Customers opening the Virgin Atlantic 1 Year Flying Savings Account will earn 1,400 miles for every £1,000 saved. The air miles can then be exchanged for a range of Virgin Atlantic flights and cabin upgrades.

This means someone saving £15,000 could earn enough Flying Club miles for a return economy classic reward flight to New York, India or United Arab Emirates (21,000 miles).

The deal is equivalent to a fixed interest rate of 1.19% AER/gross.

By comparison, a customer would need a rate equivalent to 2.10% in order to earn enough interest to be able to buy the same number of miles direct from Virgin Atlantic.

Virgin credit card customers also earn air miles. On the Reward credit card option (£0 annual fee) customers can earn 750 miles by spending £1,000. On the Reward+ credit card option (£160 annual fee) customers can earn 1,500 miles for every £1,000 spent.

Rhian Emmanuel, director of savings at Virgin Money, said: “The new Flying Club Savings account is the first of its kind and is a brilliant option for savers looking to gain more value from their cash deposits. We are delighted to be able to offer such an innovative new account and to further expand our partnership with Virgin Atlantic.”

Flight of fancy or will it take off?

If you compare the equivalent 1.19% interest rate to the top paying one-year fixed rate bonds, the Virgin offer doesn’t look so attractive.

The current best buy comes from Atom Bank, paying 2.05%. You can also open a six-month bond from OakNorth Bank and receive 1.52% AER/gross.

Based on £1,000 deposited into the Virgin account, savers would ‘receive’ the equivalent of £1,011.90 at the end of the year. With Atom, they would earn £1,020,50.

And in the last few days, the Post Office has launched a market-leading easy access Online Saver account paying 1.33% (variable) for savings of £1+, which allows unlimited withdrawals – good if you may need access to your cash at the drop of a hat.

Anna Bowes, director of independent savings advice site, Savings Champion, says this offer is a “gimmick” and a complicated one at that.

She said: “If you are flying with Virgin, it could be a way of gaining better value on flights as you can get an upgrade with the air miles.

“But this account determines exactly how you spend your interest and for many people, that will be very restrictive.

“On face value, the 1.19% interest rate isn’t remotely competitive, and you can earn considerably more elsewhere, using the money wherever you want, although the 2.10% equivalent buying direct is competitive.

“If you open this account to specifically collect Virgin airmiles, this is a way of collecting more, but if you’re simply looking for interest, there’s no reason to be interested in the Virgin account.”

Other points you need to know

• The account can only be opened online and you’ll need to have a valid Virgin Atlantic Flying Club membership account and number (you can sign up to get one before opening the account).
• No withdrawals are permitted before maturity.
• Savers can deposit up to £1m.
• While customers don’t physically earn interest, for tax purposes, the interest of 1.19% forms part of their Personal Savings Allowance and therefore, it will need to be included on tax returns like any other savings interest.
• Virgin Atlantic splits its seasons between ‘standard’ and ‘peak’ with flights falling within the high-demand periods requiring a larger amount of air miles. As an example, peak travel (22 June to 6 September 2018) to New York requires 40,000 air miles, rather than the 20,000 during off-peak periods.
• All Reward Flights are subject to taxes, fees and carrier-imposed surcharges.
• Flying Club miles are automatically transferred to the Flying Club Account within five working days after the date of maturity.
• Unredeemed Flying Club miles are valid for three years from the most recent qualifying earning or spending activity. As such, this means providing the account remains active, there’s no effective expiry date.
• Virgin only flies long-haul to destinations in the US, Caribbean and Mexico, as well as India, Hong Kong, Dubai and more.