Octopus Investments has launched a savings account with a rate that is almost double that offered by Britain’s largest banks.
The account, called Octopus Cash, allows savers to deposit between £50,000 and £255,000 of their money into a one-year fixed term account.
The new offering has an interest rate of 1 per cent, which is nearly twice the average rate of 0.55 per cent offered by the UK’s five biggest banks, including RBS, Santander, Barclays, HSBC and Lloyds.
Last summer the Financial Conduct Authority found some savings accounts were offering interest rates as low as 0.01 per cent.
Octopus has teamed up with several challenger banks, including Cambridge & Counties and OakNorth Bank, as it looks to create a better return on savings.
Sam Handfield-Jones, director of Octopus Cash, said the savings account means advisers can add value for their clients and keep their money out of reach of the high street banks’ wealth management divisions.
Octopus' launch into the savings market comes after figures from the FCA found less than 10 per cent of savers chose to move their money at the end of a fixed term because of the hassle of switching.
Mr Handfield-Jones said: “In today’s times of low interest rates and rising inflation, finding an easy way to get the best rate has never been more important.”
He also pointed out that up to £255,000 of the money savers put into an Octopus Cash account would be protected under the Financial Services Compensation Scheme.
This would be achieved by spreading the deposit across the growing number of challenger banks, up to the protection limit of £85,000.
Although savers’ money may be allocated to three banks, clients will only need to open one Octopus Cash account, which Mr Handfield-Jones said cuts the hassle and paperwork that comes with opening and maintaining multiple bank accounts.
While savers can deposit more than £255,000 into the account, the extra funds would not be covered by the FSCS.
Octopus Cash charges financial advisers a subscription fee of £10 per customer, per month, but is offering advisers their first five clients for free before the end of April 2017.
Alex Reynolds, independent financial adviser at Advies Private Clients, said: "This cash account sounds interesting, but it's a one-year fixed term so there are better options out there."
However, he said it is positive that there is now another player in the market.