Defensive asset allocation is trickier than the growth side of the equation. For the latter, you can just strap on a global equity tracker for portfolio propellant and be done with it. But there isn’t a universal ‘dark times’ asset class that reliably protects your wealth from economic misfortune.

A portfolio is exposed to multiple threat vectors: inflation, deflation, stagflation, recessions, and stock market bubbles. Fending that lot off requires a multi-layered defence. If the first line fails then perhaps the next will soften the blow.

Your choice is complicated by your personal risk exposure. For instance, inflation is typically a bigger threat to retirees than young people. The young are more exposed to recessions and periods of joblessness.

It makes sense therefore to strengthen where you’re personally most vulnerable – loading up on the assets most likely to counter your own financial arch-nemesis.

Know your enemy

Here’s a quick summary of portfolio pathogens paired with their most effective treatments:

Threat vector	Best defensive asset	Worst defensive asset	Most exposed
Surging inflation, stagflation	Individual index-linked gilts, commodities, gold	Long bonds	Retirees
Deflation, recession, stock market drawdown	Nominal government bonds, cash, gold	Commodities	Mid-career, late-stage accumulators, aggressive equity investors
Currency debasement, sovereign debt crisis	Gold, assets priced in foreign currency	Domestic government bonds, cash	Investors heavily tilted towards domestic assets

Handy though the table is, it’s missing nuance, and a generous sprinkle of ‘ifs’ and ‘buts’. Fear not: they’re coming next!

Gold, for example, looks like the ultimate wealth-preserver. I’ll have six sackfuls, please! But there are reasons to doubt it, too. (See the gold section below). 

Also, just so we’re crystal clear:

• No asset class is risk-free or ‘safe’. Not even cash. 
• No asset class is guaranteed to work on demand. 
• Unexpected circumstances can nullify any defence.
• A defensive asset may come good but not immediately, nor for the entire duration of a crisis. 
• Diversification is your best friend. Possibly your only friend in the capricious world of investing. 

These negatives aren’t meant to crush morale before we get started. It’s just a bald statement of fact.

Hopefully things will go well for all of us. But it’s best to have the full picture in case they do not.

The historical record and inherent uncertainty about the future both point in the same direction: use every tool in the box.

The best defensive asset classes

Defensives are asset and sub-asset classes that can fortify your portfolio when equities go down. Each of the following can play a useful role:

Nominal high-grade domestic government bonds

(Also known as gilts in the UK)

Defends against: Demand-led slumps such as economic contractions, recessions, depressions, deflation, and stock market drawdowns. 

Vulnerable to: Surging inflation and fast-rising interest rates. 

Younger investors

Long maturities theoretically provide the best diversification for equity-heavy portfolios. Although it doesn’t always work out that way in practice. 

Older investors

Favour shorter-dated bond maturities because longer-term government bonds are highly vulnerable to inflation and fast-rising interest rates. Such shorter-dated govies may be less effective in a downturn but offer a better overall balance of risks. They’re more resistant to spiralling inflation and interest rates. 

Diversification options 

Global government bonds hedged to the pound

Pros: Diversification across advanced economy government debt. Choose if you’re wary of having 100% exposure to the credit risk of the UK Government. Hedge them to offset the risk of adverse currency movements that swamp your bond returns.

Cons: Higher OCFs than gilt funds. Less crash protection due to lower durations. Indices tilt towards high-debt countries such as Japan, Italy, and the US. 

Unhedged US Treasuries

Pros: Often outperform gilts in a crisis because dollar-denominated assets are viewed as a safer haven. 

Cons: Currency risk means they can underperform at just the wrong time. Also US political risk.

High-grade corporate bonds

Pros: Offer higher yields than government bonds. 

Cons: Corporates don’t perform as well as govies during most downturns. Essentially because countries can withstand economic peril better than companies. 

Individual nominal gilts 

Pros: Opportunity to target particularly useful bond issues. For example, investing in specific gilts can reduce your tax burden outside of tax shelters. Extremely long maturities may be especially potent equity diversifiers. No management or platform fees. 

Cons: Require more hands-on management and a good understanding of bond mechanics. Not all brokers enable you to invest online.

