Halifax launches savings lottery(Image: Halifax)

There's no doubt that the rates paid on most savings accounts are painfully low these days. The top-paying easy access account currently pays 3.18%, which is well behind inflation at 4.5%.

Halifax is trying to boost stagnant savings market by launching a monthly prize draw for all customers who have at least £5,000 in Halifax savings accounts. Here's the breakdown of the prize money:

  • Three prizes of £100,000 each month
  • 100 prizes of £1000
  • 1,000 prizes of £100

That means a total of £500,000 will be given away each month, or £6 million over the course of a year.

All prizes are in addition to interest payments on the savings accounts. You don't need to have £5,000 in one individual account to qualify, but you will need to have that total or more in various Halifax savings accounts.

Savers will also need to register for the draw to be eligible. Registration can be done online and will apparently take less than two minutes. Halifax will write to all its saver customers in October to tell them about the draw and will also run a major marketing campaign.

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So what are the chances of winning?
It's hard to say at the moment. That's partly because Halifax won't reveal how many savers currently have more than £5,000 in their accounts, but also because we have no idea how many Halifax savers will make the effort to register.

All we can do is give an example of what would happen if one million eligible Halifax savers registered for the draw. Under this scenario, you'd have a one-in-333,333 chance of winning £100,000, and a one-in-907 chance of winning any of the prizes.

Given that some people may take a while to register, your best chances to win will probably come in the early draws. So if you're a Halifax customer, it makes sense to register before the first draw in December.

If your savings balance goes below £5,000 for one month, you won't be eligible for the draw that month, but you'll automatically be re-entered the next month if your balance goes back above the £5,000 mark.

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Little difference to average returns
Now you may be worrying that this scheme will reduce the rates paid on Halifax savings accounts.

A Halifax spokesperson told us that if £6 million was spent on boosting savings interest rates rather than on prizes, it would make a 'really, really small' difference to rates. Perhaps as little as 0.01%.

In other words, this prize scheme is going to make little difference to average returns on Halifax savings accounts. But if it encourages a few more people to save, then that's a good thing.

That said, it only makes sense to save with Halifax if the account is the best one for you and your circumstances. It makes no sense to sacrifice, say 1% in interest, for the tiny chance that you might win £100,000.

So let's see how good the Halifax accounts actually are...

Easy Access
Halifax's best instant access account, the Halifax Online Saver, pays 2.8% a year in interest at the moment and the minimum amount you can deposit is £1. That's better than many instant access accounts, but it's not the best. If you went for Derbyshire Building Society's NetSaver account, you'd be paid 3.18% and you could still access your cash whenever you wanted.

If you put £5,000 in the Derbyshire account and left it untouched for a year, you'd earn £159 in interest. If you put it in the Halifax Online Saver, you'd only earn £140.

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Fixed rate bonds
When it comes to fixed rate bonds, Halifax is further off the pace. If you can tie up your money for a year, you could get 3.46% from Leeds Building Society's Fixed Rate Bond whereas Halifax's one-year bond will only pay you 2.5%.

If you want a three-year bond, you could get 4.25% from United National Bank, whereas Halifax will pay you 3.75%.

Cash ISAs
Halifax's strongest offering is in Cash ISAs. The Halifax ISA Saver Fixed account pays 4.4% if you can tie up your money for five years. That's only just behind Clydesdale's market-leading Cash ISA Fixed Rate Bond which pays 4.5% a year over five years.

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The verdict
So the general picture is that Halifax tends to operate above-average savings accounts but not market-leaders. If you're desperate to win £100,000, by all means place your money with Halifax. You almost certainly won't win the jackpot, but you'll get a reasonable return on your savings.

But if you're a ruthless savings shark who wants to get as much as interest as possible, you might be better off elsewhere.

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