It may be easy to assume that, by the age of 60, you’ll have tons of savings ready to dip into and enjoy for your retirement years ahead. If only life was so easy! In fact, with all that life throws at you, there may not even be a chance start saving until you approach retirement, by which time, it’s worth looking into the best savings accounts for over 60s in the UK.
However, there are plenty of different options out there. Changes to banking regulations and an explosion of new account types and services have made things fairly confusing! In this guide, I’ll take you through what to look for in an ideal over 60s saver, and how you can make the most of it.
If you’re more interested in investment options instead, then you can take a look at my article covering the Best Vanguard Funds for 60-year olds in the UK.
Why invest in a savings account over the age of 60?
In many cases, banks offering savings accounts to holders over the age of 60 can benefit from interest boosters and stable base rates. This is largely to help appeal to people who are less than a decade away from retirement.
In which case, you may find it’s worth switching from your current savings account over to a new option once you reach the age of 60.
Above all, it’s just good practice to save money wherever you can. As all financial experts will agree, you should pay down your debts first and then start saving. The best accounts for people over 60 will help you grow your money while you intend to start bringing your working life to a close.
Of course, what one bank offers will always be fairly different from the next. Therefore, instead of focusing on appealing opening deals and tie-in offers, it’s worth comparing common features and benefits of these accounts before you sign on the dotted line.
What to look for in the best over 60s savings accounts
My advice below is purely generic – your own circumstances will vary compared to other savers over 60, meaning you’ll need to keep your unique needs close in mind.
That said, all of the points below offer a fantastic framework to build on if you’re simply not sure what the best over 60s savers actually look like. So, let’s dive in.
Competitive interest rates
Naturally, one of the first points to look for when comparing any savings accounts are the interest rates. Many banks offering over 60s savings options provide high initial year rates which drop soon after.
Therefore, look carefully at the opening rate and what the benefits to staying with this bank are likely to be after the drop-off. Can you withdraw money, for example?
Alternatively, you may find that fixed-rate bonds are more appropriate – in that you can simply invest for as long as a bond lasts (usually up to five years), and then reap the flat interest at the end.
Saving options (such as stocks and bonds)
It’s a misconception that there’s only one type of savings account out there. Cash ISAs are great for saving up money and gaining interest without tax woes. However, will that interest rate grow your money at the rate you demand before retirement?
People looking to build on their savings before they retire – but beyond the age of 60 – may wish to invest in a stocks and shares portfolio or savings account. Yes, there are risks involved, but various options available to savers over 60 are likely to arrive with careful management options and additional services to track your growth.
Again, consider bonds, too. These options let you ‘loan’ money to (typically) a government body in the form of an investment, and you’ll reap a flat interest reward at the end of the term. You may have to wait years for that return to arrive, but it’ll be reasonably healthy!
Flexibility to withdraw
Given that you may be only a few years away from retiring, it’s understandable that you may wish to draw on your savings ahead of time wherever possible. What if you want to make a deposit on that month-long cruise, for example?
Therefore, accessible options such as instant access accounts may let you take money away without harming your ability to grow with interest. Some over 60s savings accounts may arrive with stipulations that while you can pay in a certain amount over a year, your withdrawals may be restricted, too.
I can’t speak for all banks here, so I’ll simply recommend you take a look at the fine print each prospective bank and account has to offer you.
Types of savings accounts to consider
Again, it can feel as though there’s countless different savings account options out there when you first start comparing the market. However, there are a handful of popular options I think you’ll want to take note of when looking for the best savings accounts for over 60s:
Cash ISAs
Cash ISAs are popular with most savers. They’re straightforward to manage and you can access them from just about anywhere. What’s more, they’re famous for their fantastic tax benefits.
That is, there’s no demand for you to pay tax on interest you can earn through these accounts. There’s an upper threshold of £20,000 you’re allowed to save each tax year, but for many people, this is a high bar to reach.
Cash ISAs are also popular as they can arrive with flexible withdrawal terms attached. That means you may be able to keep withdrawing with no limits imposed. Great news if you want to be able to dip into those savings at short notice.
I’d recommend cash ISAs to most people over 60. That said, interest rates and growth potential will vary. You may actually find there are fixed rates offered through some ISA services, which can give you a little more confidence.
But, if you’re more about growth, it might be worth investigating a portfolio option before you retire.
Regular savings accounts
Regular savings accounts differ slightly from cash ISAs in that they offer monthly limits on payments you make. That means there’s both an upper threshold and a minimum payment expectation you’ll need to meet.
Generally, you can expect payments to cease at the end of whatever length of term you agree with your bank. These account options are great for getting access to high interest rates.
That said, I wouldn’t always recommend a regular account for anyone who wants to save for big, long-term goals. They give you nice bursts of interest and cashback in the short term, however, which means if you fancy taking the summer abroad or buying something lavish for a special anniversary, they’re ideally suited.
My advice would be to try and seek out a regular saver with a bank you already run a current account with. This will make it easier for you to funnel standing order payments across, and chances are you’ll get the pick of the best interest rates, too.
Fixed rate savings accounts
Fixed rates are ideal when you’re sick to the back teeth of ISAs lowering your rate from 3% to sub-1% after the first year. These accounts are ideal for those savers over 60 who don’t want to have to keep hopping around different providers for the sake of getting those first-year deals.
As mentioned earlier, these are known as bonds, which are investments you make in the form of assured loans. As such, you’ll effectively be locking the money you pay into these types of accounts for up to five years.
I think fixed rate options are fantastic for financial growth, but there’s a commitment on your side, too. If you can’t commit to saving over the period the bond issuer advises, you’ll receive a harsh financial penalty.
If you’re unlikely to do much with your savings or to even need your money until you’re closer to retirement age, a fixed rate bond is the perfect solution for easy, predictable financial growth.
If you’d prefer to dip in and out of your savings as and when you need to, however, make a point to save with a cash ISA instead.
Is it worth investing in an over 60s savings account?
As mentioned, it’s often worth saving into an over 60s savings account purely because you’ll stand to get attractive interest rates. That, of course, is a classic way to grow money when you’re winding down your income before retirement.
However, different types of savings and passive account options hold different pros and cons. You’ll need to think carefully about your short and long term plans, and when you’d like to access your money. Then, it’s worth comparing options between different banks and providers.
If the idea of a stocks and shares ISA seems particularly appealing, check out our complete guide linked for the lowdown on what you can expect.
