Virgin Money unveils its savings account rates. How do they compare?

Earlier this week, Virgin Money completed its takeover of Northern Rock. Today, it released its savings account rates: a 2.85% instant access account and a 2.85% cash ISA.

Both accounts are instant access savings products, with no penalties for withdrawal. Neither account is artificially boosted by a temporary first year bonus.

Virgin Money’s aims extend beyond topping tables to instead provide ‘long-term value’ by not ‘pulling the rug from under people’s feet’.

As noted here yesterday, banks often furtively penalise cash ISA savers for their loyalty by offering attractive rates that plummet after an introductory period. Consequently, the average cash ISA rate offered in 2011 was a miserly 0.53%.

Savers should be encouraged by Virgin Money’s offering, then. For instant access cash ISAs, Virgin Money’s 2.85% is already a strong competitor. Which4U’s current ISA tables would place this narrowly below the 3.1% ISA currently offered by the Nationwide and the 3.0% ISA currently offered by ING Direct.

However, once the temporary bonus rates on most other available ISAs expire - typically 12 months after opening - Virgin Money savers will begin recouping the benefits almost immediately.

The picture is more or less identical for instant access savings accounts. Currently on Which4U, Nationwide’s MySave Online Plus (3.12%) narrowly leads ING Direct’s Saving Account (3.10%).

However, Nationwide’s account limits penalty-free withdrawals, while ING’s account is heavily inflated by an introductory bonus, and falls to just 0.50% after 12 months.

Therefore, in an age of furtiveness and subterfuge, Virgin’s accounts are striking for their simplicity, consistency, and transparency. Savers are able to apply online, by telephone, or in Northern Rock branches, and can expect the same rates through any of these methods.

"We have a unique opportunity to build a new kind of bank in the UK", said chief executive Jayne-Anne Gadhia. "A bank that's honest, fair and transparent. A bank that will aim to make a real difference and provide enhanced competition in UK retail banking."

If consumers are quick to recognise the advantages of stable rates over artificially inflated competitors, Virgin Money could start ruffling feathers amongst high-street competitors much sooner than expected.

Keith McDonald
Which4U Editor

Edit: Virgin Money have since added a monthly interest option to their easy access cash ISA accounts, paying 2.82% p.a. (12th January 2012).

Existing savers with Northern Rock should note that Virgin Money’s savings accounts fall under the aegis of Northern Rock’s registration, and savers will only be guaranteed a maximum of £85,000 across all deposits with these institutions. More information is available on our savings account page.