Are you an NRI living in the UK? Confused about which type of account to choose to build your savings? Worry not, here in this post, we outline the different choices available, how they work and help you make the right choice to build your corpus.
UK Savings Market Explained
The savings market in the UK is flooded with several different types of accounts. Choosing the right one that suits your needs and fits your portfolio can be a major challenge. There are several factors to consider like – whether you have to pay tax on the interest or not, whether you need access to the money, lock-in times and more.
Here, in this guide, you can know about the different types of accounts available to NRIs residing in the UK, helping you choose the right one that suits your needs.
- Instant Access Accounts
As the name implies, these accounts allow you to withdraw funds immediately, helping you meet emergency cash needs. This account is ideal for storing your emergency funds. Nowadays, instant access accounts come with an ATM card with a facility to withdraw funds 24 hours a day. Though there is a limit on the amount you can withdraw from a cash machine, it will be enough to meet financial emergencies.
- Notice Accounts
In the UK, you are likely to earn higher interest rates if you agree to lock away your funds for a specific period. The trade-off here is that you cannot access your money for a particular time, and in return, the bank offers you higher interest rates.
In a notice account, you can access your money, only by providing notice of withdrawal to your bank. For instance, if a notice account has a 90-day notice period, then you can access your funds only after three months. If you wish to get your funds before that, you might be charged with a penalty.
- Cash Isas
Cash Individual Savings Accounts are accounts that help you earn tax-free interests. Cash Isas accounts do not have any upper limits on the amounts you can deposit every year. While the interest rates offered by these accounts are not as high as notice account, you can get the better deal since you don’t have to pay any taxes on the interest earned.
- Regular Savings Accounts
These are savings accounts that help individuals inculcate the habit of saving regularly. You have to put a consistent amount of money into these accounts every month. These accounts generally offer high rates of interest, along with an additional annual bonus. You forfeit the annual bonus if you fail to make the required payments every month.
- National Savings Accounts
This account is government-run and is overseen by the National Savings department. However, these accounts may not be the ideal choice for all your savings needs, but they offer capital security. Your money is returned to you, irrespective of what happens to the market.
Now, that you have a clear picture of the different types of savings accounts available in the UK for NRIs, evaluate your needs and choose the right account that offers you high-interest rates as well as convenience and security.