Useful to know

High-grade (or high-quality) refers to bonds with a credit rating of AA- and above (or Aa3 in Moody’s system). Check out our bond terms post.

Bond maturity / duration: a brief guide to risk

The following table sketches out the three term-related bond risk categories:

Bond maturities	Volatility	Suits	Yield / expected returns
Short (0-5 yrs)	Lower	Older investors, lower equity allocations, higher inflation concerns	Lower, cash-like at the shortest end of scale
Intermediate	Middle ground	Middle ground	Middle ground
Long (15+ yrs)	Higher	Younger investors, higher equity allocations, lower inflation concerns	Higher, but possibly not worth the extra risk

Longer maturities imply longer durations, though other factors are in play as well. 

Duration is the key metric when judging high-grade government bond risk. Your bond’s duration number1 is an approximate guide to how big a gain or loss you can expect for every 1% move in its yield.

For example, if a bond’s duration number is 11, then it:

• Loses approximately 11% of its market value for every 1% rise in its yield.2
• Gains approximately 11% for every 1% fall in its yield.

Read our piece on rising yields to understand how bonds respond when interest rates rise.

Index-linked government bonds (high-grade, domestic)

(Also known as ‘linkers’ in the UK)

Defends against: Inflation. Index-linked bonds also generally do okay in recessions but they aren’t as effective as nominal bonds.

Vulnerable to: Fast-rising interest rates (see below). Deflation – index-linked gilts lose nominal value when the RPI index falls as they lack a ‘deflation floor’. On the other hand, they won’t lose real value in this scenario, which is what counts most. 

Snag: Index-linked bond funds can be real-terms losers in inflationary periods. That happens when steep interest rate hikes cause fund prices to drop. Sometimes the resultant capital loss is so severe that it drowns out the inflation-adjusted gains of the fund’s underlying bonds. The problem is solved by investing in individual index-linked gilts.

Individual linkers hedge inflation if held to maturity. Linkers still fall in price when interest rates rise but will make good the capital loss by their maturity date. Ignore that paper loss and each linker will ultimately return RPI plus the real yield on offer when you bought in.

In contrast, bond funds routinely sell their holdings before maturity. This causes losses in rising rate conditions (and gains when rates fall). The process doesn’t doom index-linked bond funds to lose against an equivalent portfolio of individual linkers over time. But it can make them a relatively poor inflation hedge.

Beware that if you buy individual linkers on negative yields – and hold to maturity – then you’re accepting an annual loss in exchange for broader inflation protection. In this scenario, the bond’s link to RPI means its value will rise to match inflation. However, the price you’d pay here for that inflation matching would be the negative real yield at the time of purchase.

Thankfully, real yields are now positive, so you’re covered against double-digit rises in inflation and you can make a small annual profit on top.

Younger investors

Can ignore index-linked gilts on the grounds that equities outperform inflation in the long run.  

Older investors

Individual index-linked gilts held to maturity are the most reliable way to hedge inflation. If you use funds to hedge inflation then choose short-dated ones because long bonds are hit harder by soaring rates. 

Useful to know: Don’t get hung up on index-linked gilts lacking a deflation floor. The UK hasn’t experienced annual deflation since 1933. 

Diversification options 

Short-term global index-linked funds hedged to the pound

Pros: Off-the-shelf convenience. Should outperform nominal bond equivalents during bouts of unexpected inflation.

Cons: Other countries’ inflation rates won’t perfectly match the UK’s. Interest rate risk interferes with inflation-hedging capability as described above. Currency risk issues if the fund isn’t hedged to GBP. 

• For options, see the Global inflation-linked bonds hedged to £ section of our low-cost index funds page.

Index-linked gilt funds

Pros: May perform when interest rate rises aren’t a major factor. Aligned with UK inflation. No currency risk. 

Cons: Almost all UK index-linked gilt funds have long average maturities / durations. An exception is iShares Up to 10 Years Index Linked Gilt Index Fund. Its lower duration places it on the outer rim of the short-term choices. 

Individual index-linked gilts 

Pros: Specifically designed to hedge UK inflation if held to maturity. No management or platform fees. 

