outside the fixed term agreed upon from the outset.
The benefits of fixed-term bonds are clear. The interest rate you receive is higher than most of Santander's other savings products. You can earn that interest on sizable amounts if you have the funds available and can lock those funds away for a fixed term. That may not be possible if you recently retired or are close to retiring and will need those funds to live on when you no longer receive a salary. However, bonds have long been considered a low-risk investment. As such, you can be confident you will receive your initial investment back at the bond’s maturity date.
What are the benefits of a Santander 123 account?
A Santander 123 account offers several advantages that may make it suitable for your everyday banking.
Firstly, the account offers up to 3% cashback on household bills. Cashback is capped at £5 cashback in each tier. So, for example, you can earn 1% cashback on council tax bills as well as mobile and home phone bills, broadband and TV packages in addition to Santander monthly mortgage payments. Then, you can earn 2% cashback on gas and electricity bills and some Santander insurance products. Finally, this account pays 3% cashback on water bills.
All that can add up to a few hundred pounds a year, though you will have to pay £4 a month for this account. You can also earn 15% cashback on various Retailer Offers and take advantage of any savings products that require a Santander current account. As of September 2021, the account offers 0.3% monthly interest on balances up to £20,000.
What is the difference between Santander 123 and 123 Lite?
There are two differences between the Santander 123 and Santander 123 Lite current accounts. Firstly, with Santander 123, you earn interest; with the 123 Lite account, you do not. For that reason, the monthly fee for each account is different. The Santander 123 costs £4, and the 123 Lite costs just £2. However, both offer the same cashback benefits.
These figures may make you prefer one account over the other. For example, it could be that the interest earned on a current account balance easily makes the £48 a year fee for the account worthwhile. However, as the interest rate on the account is at historical lows (it used to be 1.5%), you may prefer the £24 a year fee, given you get the same cashback bonus. In addition, you will pay many of the bills that qualify for cashback throughout retirement. Therefore, this account can be a good way of reducing your bills overall when you start to rely on your pension.
Santander savings accounts
Santander’s savings account may - at a headline rate anyway - seem to offer pretty miserly looking interest rates. However, they are pretty indicative of the market. Savings rates have been low for years and fell even lower throughout the pandemic. So while Santander's savings accounts may not be outstanding, they could be the best savings account for you - depending on your circumstances.