Regular savers & lump sum combos vs fixed rates.
Regular savers are great for new savings you’re adding to each month, especially as you can now get up to 7% via them. But what do you do about existing savings?
This article will take you through a trick to boost your return on easy access savings using regular savings, and look at how the method compares to sticking your money in a longer-term fix.
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How the savings drip feed method works
It’s a very simple hack. If you’ve got a lump sum of savings you’ll be limited in how much you can put into the high-paying regular savers. But the rates you’ll get in accounts without those restrictions will be far lower.
But it’s not an either/or decision. You can have both and boost your overall return as a result.
To start you’d put your initial savings into the best easy access you can find. Then month by month you’d move as much as you can into a regular saver, or even multiple regular savers. This is the drip feed method.
So you’ll still earn the best rate you can on your money by using the regular savers, but not lose out on additional interest while you’re waiting to deposit it.
With most regular savers your account will close after 12 months. When that happens you’ll get all your interest payments, which you can add to your easy-access account while you open up new regular savers and start again.
If regular savers are completely new to you, then I’d recommend you read my article explaining how regular savers work.
Drip feeding vs easy access
Here are a few examples of the difference drip feeding makes when compared to just leaving your money in an easy-access account.
Obviously rates can and do change regularly, so the following are illustrative. On that basis I’ve calculated the figures using one of the better paying easy access accounts at the time of writing (2.81% from Al Rayan).
You could put some money in higher-paying accounts with restrictions (limited access or limited balances) and earn more from those, but it’d be too complicated for the purposes of this article. You can check out the best paying rates across all types of accounts here.
Drip feed £3,600
Let’s start with a smaller amount of savings, say £3,600. If you put that in the best buy easy-access account right now you’ll earn £101.16 in interest after a year.
If you kept that cash in a 0% paying account instead but added £300 a month into the best regular saver (7% from First Direct), you’ll get £135 over the year. So that’s a better place for your money.
But use the drip feed method from the best buy easy access account and you’d still earn that £135 from First Direct, but get another £47 on top, totalling £192! That’s an average rate of around 5.33%.
| Regular Saver | Interest rate | Max monthly deposit | Regular Saver interest | Additional Easy access interest via drip feed (2.81%) |
| First Direct | 7% | £300.00 | £135.00 | £47.00 |
Drip feed £12,000
The more money you have upfront, the more regular savers you’ll need. Let’s assume you’ve got a larger lump sum of £12,000. Put that in the same 2.81% paying easy-access account right now and over a year you’ll earn £337 in interest.
Alternatively, if you saved the same cash across the top four regular saver accounts, split into a total payment of £1,000 each month, you’d get a total return of £370 at the end of the year. So the difference is smaller, but still worth considering.
But if you drip-feed it into those top four regular savers, you’ll earn a total of £525. That’s an extra £155 and offers the equivalent of 4.375% AER. This table breaks each account down for you.
| Regular Saver | Interest rate | Max monthly deposit | Regular Saver interest | Additional Easy access interest via drip feed (2.81%) |
| First Direct | 7% | £300.00 | £135.00 | £47.00 |
| Club Lloyds | 5.25% | £400.00 | £135.00 | £62.00 |
| Natwest | 5.12% | £150.00 | £50.00 | £23.00 |
| RBS | 5.12% | £150.00 | £50.00 | £23.00 |
| TOTAL INTEREST | £370.00 | £155.00 |
Drip feed £24,000
You can take it even further – though there’s a bit more admin involved. This example shows you how much you’d get with £24,000 saved up and put in an easy access account, then drip feed to eight high-paying regular savers.
| Regular Saver | Interest rate | Max monthly deposit | Regular Saver interest | Additional Easy access interest via drip feed (2.81%) |
| First Direct | 7% | £300.00 | £135.00 | £47.00 |
| Club Lloyds | 5.25% | £400.00 | £135.00 | £62.00 |
| Natwest | 5.12% | £150.00 | £50.00 | £23.00 |
| RBS | 5.12% | £150.00 | £50.00 | £23.00 |
| HSBC | 5% | £250.00 | £81.00 | £39.00 |
| Halifax | 4.50% | £250.00 | £73.00 | £39.00 |
| Lloyds | 4.50% | £250.00 | £73.00 | £39.00 |
| BoS | 4.50% | £250.00 | £73.00 | £39.00 |
| TOTAL INTEREST | £670.00 | £311.00 |
This would give you a total of £981 interest, which is the equivalent of 4.09% over the year. You’ll end up with £307 more than just leaving it in an easy-access account.
