Opening a joint savings account could help you to reach shared financial goals faster – whether you’re planning a holiday, looking to buy a new car or saving to buy your first home with someone else.
Unlike joint bank accounts, which are often used to manage household bills and don’t tend to pay much interest, it’s not usually possible to set up regular bill payments on a joint savings account. But you should earn a better rate of interest.
Another key difference is there won’t be an overdraft on your joint savings account, so there’s no risk of getting into debt.
Here, Telegraph Money explains how joint savings accounts work and what to consider before opening this type of account.
What are joint savings accounts?
A joint savings account is essentially a normal savings account, but it can be held by two or more people. All account holders will be able to pay money into the account and withdraw the funds when needed.
Joint savings accounts can be a great way to save and pool your money. If you live together, having a joint pot of cash set aside can also help cover unexpected household expenses, such as a new boiler or car repairs.
Another advantage of combining your savings is that you could potentially secure better interest rates, with certain accounts requiring a larger minimum deposit or balance to access the best rates.
The interest earned on a joint savings account is usually split equally between the account holders and set against their individual personal savings allowance. This is the case even if you and the other account holder are in different tax brackets.
All account holders will benefit from individual savings protection of £85,000 under the Financial Services Compensation Scheme (FSCS) in the event the bank collapses. If two of you hold the account, that means you’ll have £170,000 of cover – as long as you don’t have other accounts with the same financial institution.
Not all providers offer joint savings accounts, but you can usually choose from the following options:
- Easy-access savings accounts: Allowing you to withdraw funds whenever needed.
- Fixed rate savings accounts: Requiring you to lock away your funds for a set amount of time – usually a year or more – in return for a higher interest rate.
- Regular savings accounts: Helping you to save a certain amount every month.
You won’t be able to open a joint cash Isa, so if you want to shield your savings interest from tax you’ll have to save individually.
Who is eligible to open a joint savings account?
To open a joint savings account you’ll typically need to be at least 18 years old and a UK resident.
It’s often possible to open a joint savings account online by filling in a short form on the provider’s website. In some instances, you might have to open an account in a sole name first and then convert it into a joint savings account in a branch or over the phone.
Certain banks might also ask that you hold a current account with them before you can open a joint savings account.
If you don’t already have a current account with the bank, you’ll usually be asked to provide proof of identity (such as a passport or driving licence) and proof of address (such as a recent utility bill).
All account holders will need to sign a mandate. This establishes rules such as who can withdraw money from the account and who can close it.
Do you have to be married to have a joint savings account?
You don’t need to be married to open a joint savings account. You don’t even need to be related to the person you hold a joint account with, or live at the same address.
This means you could open a joint savings account with a flatmate, friend, partner or relative.
Considerations before opening this kind of account
The most important consideration is to only open a joint account with someone you trust. Both of you will have access to the money in the account, which means one of you could empty the account at any point.
It’s also important to establish some ground rules about what the account will be used for and how much you’ll each pay into it.
As you’ll both be able to track what’s being spent from the account, there’s the potential for arguments if one of you spends money on something that’s not a shared financial goal. Similarly, things can turn sour if one of you doesn’t contribute as much as the other to the account.
Unlike joint bank accounts, where your credit file is linked with the other account holders, joint savings accounts aren’t a consideration for lenders. So if you open a joint savings account with someone who has a poor credit score, this won’t have any effect on your ability to secure credit in the future.
However, if you need to open a joint bank account before you qualify for a joint savings account, your credit files will be linked.
What if you have a disagreement or want to close the account?
If you have a disagreement with the other account holder(s) and you’re worried they might withdraw the account funds, you can ask your bank to freeze the account. You won’t usually be able to unfreeze it until you’ve resolved the issue.
To close the account permanently, you will usually need to fill in a form that must be signed by all account holders. Alternatively, if appropriate, you can pop into your local bank branch to close the account in person. You might be asked to provide photo ID and you should ensure you stop any automatic payments into the account.
If one of the account holders should die, the way the funds are split will depend on how the account was set up. If the account holders are listed as “joint tenants”, any funds in the account will go straight to the remaining account holders.
If the account holders are listed as “tenants in common”, the deceased’s share of the money becomes part of their estate and is distributed according to their will.
To remove the deceased account holder from the joint savings account, you’ll need to inform the bank of the death and provide a death certificate.
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