Sit back and let your money earn the best-buy rate

In a world of low interest rates, savers have to fight for every penny. All too often, they move their cash into a new account with a seemingly attractive rate only to see the return plummet. Savers are then faced with the choice of sitting tight or going through the hassle of moving again. The search for consistently high returns that won't disappear seems never ending.

Now Nationwide says it has the answer. Tomorrow it will launch its Champion Saver, a new product designed to take the effort out of finding the best rates. Uniquely, the interest rate offered will be determined by the average interest on the top five branch-based accounts from its main competitors.

"Some people can switch from month to month but we're checking our competitors every month and updating accordingly. Customers don't need to keep checking the rates because Nationwide is doing it for them," says bank spokesman Anthony Hua.

On the second Monday of every month, the building society will use Moneyfacts, an independent comparison site, to check the rates offered by eight of its competitors. The best rates that Abbey, Barclays, Halifax, HSBC, Lloyds TSB, Northern Rock, NatWest and Royal Bank of Scotland offer will be used to calculate an average. The rate will then come into effect on the first of the following month. At the moment, the Champion Saver is paying 2.80 per cent AER.

Not more than one rate from any given provider is taken into account. Instead Nationwide picks the best rate from each of the eight providers and then whittles those down to the top five, including any bonuses. These are used to calculate the "core rate", at which point Nationwide adds its 1.10 per cent bonus on top. Only instant access, limited access and notice accounts will be included; ISAs, fixed-rate accounts, regular savers of age-specific accounts are excluded.

As well as offering a level of consistency from month to month, there are long-term benefits as it allows savers to spread the risk of the rate dropping across five providers. Conversely, this also means that it is unlikely to offer the very best rate.

"This is a good move for the savings market," says Pierre Williams, head of research at MoneyExpert.com. "Anything that offers some transparency as to how rates are chosen is to be applauded. At 2.8 per cent, the rate is strong, but by limiting itself to an average of branch-based accounts, Nationwide fails to top the table.

The Champion Saver includes an introductory bonus of 1.10 per cent, fixed until 31 January 2011, for balances over £1,000. Helpfully, Nationwide has promised to write to its customers and remind them when the end of the introductory bonus will end.

The minimum opening investment of £1,000 may put some savers off and account holders will also need to give 60 days' notice if they want to withdraw their money, or they will lose 60 days' worth of interest. It may be that savers who need regular access to their money are better off with an easy access account that will not incur any penalties or loss of interest for withdrawals. On the other hand, savers with a lump sum that they want to tuck away will get better returns from a fixed-rate bond. The one-year bond from the Post Office, for example, pays 3.85 per cent AER, more than 1 per cent more than the Champion Saver.

"Before you go to open an account think about what you want it for. Is it money you're going to need access to, or money for a rainy day? If you do need access, losing 60 days' worth of interest each time is soon going to wipe out any earnings," says Rachel Thrussell from Moneyfacts.

There is also a similar product on the market which some savers may find preferable. The Investec High 5 account pays the average of the five highest savings rates in the market, again set by Moneyfacts. As with Nationwide's account, ISAs and bonds are excluded and there is a notice period, this time of three months, for withdrawals. Early access is subject to a 0.50 per cent penalty fee of the amount withdrawn at a minimum of £50.

The Investec saver comes up trumps because the rate is based on the top accounts, not specific accounts from certain providers. "Accounts such as the Investec High 5 offer an average of the top accounts in the market as a whole, including online accounts, and offers a great rate with no bonus whatsoever," says Mr Williams.

As savings rates have begun to increase across the board, the rate on the Investec account has steadily increased from 3.03 per cent at the beginning of June. At the moment, with the top five rates ranging from 3 per cent with the Reward Saver from Newcastle Building Society, to 3.5 per cent with the 3 Month Gold Deposit from United National Bank, the Investec account is paying 3.17 per cent. Where this account does fall down quite considerably, however, is that savers will need £25,000 to open the account.

"Not everyone's heard of Investec and the £1,000 minimum investment with our Champion Saver is much more accessible to every day people," says Nationwide's Mr Hua.