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Lloyds is paying 12-months' worth of interest upfront through a new savings account offer. The Lloyds Upfront Interest 1 Year Online Fixed Bond pays a fixed rate of 4% AER in the first month, meaning savers would earn £400 on an £10,000 deposit. Customers can get a slightly boosted rate if they have a Lloyds Premier current account that has been open for at least eight days, earning an extra 0.20% AER.
Customers can open the account with £500, and pay in up to £9million within 10 days of opening the account. After that, more money cannot be added or withdrawn. Even though the interest is paid near the start of the fixed term, customers cannot withdraw any money until the 12-months are up.
Lloyds said this new way of offering interest was shaped by customer research, particularly those who have been saving for a long time, who said they’d welcome a straightforward new option for managing their money and accessing their interest.
Simon Caddick, savings director at Lloyds, said: "One thing that can stop people putting money away for a fixed period is the wait to benefit from the interest it earns. Our new Upfront Interest changes that.
“We know savers value choice when managing their money and Upfront Interest gives them the opportunity to receive their interest at the beginning of their savings term, helping them benefit from that money sooner, while still having the certainty of a fixed-rate bond.
"This is a fresh approach to fixed-rate savings and reflects our commitment to offering savings that reflect the ways customers tell us they want to save and manage their money."
When opening a Lloyds one-year Online Fixed Bond, customers can either choose to receive all the interest shortly after the account's funding window closes, or for their interest to be paid at bond maturity. The interest is paid into a nominated account, which customers can specify when opening the one-year Online Fixed Bond.
Lloyds said it is the first UK bank to offer interest upfront. However, other banks are offering higher levels of interest on their one-year fixed accounts.
The Union Bank of India (UK) Ltd is offering 5.12% on its Fixed Rate Deposit for one year. GB Bank is paying 5.11% on its 1 Year Fixed Rate Bond. The thisbank Fixed-Term Savings Account is paying 5.10% on its one-year option.