Lloyds Bank has explained its savings rules after a query from a customer concerned they could be dropped to a lower rate.
The individual got in touch over social media, to ask: “When renewing advantage ISA and advantage saver, does that reset the three withdrawals? I know 4 or more means lower interest.”
The interest rate for both the Club Lloyds Advantage Saver and the Club Lloyds Advantage ISA Saver is set at 3.7%, allowing up to three withdrawals during the 12-month term from when you open the account.
But this drops to 1.05% for either account if you make four or more withdrawals during the 12-month period, a drop of 2.65%.
Lloyds Bank said in response: “Yes, the withdrawal limits will reset when your accounts are renewed.”
You can have up to five of the Advantage Saver accounts, so you can use each of the savings pots to build up funds for different purposes.
You can make withdrawals online or in branch, but if you do a transfer online this can only be to an existing Lloyds Bank account.
Once the 12-month term ends, the account will become a Standard Saver, which currently pays 1.8%.
The Advantage ISA is a flexible ISA, meaning if you make a withdrawal, you can pay money back into the account before the end of the tax year, and this will not count towards your £20,000 ISA allowance.
This account also has a 12-month term, and once this matures, the funds will become an Instant Cash ISA, which is currently at 1.6%.
Savers may also be wondering if rates on their accounts will drop if the base interest rates move again.
Rob Morgan, chief investment analyst at Charles Stanley, said: “We believe a balance of policymakers will decide it is appropriate to take a further 0.25% slice off interest rates from 4.75% to 4.5% at the next meeting in February.
“If anything, the recent tightening in financial conditions, which pose clear downside risks to the UK economic outlook, reinforce the case for BoE easing in the Spring too.”
Mr Morgan encouraged people to look at locking in a high rate. He explained: “This inflation-beating rate of return is likely to narrow over time as the base rate moves lower.
“It may therefore be a good time to consider a fixed rate if you are happy to lock your money away because inflation and interest rate expectations may now fall back a little. A rate of around 4.5% is currently achievable for a one-year fixed term.”