Cons: Require more effort to manage than bond funds. Not all brokers enable you to invest online.

Physical gold

Defends against: Stock market drawdowns, surging inflation, recessions, simultaneous falls in equities and bonds.

Vulnerable to: Volatility, small changes in demand, lack of fundamental value, myth-making.

Snag: Gold’s versatility looks incredible – like the everything burger of defensive assets. Yet there are reasons to be wary.

For one thing, gold’s track record as an investible asset is relatively short. That’s because it was subject to government control until 1975. 

This means that unlike with bonds and cash, we can’t see how the precious metal performed during World Wars, depressions, and multiple inflationary episodes. There’s a danger that gold’s impressive history is flattered by a small sample bias. (Gold has only racked up 50 years as an investible asset class versus more than 150 years for other defensives.) 

Moreover, beware being bedazzled by gold’s recent amazing run. Dig a little deeper and you’ll see that the yellow stuff fell 78% in real terms from 1980 to 1999. 

Another concern is that physical gold returns aren’t linked to intrinsic value. Equities provide a claim on the future cash flows of productive businesses. Government bond interest is paid by tax revenues. Even commodity profits can be traced back to ‘roll return’ and interest on collateral. 

In contrast, your gold gains are dependent on someone deigning to offer you a higher price than you bought in for. 

Thus it’s worth asking if current gold prices are sustainable? Are they being driven by fundamental sources of demand? Or are waves of performance-chasers being suckered in by a succession of all-time highs? What happens when gold’s momentum falters?

The irresolvable nature of these questions underlies my caution about gold. For a (much) deeper discussion see the excellent Understanding Gold paper by Erb and Harvey.

Younger investors

Consider a 5-10% allocation for diversification purposes.  

Older investors

Consider a 5-15% allocation for diversification purposes. Remain wary of overcommitting due to the question marks hanging over gold’s short track record and its high current valuation levels.  

Diversification options 

Gold miners: You’d have to be insane to think of miner stocks as a defensive asset class. 

Gold future ETCs: WisdomTree Gold (Ticker: BULL) invests in gold future’s contracts and has seriously underperformed its physical counterparts since inception. 

Silver: Appears to be a less powerful defensive diversifier because demand is more closely tied to economic activity. 

Broad commodities

Defends against: Surging inflation.

Vulnerable to: Recessionary conditions.

Snag: Commodities are highly volatile and typically a liability during economic contractions when demand evaporates for raw materials. Diversification is key so choose broad commodity ETFs not single commodity funds. 

Younger investors

Can ignore commodities on the grounds that equities outperform inflation over time.  

Older investors

Potentially the best portfolio diversifier against inflation. Whereas index-linked gilts match inflation by design, commodities can massively outperform by nature. Commodities are especially potent when the cause of the price shock is global supply chain shortages – as occurred after each World War and post-Covid.  

Diversification options 

Single commodity ETCs

Pros: None – excessive idiosyncratic risk.  

Cons: Studies show that a basket of diversified commodities significantly outperforms any single commodity over the long-term. 

Commodity equities

Pros: None as a defensive portfolio diversifier. 

Cons: Too correlated to the stock market.

Cash 

Defends against: Demand-led slumps such as economic contractions, recessions, depressions, deflation, and stock market drawdowns.

Vulnerable to: Inflation, low interest rates.  

Snag: Cash has delivered the lowest historical returns of any of the defensive diversifiers on our menu. Carrying too much cash will probably hold back your portfolio over time. 

Younger investors

The flight-to-quality effect means longer-dated bonds are more likely to prop up an equity-dominated portfolio in a crisis. 

Older investors

Cash is a useful complement to bonds. Cash won’t spike in value during a crisis but neither will it plummet when interest rates rocket. But beware the ‘money illusion’ effect when interest rates look good but are largely wiped out by inflation. 

Diversification options 

Money market funds (MMFs)

Pros: Highly responsive to interest rates. There’s no need to keep on top of Best Buy tables when interest rates are rising because MMFs automatically reinvest into higher-yielding securities. The opposite is true when rates are falling.  

