Opening a joint savings account
Saving for a nest egg or a rainy day needn't be a solo effort. We look at the pros and cons of combining forces and opening a joint savings account.
- A joint savings account can be held between two or more people, and usually you don't need to be married or in a civil partnership
- All co-owners are responsible for the debt on an account, regardless of who was responsible for overspending
- If you part ways with your co-owner(s), the account can be frozen until you come to an agreement on how to split the funds
A joint savings account can be a convenient way to share the responsibility of mortgage repayments and household bills with two or more other people.
Much like a joint current account, you don’t usually have to be married to the co-owner of the savings account. They could be a partner, relative, friend or flatmate.
Plus most providers don't require you to all live at the same address. So all you need is a common savings goal and a co-saver to help you get accomplish your target faster.
A joint savings account works in the same way as a sole owner account, except that there are two or more named account holders that are able to pay into the account.
Each account holder can access the account, deposit and withdraw funds, view all transactions, and set up standing orders and direct debits.
To open a joint bank account you need to have a permanent UK address and be over 18. You’ll then be required to fill in an application form either online, over the phone, or in person.
Did you know...?
- You can't take out a joint Isa account. This is because the annual, tax-free savings allowances apply to individuals. In fact, that's what the 'I' stands for.
Your bank may provide all account holders with a debit card, or a chequing book and (depending on the provider) supply access to online and telephone banking. Plus you may be provided with access to the account via cash machines. Usually a cheque book can also be requested.
You can still maintain your personal accounts, separate to your joint savings account, and they don’t have to be with the same provider.
You may earn more interest on a joint savings account if the pooling of funds means the value of the account is higher than in your sole account.
Adding a named saver to an existing savings account?
If you’re warm for the form of a pre-existing savings account, your bank may let you add a co-saver to the account.
Remember though that shopping around gives you a chance to reassess your saving style, and check you’ve got the right rates and type of savings account for you.
On the other hand, some banks will require you to open the account as a sole saver rather than as a twosome, and add another saver retrospectively.
Who could be excluded from holding a joint savings account?
Restrictions will vary between banks, but students and their parents may find they're ineligible for joint savings. Likewise, those under 18 may struggle too.
You may also be asked to open a current account with the bank in order to gain access to a particular savings package.
If the savings account is a real bobby dazzler, make sure there’s no sting in the tail when you dive into the terms of the current account. Find out if the current account is really free, and there are no scary provisos, before committing.
Reasons to be cautious
There are a number of elements to be aware of before committing funds to a joint savings account.
Do you and the co-owners have a similar attitude towards money?
It’s important that you completely trust each other and hold shared values towards finances, as all the funds in the account can be withdrawn at any time by any of the named account holders.
Some accounts do allow you to set up restrictions, meaning permission needs to be granted for certain transactions.
Is there an overdraft on the savings account?
Most providers will enable you to arrange an overdraft facility on your joint savings account, provided all named co-owners pass the provider’s credit checks.
However, all co-owners are then responsible for the overdraft, regardless of who raked up the debt.
It’s worth noting that if you have a sole account with the same provider as the joint account, some providers may move funds from your sole account to the joint account to cover debts.
Protecting your credit record
Your credit record will take into account the activity of all co-owners of joint savings accounts and current accounts that you're named on.
When opening a joint account, the provider requires all account holders to read and sign a mandate that outlines how the account is run, and the responsibilities of all named co-owners.
What happens if you and the co-account holder(s) go your separate ways?
If – for whatever reason – you and the other account holders decide you don’t want to continue holding a joint bank account together, then you can close the account and divide the balance between all co-owners.
The bank will need this, or any alternative split in funds, agreed in writing by all parties.
However, if co-owners are in disagreement either over the closing of the joint account, or how the funds should be distributed, then it’s possible to cancel the mandate and freeze the funds. No one can access the funds until the co-owners, or the courts, decide how best to split them between all relevant parties.
For accounts where parties can’t come to a harmonious decision on closing the account and splitting the funds, the legal protection available varies depending on the relationship between the co-owners:
- In general, married couples or those in civil partnerships will have the balance of the joint savings account split equally between them, regardless of how much each individual contributed. This does vary though depending on where in the UK you live.
- Joint savings accounts where the co-owners are friends or family members will be instructed to divide the funds depending on what each party has contributed.
The Financial Services Compensation Scheme (FSCS) covers joint savings accounts up to the value of £75,000 – or £150,000 for a couple – in the case of the provider collapsing. This assumes you have no other accounts with the same provider.
Are there alternatives to a joint savings account?
For families making financial decisions on behalf of an elderly or infirmed family member, a joint bank account allows for greater flexibility at a difficult time.
Certain providers may offer you a ‘convenience account’, which – in a similar gesture to joint savings account – enables the account holder to add an additional named person to their account.
This person is authorised to make payments, write cheques and perform a range of pre-agreed actions on behalf of the account holder.
Remember that not every savings account is suited to making payments online, or over the phone, so read the terms and conditions carefully.
You may need a third-party mandate in order to manage the account, or gain the power of attorney if the account holder is too unwell to make decisions or manage the account.
Contact a solicitor or speak to Citizens Advice to find the right method of managing a savings account on behalf of another person.†
Which joint savings account is right for me?
As with sole accounts, there are a variety of different accounts available from a range of providers, each with varying interest rates, overdraft facilities, rewards, extras and fees.
It’s important to compare all the different accounts available to make sure you get the joint savings account most suited to you and your co-owners’ needs.
Don’t forget about tax
The personal savings allowance introduced in April 2016 allows higher-rate taxpayers tax-free savings of up to £500, and £1,000 for basic-rate savers.
If you and your co-saver are taxed differently, the HRMC splits the interest between each saver, and reviewed against the individual’s personal savings allowance.