Lloyds launches one-year fastened financial savings account with a twist – it pays upfront curiosity in time for Christmas
Lloyds Bank has launched a fixed savings account that pays the full year’s interest within the first month.
This gimmick could be very enticing for those keen to squirrel more money away before the festive season.
The interest rate sits at either 4 per cent or 4.2 per cent for Premier customers. For most this means that if you can lock £5,000 away for a year, you’ll bag £200 interest before Christmas.
The payout only increases the more you can stash into the account. The maximum deposit is £9million, on which you’d earn a whopping £360,000 interest before tax.
Keep in mind that the rate is good, but not close to the best rates available on other one-year fixes.
It’s currently possible to get rates of up to 5.12 per cent elsewhere, for example from Union Bank of India and Alrayan Bank.
> Read more: The best fixed-rate savings accounts
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How unique is the feature – and is it worth signing up?
Simon Caddick, savings director at Lloyds, says that the account is a ‘fresh approach to fixed-rate savings’.
To sign up, you just need to open a one-year fixed online bond and choose to receive upfront interest during the application process.
Upfront interest is a feature that This is Money very rarely sees, with Santander launching something similar way back in 2011 that paid £1,000 for every £12,000 deposited.
As with any incentive like this – and like Santander’s account previously – it’s important to look beyond the gimmick to the nuts and bolts of the account.
The interest rate isn’t exactly stellar. Savings rates have been particularly strong over the last few months. Even the rates at the bottom of our best one-year fixes are significantly higher than the Lloyds account, at 4.82 per cent.
And beware that the gimmick doesn’t detract from it being a fixed account. You should be comfortable with locking your money away for a year, because there are no withdrawals allowed and you can’t close the account early to access your money.
But it could be attractive for those looking to earn some extra cash quickly. Lloyds pays upfront interest to an account of your choice shortly after your funding window closes.
You should get the cash in a maximum of 20 days after your application.
Combine it with a switch bribe to boost your earnings
You could hike your cash reserves for the festive season even further by moving more of your banking to Lloyds.
The bank is paying £200 if you switch to its perks account, Club Lloyds, using the Current Account Switch Service, and you should get the incentive within 14 working days of the switch.
If you stashed £5,000 and switched your current account, you’d have £400.
You don’t need a Lloyds bank account to open the one-year fixed bond, so you could also switch to a bank that’s offering a bribe of more than £200.
First Direct has boosted its regular £175 sweetener to £210, while HSBC is paying £220 to switch.
Meanwhile Barclays has laid up to £300 on the table, although this consists of an initial £150 payment followed by five £30 payments for each month you use your debit card at least ten times.
Just check how quickly you’ll receive the money if you’re hoping to bag it for Christmas spending. Barclays should pay you within 28 days of meeting the requirements.
Should you invest rather than spend the money?
Another positive about blagging interest upfront is that your money will have more time to grow.
If you were to invest the money rather than spend it, your investments would have more time to benefit from the effects of compounding – whereby any returns are reinvested for further growth.
It’s worth considering investing if you have cash savings that would cover three to six months of essential spending, and you can keep your money invested for at least five years.
Over longer time frames, invested money has a better chance of beating inflation – the rate at which prices rise over time – than cash savings.
Research from the investing platform Fidelity found that for every rolling ten-year period from 1988 to 2025, someone investing in UK stocks would have beaten inflation 95 per cent of the time.
That figure drops to 58 per cent of the time for someone saving in cash.
You can read our guide on how to start investing, or jump straight in to how to choose the right stocks and shares Isa.