Cons: Riskier than cash. Money market funds can struggle to meet investors’ demands for their money back under extreme conditions. MMFs aren’t covered by the FSCS bank guarantee. (Your platform may be covered by the FSCS investor compensation scheme.) Management and platform fees.

Treasury bills

Pros: Like money market funds they are highly responsive to interest rates. Backed by the UK Government so safer than MMFs. 

Cons: Must be held to maturity – usually one, three, or six-monthly terms. Not covered by the FSCS bank guarantee. (Your platform may be covered instead.) Platform fees.

Defence in depth

If you’d like to see the multi-layered defence concept in action then check out our posts on: 

• The All-Weather portfolio which has demonstrably dampened some of the world’s worst stock market crashes. 
• The No Cat Food portfolio – it’s regularly tracked as part of our decumulation series.

Ultimately, a simple equity/bond portfolio was shown to be too simple by the events of 2022. Just swapping nominal bonds for cash is probably not ideal either. Money market funds have been soundly beaten by bonds in the long run.

What we know for sure is that all of the defensive asset classes we’ve covered above work some of the time. But none of them work all of the time.

They each have uses and flaws. As we never know what’s coming around the corner, the answer is surely diversification. 

Take it steady,

The Accumulator

1. Technically, modified duration. [↩]
2. Yield to maturity or YTM. You can think of YTM like the interest rate you’ll get if you hold the bond to maturity. [↩]

What caught my eye this week.

Blogger 3652 Days has a great post up about why they’re shifting more of their money into private market investments, writing:

As a passive investor, I’m supposed to do nothing. Ideally forever. Also: I dislike thinking too much.

But public markets keep shrinking – fewer IPOs, more delistings, and an ever-increasing proportion of capitalism conducted behind NDAs and closed doors.

So, in a lapse of principle, I’ve been buying shares in listed private equity vehicles and management outfits – Oakley Capital Investments (OCI), Brookfield Corp (BN), and Blackstone (BX), to name a few.

This is the private equity exposure accessible without the $5 million minimum investment, a Cayman lawyer, and a relationship manager who calls you by first name and means it.

It is, admittedly, a semi-active decision. But then, so is breathing.

I’ve long identified the same trends in markets. For good or ill, as an active investor it’s a lot easier for me to shuffle some money into different pockets of the private space, whether it be through crowdfunded investments, or via some of the vehicles that 3652 Days discusses in their article.

But purely passive investors face a quandary with private markets. Investing widely in private companies is a very different proposition to buying into a basket of public companies via an index tracker.

Not only in the many technical ways that 3652 Days outlines. But also because by definition when you buy a private asset you cannot lean so much on the wisdom of the crowd (the public market) to assume you’re (usually) paying something like the appropriate price.

It’s a big existential divergence. It also potentially brings company analysis and fund manager skill back into the picture, which inevitably means higher fees.

No wonder the financial services industry likes private and alternative assets…

Fee-ver pitch

As I wrote recently for Moguls:

The fees on private funds are much higher than for cheap index funds. And as I explained above, private assets are always more opaque and illiquid.

Yet if we run the trend to stay/go private to its logical conclusion – and public markets continue to shrink – then we could all end up paying more in annual fees to hold much the same equity mix we once got cheaply via a tracker. And we’ll have far less idea about what we own and what it’s worth for the privilege.

Maybe this is what ultimately defeats the rise of indexing and passive investing?

The zero-sum maths of active investing in public stocks is irrefutable. So perhaps financial services simply changes the game instead.

A world where a huge proportion of our money goes into private market investments – and into the pockets of private managers – would be a step backwards for everyday investors.

Run to the logical conclusion, it’d mean we’d pay more for less transparent and likely less comprehensive diversification than we already get today from trackers. And yet with all that private money pooled into big pots, you’d not even have the fun of pursuing a 100-bagger.

We’re not there yet. We can still diversify widely via index funds. And it’s too soon to be sure that listed small caps are underperforming simply because the best start-ups are remaining private.

However the push to private (both in equity and debt) is for now the clear direction of travel. So take some time to read the roadmap at 3652 Days.

Have a great weekend!

