What a notice account is
A notice account is a deposit you can add to at any time, but can only take money out of by giving the bank a fixed period of warning. On a 95 day account, you tell the bank today that you want £500,000 back and it arrives in 95 days. There is no fixed term and no maturity date. The money stays in the account for as long as you leave it there, earning a rate that is usually variable, and the only restriction is the notice period on the way out.
Notice periods run from around 30 days up to six months. Ninety five days is the most common point in the business market, and the reason is not arbitrary.
Why the bank pays more for it
Banks are required to hold enough liquid assets to survive thirty days of stress, under a rule called the liquidity coverage ratio. When the regulator works out how much money might leave a bank in those thirty days, a deposit the customer can withdraw at will counts as money that might go. A deposit the customer has to give more than thirty days' notice on does not, because by the time it can leave, the thirty day window has closed.
That is the whole economics of the product. Money on 95 days' notice is, in the bank's regulatory accounts, stable funding. It is cheaper for the bank to hold than instant access money, and the bank passes some of that saving back as a higher rate. Ninety five days sits comfortably past the thirty day line and just past a calendar quarter, which is why so many providers have settled on it.
The regulatory window a bank has to be able to survive. A deposit on 95 days' notice sits outside it, so the bank can treat it as money that is staying. That is what it is paying you for.
Why nobody has offered you one
Your main bank almost certainly has a notice account. It is on the website. What it does not have is a reason to tell you about it, because the money you leave in the current account or the basic business saver is the cheapest funding the bank will ever get, and moving it to a notice account costs them margin. The accounts are also most actively offered by the specialist and challenger banks, who fund their lending with deposits and compete hard for them. A finance director who only ever speaks to one relationship manager at one bank will rarely hear about any of this.
The catch, stated plainly
There are three. The money is not available in an emergency. Some providers will release it early with a rate penalty, many will not, so a notice account is for cash you are confident you will not need at short notice. The rate is usually variable, and the provider can cut it, though it normally has to give you at least the notice period's warning so you can serve notice and leave at the old rate. And a notice account is still a bank deposit, so the £120,000 Financial Services Compensation Scheme limit applies per banking licence in exactly the way we set out in the last piece. Larger balances belong across several providers, not one.
How much of your cash belongs in one
Draw the company's cash balance over the last twelve months as a line. It goes up and down with the quarter, the tax dates, payroll and the big customers' payment habits. Below all of that there is a floor, an amount the balance has never dropped beneath. That floor is the money that has been earning the instant access rate for a year without ever being needed instantly.
The floor is the notice account money. Above it, the operating buffer stays instant access because that is what it is for. Known future payments with a date, a tax bill or a dividend, suit a fixed term deposit that matures a few days before. Most businesses with cash in the low millions end up with something like a third of it on notice, a third available immediately and a third on fixed dates, and the mix is rebalanced each quarter when the forecast is updated.
Three questions before you open one
What is the floor? If you cannot say what the balance has never dropped below, you cannot size the account, and a guess that is too high is the only way this product hurts you. Which licence is the provider on? Specialist banks are often standalone licences, which helps with spreading, but check rather than assume. What does the notice account pay against your instant access rate, and against what else is available? The gap between a high street default rate and a competitive notice rate is usually the single largest number in the whole exercise, and it is a number worth having in writing before you decide.