Post Office savings deal fails to deliver

The Post Office is wading into the long-running battle between banks and building societies for savers' business, with a new account paying 4.75 per cent.

The instant-access saver account is open to customers aged 11 and over and can be accessed via any Post Office branch, as well as over the phone or internet. Savers can also withdraw money from their accounts using an ATM.

But while 4.75 per cent is a market-leading rate for a savings account with branch-based access, in this case it includes a bonus of 1 percentage point for the first 12 months. After that, the Post Office guarantees it will dip no lower than 1 percentage point below base rate.

Savers also need a minimum of £500 to open an account and, despite the "instant access" tag, can make only six withdrawals a year free of charge. Take any more money out, and you'll be charged £1 for every withdrawal.

Savings industry specialists are less than convinced by the hype.

"This account screams of desperation," says Sue Hannums from the independent financial adviser Chase de Vere. "It is offering a headline-grabbing rate to start with, but one year later this drops to 3.75 per cent.

"This is currently 0.75 percentage points below the base rate - and the rate could drop even lower [to 1 point below base rate]."

There is no point in saving your money in this account - even for just 12 months - as there are better deals around, she says.

Ms Hannums was not alone in giving the product the thumbs down.

Stuart Glendinning of Moneysupermarket.com, the price comparison website, says that the restriction on the number of fee-free withdrawals means that anyone wishing to take money out frequently should avoid the Post Office account.

Nick White from the price comparison service Uswitch agrees that it becomes less attractive when you "scratch beneath the surface". He says: "The account is likely to appeal to those consumers who appreciate the traditional values of the Post Office and the ease of access to its large branch network."

For those who have internet access, Mr White prefers the e-savings account from First Direct, paying 5 per cent on balances of £1 and over.

If you would rather operate an account by phone and post, Ms Hannums recommends Anglo Irish's Easy Access, paying 4.8 per cent on a minimum of £500.

Mr Glendinning picks out Capital One's easy-access account, paying 4.75 per cent on balances of £500 and over - although this includes a 0.25 per cent bonus for 12 months.