A&L increases rate on online tracker

By THIS IS MONEY
Updated: 10:55 EST, 22 October 2008

Alliance & Leicester has dramatically improved its online tracker account. It now pays a basic 4% after tax (5% before tax) and a bonus which brings the rate up to 5.04% (6.3%).

Rate rises: A&L gives savers a better deal

The 1.04 percentage point (1.3 point) bonus is payable until January 2010.

Importantly, the account comes with a guarantee that it will pay at least base rate until January 31, 2011.

It makes it a good deal for savers keen to earn a top rate and prepared to switch out once the bonus expires. The guarantee of base rate plus the bonus means the rate can fall to 4.64% (5.8%), but it's still a worthwhile deal.

And rather than just using the bonus to woo new savers, the bank is raising the rate to savers already with the account. Their rate has jumped from 3.4% (4.25%) to 5.04% (6.3%)

There are no withdrawal restrictions on the account. Alliance & Leicester is now part of Abbey, but has retained its own banking licence.

It means you have the full £50,000 cover on your savings with Alliance & Leicester, even if you also have money with Abbey.

Banks have been quick to cut rates to savers following the 0.5 point cut in the base rate. Co-op Bank has cut the rates by 0.5 points and now pays a tax-free 4.25% on its cash Isa. Its Smart Saver account is down at 2.95% (3.68%).

Smile, the internet bank owned by the Co-op, has also cut rates. Its cash Isa pays 4.25% tax-free to those who have a current account with the bank and 3.5% to those that don't.