[continue reading…]

New contributor Frugalist is back to explain how he gamifies chasing the best regular saving accounts to make his cash work harder.

There’s something deeply satisfying to me about maximising my return on cash.

Not as an alternative to investing, of course. I’ve got bigger ambitions than simply fighting a slugging match against inflation with respect to my long-term goals.

But when you’re anticipating the risk of your boiler exploding in December, you’re wondering why your car’s clutch smells funny, or you’ve built up a giant stoozing hoard, cash savings accounts fit the bill.

Many people treat cash as afterthought. Whether through prudence or – let’s face it – laziness, they’ll put up with a less-than-1% interest rate from their bank.

But I won’t! Instead I’ve developed a hobby of finding the savings accounts with the juiciest rates.

If I’ve got cash I’ll always try to squeeze every drop of interest out of it.

I love big rates (and I cannot lie)

What gets me really giddy and excited are regular savings accounts.

The principal feature (/downside) of regular savers is that they invariably cap how much money you can put in each month.

Sometimes you can freely withdraw money whenever you like. More often your money is locked up for a time. They may pay a set rate of interest for a year before maturing, or the rate may be variable (which tends to mean downwards in the current climate…)

Either way the key is they usually won’t let you add money indefinitely. Instead you’ll earn interest for a year and then they’ll mature and you’re back to square one.

What’s the upside? Well in return for these limitations you can score some pretty attractive interest rates.

How about Virgin smashing the leaderboards with a 10% account in 2024? Or Saffron Building Society grabbing headlines with a 9% rate?

Kerpow!

When you clickthrough to read about these great rates though, you’ll typically find authors and readers in the comments alike saying the rates are too good to be true. 

Geoff from Shrewsbury might claim: “I get more interest putting £40,000 in a normal easy access account.”

Mildred from Ramsbottom adds: “Erm, actually you’ll only get half the advertised rate.”

It’s almost impressive how much vitriol can be generated by something as seemingly uncontroversial as a regular savings account.

Regular savings accounts needn’t be confusing

I’m here to tell you that these accounts are far simpler than people suggest – and that you can do better than Mildred moans.

Hopefully I’ll provoke less fury in the Monevator comments for my troubles, too!

Let’s consider that Virgin account (though it’s no longer on the market as I write).

Virgin paid 10% (10.38% AER) on a maximum deposit of £250 per month for 12 months.

• By the sixth month, Mildred could have loaded it with £1,500 of contributions
• But the balance would only reach its maximum £3,000 in the final month
• So Mildred would get interest on the full £3,000 balance only in the twelfth month

To calculate what she’d earn over a year, a rough rule of thumb is to take the average balance (£1,500) and multiply that by the AER (10.38%), giving £155.70.

Getting a more precise number is a nightmare. It depends on the number of days elapsed when cash qualifies as interest-bearing in your account. Weekends and Bank Holidays aren’t just for frolicking – they are also for playing havoc with financial predictions and computer systems.

Anyway, if by comparison you put £250 into a 5% easy access savings account each month, then you would receive £82.50 in interest in a year.

That’s roughly half what you earned from Virgin’s 10% offering – just as you’d expect from a 5% account.

Limits are frustrating

Of course there are legions of people out there with tens or even hundreds of thousands in cash savings. Such people may remember – wistfully and rather selectively – heady 7% easy access savings interest rates being paid long ago by the likes of Icesave and Kaupthing. (Ah, great days!)

So when a flashy headline nowadays touts, say, a 9% interest rate, it’s excellent clickbait to attract these frustrated savers.

And it’s not surprising if on reading the restrictions in the T&Cs, some of these people then complain that regular savings accounts are pointless as you can only save £250 per month.

However just because you have £20,000 in total savings doesn’t mean you need to put the entire lot into one bank account.

Your savings pot is not monolithic

Separating your cash into pots instead and then maximising the interest rate on each can make a big difference to your total return, as I’ll demonstrate.

Do check those terms and conditions though. As I mentioned some regular savings accounts insist on no withdrawals until the term is up.

If you’re relying on a pot of cash for emergencies, you’ll need easy access. So check the clauses carefully.

