If you need somewhere you can be confident your money will be safe, a Post Office savings account may be a good bet. They offer a wide range of products with competitive rates, some purely online while others you can access in-store. The Post Office can offer types of savings accounts as the Bank of Ireland UK, which has offices in London and Bristol, runs a range of bank services in the Post Office's branches and online.
Some Post Office savings accounts are available with an online service only, and some are available in branches. Let’s explore each type.
What savings accounts does the Post Office offer?
As of November 2023, the following Post Office savings accounts are on offer:
- Instant Saver - offering 4.10% gross/AER variable for the first 12 months.
- Growth Bond - offering up to 5.00% gross/ AER fixed.
- Easy Access cash ISA - offering 3.80% tax-free/AER variable.
- Fixed-rate cash ISA - offering up to 4.90% tax-free gross/AER fixed.
- Junior ISA - offering unlimited tax-free growth.
Let's explore these in more detail.
The Post Office Instant Saver
The 4.10% interest rate available on the Post Office Instant Saver is a little lower than that of the best instant savers in the current market and includes a gross fixed bonus of 2.55%. You only get the 2.55% gross fixed bonus for the first 12 months. After that, you'll earn the basic underlying rate of 1.55%.
Let’s break this down in an example:
- If you open the account with a deposit of £1,000 and add £250 every month, you’ll have £4,098.80 at the end of the first year with the boosted 4.10% interest rate.
- At the end of a second year, when the rate reverts to the standard 1.55%, assuming you continue to deposit £250 every month and make no withdrawals, your account will be worth a total of £7,184.19.
This means that you’ll accumulate £184.19 total interest over two years. Any accumulated interest is paid annually in March.
However, there’s nothing to stop you from moving your money after the first year if you can get a better rate elsewhere. Interest is calculated daily, so if you make other deposits in that year, the amount of interest on those savings would be pro-rated up to your year’s anniversary - the interest payment date.
The Instant Saver account offers unlimited free withdrawals, and it has its own ATM card, which you can use to transfer money at ATMs, too. You can open an account with £100 and make other deposits as often as you like. It’s possible to manage it through an online account, but you can also manage funds in branches, by telephone or by post.
Pros of Post Office Instant Saver
The flexibility of this savings account from the Post Office means you can mix the ease of a current account, yet still earn a return. Having an ATM card makes for easy access to your savings, too.
Cons of Post Office Instant Saver
The rate drops off significantly after 12 months. You'll likely have to move it to other savings accounts at that point, which is easily done - just more paperwork! The rate isn’t market-leading either and, as of November 2023, is below inflation.
The Post Office Growth Bond
A Post Office growth bond will give you a fixed interest rate for the time you put your money away. You can purchase one of these bonds with anything from £500 to £1 million. You will earn 5% gross/AER fixed each year you lock your money away. You can open a 1, 2 or 3-year bond.
Interest is calculated daily, and the fixed-rate bonds are paid at a fixed rate annually. In practice, that means for the 1-year bond, the interest is paid on maturity. For the other fixed-rate bonds, the 2 or 3-year products, interest is paid on the anniversary of opening the account. For the 2 and 3-year bonds, you benefit from compound interest. You cannot make any additional deposits after you have opened your account.
A Growth Bond may be suitable for you if you are interested in knowing exactly how much you'll earn on your savings and want to put in a lump sum between £500 and £1million. You also need to be happy to leave your money for the entirety of the fixed term you pick.
Pros of the Post Office Growth Bond
These bonds have a higher interest rate than other savings products the Post Office offers. Plus, as you can save up to £1million, it’s possible to earn interest on a much larger amount through these bonds than with other saving accounts. For instance, the Instant Saver account has an initial interest rate of 4.70% gross/AER variable, and sees a reduction to 1.55% after 12 months, making these bonds a compelling choice if you are seeking greater financial growth.
