TSB announce new 5% interest bank account

From 31 March 2014, the new TSB Plus bank account will offer customers 5% AER on savings up to £2,000

TSB Bank has been keen to highlight that its customers' money will stay in Britain

TSB Bank has been keen to highlight that its customers’ money will stay in Britain

TSB has unveiled a new high-interest current account, offering 5% AER on savings up to £2,000, which will launch on 31 March 2014.

The Plus account is TSB’s first new bank account launch since returning to high streets across Britain in September 2013.

With a rate of 5% AER, the new bank is set to match Nationwide’s market-leading FlexDirect current account, which offers the same rate but on up to £2,500.

However, TSB only requires a monthly deposit of £500, whereas Nationwide has set the minimum at £1,000 per month.

Jatin Patel, products director at TSB, said the fact that the bank “helps communities thrive” across the country makes it stand out from other banks.

“TSB was born to bring more competition to Britain’s high streets and we’re confident our new TSB Plus Account will do just that,” he said.

“All we ask is for people to pay in £500 a month and work with us by registering for paperless statements and correspondence, so the money we save can be put straight back into people’s pockets as interest.”

What is TSB Bank?

In 2012, a proportion of Lloyds bank customers were informed that their branches would be transferred to a new separate bank called TSB.

This would then pave the way for TSB bank to be listed on the stock market later in 2014 – a consequence of the agreement that allowed Lloyds to be bailed out by the EU.

Despite the change, mortgages and overdrafts being held at the time of the transfer continued as normal, without any change to customers’ rates or terms.

Since launching in September 2013, the bank has been keen to portray itself as different to the competition by announcing that all of its customers’ money will stay in Britain.

One of its key messages has been that TSB will not gamble money on overseas speculation or investment banking.

Best high-interest bank accounts

Commenting on the news, personal finance expert, Jafar Hassan, said that banks were now fighting for customers’ money.

“More good news is that the 5% rate is not limited to one year, unlike Nationwide’s account that offers 5% interest on balances up to £2,500, but only for the first year,” he said.

“The TSB account is an extremely attractive offer, particularly to those who are new to the concept of making the money in your current account work harder.

“However, for people with balances of £5,000 and over, the Santander 123 account with 3% AER might work out better.

“With the six month anniversary of the current account switch service coming up soon, it’s no surprise that banks are pulling out all the stops.

“The latest proposed current account from M&S aims to capitalise on its brand appeal by offering £100 in gift vouchers to new customers.”

Join the conversation

13 comments

  1. Peter on April 3, 2014 at 11:17 am

    Is there a monthly fee required for this account ?

  2. Jafar Hassan on April 3, 2014 at 2:01 pm

    Hey Peter, there’s no monthly fee required for this account. You’ll just need to make sure you deposit a minimum of £500 per month (for example, your salary).

  3. Andrew Morris on April 3, 2014 at 5:46 pm

    I am a TSB current account holder. Will I have to apply or will the TSB contact me to see if I’m interested?

  4. Ray Gilmore on April 3, 2014 at 7:00 pm

    deposit £500 a month but can you withdraw or transfer £500 a month as well

  5. Paul Savage on April 3, 2014 at 8:27 pm

    Is this rate available to existing current account customers?

  6. Tony Cunningham on April 3, 2014 at 8:30 pm

    How many accounts can an individual hold ?

  7. Very Old Vic on April 3, 2014 at 9:47 pm

    Do I have to keep the £2,000 in credit at all times and what happens if I need to withdraw the savings for a short time?

  8. Lin on April 3, 2014 at 9:54 pm

    What’s the rate once you reach the maximum for 5%? And how/ when will rate changes be brought in?

  9. Mary Honig on April 4, 2014 at 7:13 am

    Do they offer overdraft facilities and at what rate ?

  10. Jafar Hassan on April 4, 2014 at 9:09 am

    **** Hey all – will try to answer these questions above ****

    Andrew + Paul
    - The account is available to new and existing customers, including the rate of interest

    Tony
    - There is no definite answer to that. Some bank accounts will insist that you make it your “main” account, which usually means having a minimum of 2 Direct Debits coming out and having a minimum deposit of £X coming into your account each month. You could technically have several bank accounts, but whether you’ll be accepted for all of them based on their minimum requirements is another matter.

    Very Old Vic
    - If you withdraw savings before the interest is paid (typically, first working day of the month), then your interest will be based on the final balance for that new month, rather than what you had before. You don’t need to have a balance of £2,000 or always have money in your account. You just need a minimum of £500 paid in each month.

    Lin
    - No interest will be paid on any amount over £2,000. Currently TSB are saying that the rate is not just an introductory offer. It’s likely then they will keep that rate going for at least a year, and if the Bank of England raises interest rates as expected over the next year or so, then TSB *theoretically* shouldn’t be lowering their 5% rate anytime soon.

    Mary
    - They do offer planned overdraft facilities but you need to apply for this separately from the bank account. What they offer you, if you’re accepted, will be subject to your status. However, it seems this bank account is probably more suited to those who are regularly in credit. You can read up more on their charges here http://www.tsb.co.uk/media/tsb/pdfs/banking_charges_brochure.pdf

    Happy to answer any more questions if you have any :)

    You can compare current accounts here: http://www.uswitch.com/current-accounts/

  11. Ian Higgins on April 4, 2014 at 2:13 pm

    No mention of whether these are “gross” or “net” rates .Lose 20% if gross through taxation if a tax payer and more for higher tax payers. The full details are not given.

  12. Jafar Hassan on April 4, 2014 at 2:38 pm

    Hi Ian, it’s definitely gross variable rates, so yes it’s subject to taxation. However, 5% even with tax is generally better than many ISA rates. Just depends how much you can afford to put away each month to make it worth your while.

  13. Paul on April 26, 2014 at 11:47 pm

    Hi, can I deposit the £2000 & then withdraw £500 & immediately re deposit once a month to qualify? Thanks