A guide to savings accounts at Principality

How savings accounts work  

A savings account allows you to set aside money you don't plan to spend immediately.  Savings accounts give you a safe place to keep your money while it earns interest. The interest you earn is based on the interest rate on your account.  

 

There's no limit to how many savings accounts you can have. But some of our savings accounts are limited to one per customer.

 

How many you open is up to you and depends on how you want to save.  

How interest works  

The interest rate on your savings account represents the amount a bank or building society will pay you for saving with them. The money you earn from your savings is called interest.  

 

How interest is set  

The Bank of England (BoE) sets the 'base rate' for the UK. If the base rate goes up, banks and building societies rates will usually increase too.

 

How we set our rates also depends on changes in the market and economic climate. So, we may increase or decrease variable rates outside of changes to the base rate. And when the base rate changes, we won’t necessarily change our own rates.

For savers, higher interest rates mean you earn more interest on your savings. Let's look at an example.  

 

How interest works  

If you have £1,000 in a savings account with a 1.00% fixed interest rate each year, after 12 months you'd have earned £10 in interest. So, your total balance would be £1,010 once your interest is added.  If you'd opened an account with a 5.00% fixed interest rate each year instead, you'd have earned £50, and would have a total of £1,050.  

Savings accounts we offer  

 

Regular saver accounts 

Designed to help you save regularly and flexibly. You don’t have to pay in every month. Just save as and when you want to. Open an account with as little as £1. 

More details
View regular saver accounts

 

Easy access accounts 

Save flexibly with the freedom to access your money when you need it. Choose between unlimited withdrawals, or limited access. Limited access usually gets you a better interest rate. 

More details
View easy access accounts

 

Fixed term bonds  

Lock away a lump sum for a set period, usually between one to five years. And if the bond has a fixed rate, you'll get certainty about the interest rate while your money is in the account.

 
More details
View fixed term bonds

 

Children’s savings accounts  

Start saving for your little one or encourage them to save for themselves with as little as £1. You need to visit us in one of our branches or agencies to open a children’s account.  

More details
View children's accounts

 

Cash ISAs  

Earn tax-free interest on up to £20,000 in an ISA. Remember, interest earned on money in an ISA won’t count towards your personal allowance. We have a range of ISAs. Some offer unlimited withdrawals, some limited, and some don’t allow withdrawals. 

 

Our flexible ISAs let you take money out and replace it before the end of the same tax year. Not all of our ISAs are flexible so if that’s important to you, make sure you check before opening one. 

 

Closing your account or withdrawing money could mean you lose out on interest. Always check the terms and conditions.

More details
View cash ISAs

 

How to choose a savings account  

Ask yourself these questions before you decide how you want to save. 
 

Do you want to be able to access the money you’re saving?  

Some accounts allow you to withdraw money as often as you like. Others have limits on how often you can take money out. And some don't allow withdrawals until the end of the term.   
 

How long do you want to put your money away for?  

Some accounts require you to keep the account open for a set amount of time before you withdraw your money. So, think carefully about how long you're happy to set your money aside for.  
  

Can you commit to regular payments?  

With some accounts, you agree to pay in a minimum amount on a regular basis.  

 

Other things to think about  

The below might apply to savings accounts offered by most banks or building societies. Always check the terms and conditions:  

• you might have to commit to regular monthly payments  
• your money may be moved to a different type of account once the term of the account ends   
• making withdrawals or not making regular payments might reduce your interest rate  

Will you pay tax on your savings?  

You can save up to £20,000 in an ISA in the 2024/25 tax year, tax-free. The interest you earn will be tax-free, and won’t count towards your personal allowance. The rules on ISAs can change so it’s worth keeping up-to-date on the latest rules and how they impact your savings.

 

The interest you earn on any money you have in a savings account that isn’t an ISA could be subject to tax.

 

Most people can earn some interest from their savings without paying tax. Your Personal Savings Allowance (PSA) is the amount you can earn in interest before you’re taxed.  

 

About your Personal Savings Allowance  

How much your PSA is depends on the rate of income tax you pay.  

Your income tax band	How much you can earn in interest before it’s taxed
Basic rate (20%)	£1,000
Higher rate (40%)	£500
Additional rate (45%)	£0 (No PSA)

The Government website has more information about your personal savings allowance

 

The information in this guide was accurate when published.    

 

*Tax-free means the interest you earn isn’t subject to UK Income Tax and Capital Gains Tax. Tax treatment depends on your individual circumstances and could change in future.