Drip feeding vs fixed rates
Before you get too excited about the extra money you can make from drip-feeding into regular savers, it’s worth having a look at what you’d get if you just stuck the lump sum in a fixed-rate account.
This table assumes you’re happy to lock the money away for one year at a rate of 4.32% (the best option at the time of writing).
| Lump sum | Total drip feed interest | Total one-year fixed interest | Difference |
| £3,600 | £192 | £156 | £36 |
| £12,000 | £525 | £518 | £7 |
| £24,000 | £981 | £1037 | -£56 |
As you can see the margins are pretty small. And at a certain point you’ll actually earn less by drip feeding from easy access to regular savers. Even when there is a profit, the difference is marginal.
But that’s not the end of the story. Recently, one-year fixed rates have been falling while regular saver and easy-access account rates have been rising. If this continues the gap could well increase and become more appealing.
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The importance of access
Whether you go for drip-feeding money or just whacking it into a fixed rate, you need to think about if you’ll need access to the cash at any point.
Fixes will completely lock the money away so you can’t get to it without a penalty (probably the loss of all the interest). But drip-feeding isn’t risk free either. Most, though not all, regular savers, will also lock your money away for a year.
So if you will need to access the bulk of the cash during the year then it makes sense to just keep it in fully easy access accounts.
But the drip feed method does offer you some flexibility over the fixed accounts. You’ll have access to the money while it’s in the easy access account, and you can also reduce how much you pay into regular savers month by month. So if plans change you can adapt accordingly.
Drip feed admin
There are few things to be aware of before you start.
First up, the best regular savers all require current accounts with those banks, and you’re usually limited to just one of the regular savers per person.
That’s not a problem as you can open up new accounts for those you don’t already bank with. However, each new application will be subject to a credit check, which will appear on your credit file. And it can be prudent to space out applications over a few months. So if you are planning on opening multiple current accounts to get access to multiple regular savers, this could take a while.
There’s also the ongoing movement of money to consider. This should be easy enough to automate, simply using standing orders to move the money from your easy-access account over to the regular savers.
Just make sure you aren’t required to have the standing order come out of your current acount. If so, you can still set it up to happen, it’s just an extra step.
Is drip-feeding worth it?
Andy’s Analysis
If you are happy to fix your savings and if rates continue to be comparable on average, then I wouldn’t bother drip feeding.
But I think this is a great trick to try if you can’t commit to locking your money away in a fix. You’ll get similar amounts of interest but with some added flexibility. Just don’t get overwhelmed by the admin.
Perhaps though it’s best to use it as part of a mixed strategy. Put some in a fix and some in an easy-access, which you then drip-feed across to those top regular savers.
I am not amazing at finance but I struggle to see the benefit of this now instant access savings are at higher rates. You can get instant access between 5-5.w% as far as I can see and the top regular savings is 8%.
From the maths it suggests that you essentially get 4% from that 8% saver which is less than the instant access top rate so is it best to just keep it all in instant access?
Love the website and videos by the way
Does this really work? The way I see it is this.
Firstly you can only pay in a set amount per month eg. £500 per month. Next, only your first payment gets 7%. Payment 2 gets 11/12x 7%, payment 3 gets 10/12 x7% and so on, so in final month you are only getting effectively £2.91 on your last £500. So on average you are probably getting about 4.8% on the total. Then it’s only valid for 1 year. If you don’t withdraw in time, you’ll be locked into a month at prob 1% which negates any benefits. But like you said, some people may prefer this method, and also not mind the admin and having multiple banking apps to check up on their savings.
You say “There’s also the ongoing movement of money to consider. This should be easy enough to automate, simply using standing orders to move the money from your easy-access account over to the regular savers.” However, the best paying easy-access savings accounts don’t usually allow you to set up standing orders out of them. At least that’s my experience – can you recommend a high paying easy-access savings account that does allow you to set up outgoing standing orders?