Cons of the Post Office Growth Bond
Locking your money away, especially if it’s a large amount, adds a certain amount of risk should you need to access it for any reason. Plus, with this product, you don’t know how much the penalty will be for withdrawal. The Post Office states, “Any account closure we allow during the term or outside of any notice period may be subject to a breakage charge. The way the breakage charge is calculated will be fully explained to you at the time of your request, and could mean that you get back less than you originally deposited.” Finally, you cannot add funds or switch to another product until the end of the fixed term.
The Post Office Easy Access Cash ISA
The Post Office’s Easy Access cash ISA pays a respectable 3.8% return, but as of November 2023, this is well below inflation. While it offers the same ISA benefits, such as tax advantages or using up the entire annual allowance of £20,000, you can also open it with just £100. Being easy access means you can make a withdrawal without paying a penalty. However, to do so, you must call or write to them to confirm you want to take money out. You cannot do that over the counter at a branch even if you have all the correct account details. They will send you a cheque or pay your money into the account that you linked to your ISA during your application. Payments into bank accounts take up to three working days to clear.
Pros of the Post Office Easy Access Cash ISA
Like all ISAs, you pay no tax on the interest you earn.
Cons of the Post Office Easy Access Cash ISA
Again, like all ISAs, once you have withdrawn your money, it cannot be replaced within this ISA without affecting your annual ISA allowance. With this specific ISA, the rate of return is relatively low and definitely not inflation-beating.
The Post Office Fixed-Rate cash ISA
The Post Office’s Fixed Rate cash ISA is a bit like a bond, but with the added incentive that its interest is tax-free. Currently (November 2023), the Post Office’s Fixed Rate cash ISA pays 4.90% tax-free/AER fixed for a one-year account and 4.90% tax-free/AER fixed for two years. The interest rate of your Fixed Rate ISA is fixed until maturity. You can invest £500 from the start, but you can't request access to your savings until maturity. No further deposits or transfers are allowed into this account once you have opened it and made your deposit.
Pros of the Post Office Fixed-Rate Cash ISA
You get a tax-free savings account with a known amount rate of return right from the start.
Cons of the Post Office Fixed-Rate Cash ISA
Penalties for early withdrawals always have to be considered before opening any savings accounts. With this specific Post Office account, early closure or transfer for a term of 1 year or shorter, the charge will equal 90 days loss of interest. For a term longer than one year but shorter than five years, the charge will be 180 days loss of interest. If the interest you've earned doesn't cover this, you may get back less than you paid in.
The Post Office Junior ISA
If you want to save money for a child or grandchild, then this product is one way to do so. You can’t open it as a grandparent, but you can transfer in if a parent opens it. It’s a stocks and shares ISA and, therefore, offers tax-efficient savings. One of the big benefits of these types of ISA is that it can invest in stocks as the name suggests, but also bonds and other funds, all of which offer unlimited growth potential. As a result, these types of accounts are a medium to long-term investment. So, when you make a transfer, you must be prepared to invest the money for ten years or more.
You can open it with a lump sum of £100 or from £10 per month. You can even transfer in any existing Child Trust Funds.
Junior ISAs are likely not right for you if you want your child to have access to the money before they turn 18 or if you want a guaranteed return on your investment. It's also important to note that it is subject to an annual management fee of 1.5%, which could eat into the returns and the final value of the account’s balance.
Pros of the Post Office Junior ISA
These products, in general, are a great way to put money away for a child or grandchild who inherently has a long-term investment timeline, and this one does not need a large amount of money to open.
Cons of the Post Office Junior ISA
The annual management fee can reduce returns, which can have a large compound effect over time. Not being able to open it as a grandparent is also frustrating, though it’s easy to pay into it once it’s opened.
Post Office online savings accounts
The Post Office also offers three types of online savings accounts:
- Online Saver - offering 4.90% gross/AER variable for the first 12 months.
- Online ISA - offering 4.90% tax-free/AER variable rate, which includes 3.35%. tax-free/AER fixed bonus for the first 12 months.