The numbers feel unfair

If Mildred worked hard to put £3,000 in her 10.38% savings account, then she might have thought she could earmark a £311 interest payment for a new TV.

When she instead received roughly £150 over a year – and she doesn’t understand why – you can see how she’d feel diddled.

Now she repeats that same mantra for a decade: “They only pay half the rate”.

My issue is not that these people have these feelings – even if they are misinformed – but how their complaints get amplified and repeated, tarring regular savings accounts unfairly.

Institutions are partly to blame too for touting the juicy headline rate rather than the actual interest payments someone can expect for a year.

How I look at the maths 

To be clear, ‘half the rate’ is actually no different mathematically to my ‘half the balance’ rule of thumb from earlier.

• £3,000 multiplied by half of 10.38% is £155.70. 

If you didn’t fall asleep in your maths lessons, you will know that the order in which you multiply and divide numbers makes no difference to the result.

But psychologically, it’s totally misleading. The bank is not paying half the amount of interest owed. They are paying the full amount of interest on the average balance.

Not appreciating this can needlessly discourage people from opening such accounts, and hence from earning the most interest they could.

Making the best of regular savings accounts

Most of us function on regular income. We get paid monthly. We pay our bills monthly. 

So if an account lets us save each month, that actually aligns with our finances. 

If you can save a fresh £250 from your paycheque per month, then when you open a 10% regular saver you are maximising its benefits.

Whereas if you whinged about it ‘not really being 10%’ and instead stuck that £250 each month into a 5% easy access account, you would be missing out on double the interest.

But what if you’re in the camp of having a starting pot of cash? Say £3,000.

You don’t need to keep it under your mattress doing nothing as you slowly load it into your regular savings account. Instead:

• Put £3,000 in a 5% easy access account
• Each month, move £250 into the 10% regular savings account
• Earn 5% on £1,500 (£75)
• Earn 10% on £1,500 (£150) as well
• After a year withdraw your £225 in £5 notes and throw them into the air like Scrooge McDuck 

That’s far better than the £150 you’d get using just one of the accounts. It’s an effective interest rate of 7.5%.

Testing this out with an example

Assume you amassed £10,000 to stash over the course of the past year. Let’s see what you might have earned in doing so.

I’ll use some recent examples of regular savers rather than only limiting myself to ones available right now.

That’s because the examples quickly get out-of-date anyway, and with regular savers it’s important to jump on opportunities when they arise. Products are withdrawn quickly if they prove too popular.  

Consider for example the Monmouthshire Building Society. In August it launched two accounts allowing members to earn 7% on a whacking £1,500 per month! But it didn’t wait even a month before closing such accounts to new customers.

In the following table of recently available regular savings accounts, those in bold could still be opened as of October 2025:

Provider	Rate (AER)	Monthly Max	Average Balance	Approx Interest
Virgin	10.38%	£250	£1,500	£156
Zopa	7.10%	£300	£1,800	£128
Co-Op	7.00%	£300	£1,800	£126
Nationwide BS	6.50%	£200	£1,200	£78
Progressive BS	7.50%	£300	£1,800	£135
RBS / Natwest	5.50%	£150	£900	£50
Principality (6 Month)	7.50%	£200	£600	£45
Saffron BS	8.00%	£50	£300	£24
Total		£1,750	£9,900	£741

Utilising all of these products to save money each month would have seen you earn £741 in total interest after 12 months.

In contrast, putting £9,900 into a standard savings account at 4.5% would have generated just £446.

Hence someone using the regular savings accounts would have generated £295 additional income (pre-tax), compared to simply taking out the best easy access account and leaving it there.

This is a little pessimistic though, as many of these regular savers are either fixed or are held at high rates despite base rate reductions. And that can’t be said for the market-leading easy access accounts.

Also I’ve not cherry-picked the best rates here. Swap those harder-to-get Monmouthshire accounts in for the RBS and Nationwide options, and your returns would be even higher.

Many happy returns

It’s easy to nitpick the scenario I’ve laid out. In practice it isn’t quite so simple. 

