It can be tricky to find the best savings account for your needs, especially if you have specific financial goals.
We reveal the best options for the over 60s, from Individual Savings Accounts (ISAs) to fixed-rate bonds.
What is a savings account?
When you turn 60, preparing for retirement should be a top priority.
This includes maximising your money in your remaining working years, which the right savings account can help with.
A savings account is a deposit account that often offers a better interest rate than a standard current account.
According to Money.co.uk, 23% of UK savers don’t check the interest rate before opening an account.
With savings accounts, interest rates may be higher if more restrictions apply.
For example, you might get a competitive rate on an account that only lets you withdraw penalty-free once a year.
This is important to consider. You want to be able to access your cash in an emergency, but also, you should make sure your money can grow in value.
And while your interest is taxable, in most cases, this only applies over a certain threshold.
If you’re concerned about your tax liability, it’s worth considering an Individual Savings Account (ISA), which is tax-free.
You can save up to £20,000 each year in most ISAs, and you can also use other savings accounts for any savings above that limit.
What are the best savings accounts for over 60s?
We’ll now reveal the best savings accounts for over 60s, as well as the pros and cons.
Instant access accounts
Instant access accounts allow deposits and withdrawals without any restrictions.
One of the advantages of these accounts is that you may be able to access some benefits and bonuses if you meet the criteria, plus you should never be charged for withdrawing money.
However, the flexibility of instant access savings accounts means that they tend to have lower interest rates compared to limited access accounts.
Limited access accounts
With these accounts, withdrawals are limited, so it’s ideal for savers who don’t need instant access to their cash.
One of the benefits of limited access accounts is that they usually offer more competitive rates, so you’ll tend to earn more interest than you would with an instant access account.
A key disadvantage is that withdrawal fees will apply if you need to get withdraw your money within a certain time period.
Regular savings accounts
These accounts pay interest yearly and are ideal for those who want to save a certain amount every month.
The best regular savings accounts offer some of the top rates of around 7.5% at the time of writing.
However, some regular savings accounts limit the number of withdrawals you can make and require you to deposit money every month, while the introductory interest rate usually only lasts a year.
These accounts require a notice period before withdrawal, which is usually between 30 and 180 days.
Similar to a limited access account, a notice account can allow you to access some of the best interest rates.
One disadvantage of notice accounts is that you cannot easily and quickly access your cash in an emergency.
Fixed-rate savings accounts
Also known as fixed-rate bonds, these accounts are suitable for those who want to lock their money away for a set amount of time.
With options from six months to five years and competitive interest rates, this type of account could be ideal ahead of retirement.
Similar to limited access and notice accounts, fixed-rate bonds have less flexibility and accessibility.
These are tax-free with the limit for most ISAs of up to £20,000 every year.
ISAs allow you to minimise your tax burden. There are many different ISA types, and these can be flexible.
However, you can’t save more than £20,000 combined across any open ISAs, so if your savings exceed this amount in a tax year, you’ll need another savings account.
Finding the savings account for you
The best savings account for you will depend on several factors.
It's worth seeking the option that best aligns with your circumstances and financial goals you’re hoping to achieve.
Do you want quick access to your cash? Are you hoping to put away some savings for a while and earn interest?
Asking the below questions can also help you choose the best savings account for you.
What restrictions are placed on this account, and do they suit me?
What benefits will I get from this account?
Do I need a minimum balance to open this account?
Does this bank have good customer service?
How do I feel about any notice periods?
Do I want quick access to my money (without penalty) if necessary?
You should also be aware of how your Personal Savings Allowance could impact you.
If you’re likely to earn over a certain amount in savings interest (£1,000 if you’re a basic rate taxpayer, £500 for higher rate taxpayers), you’ll have to pay tax on this.
For more guidance on managing your finances and making the most of your savings in your 60s, connect with an FCA-regulated financial adviser via Unbiased.