- Online Bond - offering from 5.35% gross/AER fixed for three years.
They vary in many ways, the details of which we explore below.
The Post Office Online Saver
The Post Office’s online saver account has some notable features that set it apart from other savings accounts available elsewhere. Firstly, it allows you to make as many deposits and withdrawals as you like without penalties. That's in stark comparison to many savings accounts, which usually drop their rate dramatically (often to nothing) in the months you withdraw from your account. It’s also got a low opening balance to open an account at just £1. You must be over 18, and you’ll be asked to confirm you are a UK resident with a UK bank account or building society account - so you'll need an account number and sort code.
Pros of the Post Office Online Saver
Setting up one of these accounts is easy, and there are no penalties for withdrawals.
Cons of the Post Office Online Saver
Your rate drops to just 1.55% after 12 months, so you’ll likely have to transfer funds to other accounts again at that point.
The Post Office Online ISA
Post Office cash ISAs offer account holders the ability to choose the rate they receive from several predetermined options, including:
- Easy access Issue 40: 4.90% tax-free/AER variable rate, which includes a 3.35% tax-free/AER fixed bonus for the first 12 months. After 12 months, this changes to 1.55% tax-free/AER variable.
- Fixed Rate Issue 42, 1 year: 5.45% tax-free/AER fixed.
- Fixed Rate Issue 42, 1 year: 5.35% tax-free/AER fixed.
You can open an Online ISA with the Post Office for £100. The minimum amount you can withdraw from this account is £10. Again, you need to confirm that you are a UK resident with a bank account number and sort code, but you only have to be 16 or over to apply. The Post Office will also require your National Insurance number when you apply.
Pros of the Post Office Online ISA
The same advantages of ISAs are available with the Post Office's online version: your savings will earn tax-free interest.
Cons of the Post Office Online ISA
The interest rate offered on the easy access account is almost equal to inflation, meaning you don’t gain anything in real terms. As it's not a stocks and shares ISA, there is no possibility of trading assets to make unlimited gains.
The Post Office Online Bond
A Post Office Online Bond could be suitable if you are happy to lock away a certain amount of money for a specific period. You can open a 1, 2 or 3-year bond. All of these durations are available with interest paid annually or monthly. The interest and service that these products offer is currently:
- 1-year fixed term - Annual option 5.50% gross/AER fixed.
- 1-year fixed term - Monthly option 5.36% gross/5.50% AER fixed.
- 2-year fixed term - Annual option 5.40% gross/AER fixed.
- 2-year fixed term - Monthly option 5.27% gross/5.40% AER fixed.
- 3-year fixed term - Annual option 5.35% gross/AER fixed.
- 3-year fixed term - Monthly option 5.22% gross/5.35% AER fixed.
Pros of the Post Office Online Bond
The benefit of a bond is that you know exactly what your return will be, reducing the complexity of future retirement planning.
Cons of the Post Office Online Bond
You may want to access your funds before the bond matures. Doing so incurs a penalty, and you may not get back the original value of your investment.
What are the benefits of banking online?
Managing your money on a screen, through the provider website, from the comfort of your home is a massive time-saver. If you live outside of a large city like London, it can be a big help if you have limited options of branches to visit. Managing your accounts through a website link rather than over the phone makes it easier to stay on top of your returns, too - particularly if you have several accounts with various providers.
When opening Post Office savings accounts, it's crucial to provide accurate personal details for a seamless and secure account setup. Logging on is easy once you have signed up. All you need is your User ID, date of birth and your 6-digit security number provided with your new product documentation.
Post Office savings account options
Even though you may not immediately think that the Post Office would sit amongst the likes of Barclays or Natwest, its range of savings accounts offered by the Bank of Ireland is arguably as wide-ranging as any other range provided by bank institutions or financial services providers. Whether they are the right provider for you comes down to the service the Post Office gives you and how the specific products are structured.