You might be thinking, for instance, that a chunk of that £10,000 would have to wait for several months on the sidelines before it could be moved into a regular saving account. I’ll get to that in a minute!

As far as the maths is concerned though, it’s correct insofar as I’m assuming an average balance of £10,000 earning c. 7%. And from a ROCE1 perspective that’s around £700.

In my opinion this is where many articles get a bit stuck in the weeds. They focus on individual accounts and drip-feeding money across. It all sounds a faff.

However as I see it, if you’re looking at cash management as part of your wider portfolio, it’s more about how much you earn from maximising your return on your cash over many years. It’s a process, not a one-time thing.

In practical terms, you’ll look to open up these accounts as they are launched and when their rates pique your interest. As spare cash becomes available you’ll simply deploy it into the highest-paying accounts at your disposal, subject to their contribution limits.

If you’ve got, say, ten of these accounts then money will be cycling in and out of them periodically – such that you aren’t actually performing a mechanical drip-feed from an easy access to a regular saver.

You’re simply deploying cash (from whatever source) as it becomes available into your best-paying regular savers and recycling money as your accounts mature.

In this way cash from maturing accounts will only sit in easy access accounts for short periods of time, before being shuffled off into the next regular saver.

Still all this does raise another pushback…

Are regular savings accounts worth the effort?

Perhaps you think that £295 is not worth the hassle of maintaining all of these accounts.

You may also earn enough interest to pay tax on savings interest. That takes a further bite out of the possible gains.

Moreover with some building societies you must be an existing member to qualify for the best accounts. Even I wouldn’t recommend you speculatively join Saffron BS in the hopes of receiving £24 interest in some future year.

That said, joining the Monmouthshire BS a couple of years back definitely paid off for me now that I’ll be earning £630 from its exclusive 7% accounts.

And strategically choosing to start doing business with one or two key building societies might be worth the (digital) paperwork.

Nationwide is growing its user base consistently, so I’ll use its regular saver as an example of one that might be opened by Monevator readers.

With it paying 6.5% interest on £200 per month, we can quickly compare Nationwide’s regular saving to a 4.5% easy access alternative on an after-tax basis:

Tax Rate	4.5% Savings	6.5% Savings	Difference
0%	£54	£78	£24
20%	£43	£62	£19
40%	£32	£47	£14
45%	£30	£43	£13

Don’t forget, if you’re a 20% taxpayer earning less than £1,000 in interest per year or a 40% taxpayer earning less than £500 in interest per year, you would also sit in the first row. 

By opening the regular savings account, you’ll benefit by roughly £24.

If the only requirement is a couple of minutes of tapping away on an Nationwide app you already have installed, that’s a pretty good return on your time IMHO.

But the big win comes when you have a portfolio of such accounts. This enables you to maximise the benefits of all and spread the maturities through the year.

You’ll also likely end up with a monster of a spreadsheet that you can show off to your friends and family.

Does it spark joy?

Everyone is different, so I can’t argue that regular savings accounts are for you.

Clearly if you’re a new saver with a few thousand pounds who has just started rolling your snowball, then these tactics are going to be more consequential than for grizzled Monevator veterans sitting on six- or seven-figure investment portfolios.

Even so, some people take real satisfaction out of extracting the most benefit from our cash for its own sake. I’ll let you guess whether that includes me. (Clue: I spend my free time writing about savings for Monevator!)

But I won’t stretch to the more extreme tactics employed by some, such as:

• Timing their payments based on which specific days qualify for interest at the receiving bank
• Opening fixed-rate regular savers speculatively in case rate drops make them more useful in future
• Finding loopholes to cram extra cash into their accounts

I think the law of diminishing returns kicks in here, given the limits of how much cash you can practically put away through even a portfolio of regular savings accounts.

But in more everyday ways, if you’re going to hold some cash then why not shoot for getting the best rate you can? 

You’ll need to keep an eye on services that track rates. (Try MoneyFacts.) You’ll also need to get in before the masses of regular saver aficionados overwhelm new offerings and applications are closed, especially with the smaller buildings societies.

Happy stashing! Just please promise me that you’ll never say regular savers only pay half the advertised interest.

1. Return on Capital Employed. [↩]