Savings update: best deals on offer as rates creep higher
Some banks and building societies have edged rates up on easy-access accounts or launched competitive fixed rate deals, but they are still at historically low rates and likely to remain there for the foreseeable future. Experts predict there is very little chance of a rise in base rate this year.
But with Post Office Online Saver, make sure you move your money after the first 12 months. The 1.01% includes a 0.76% bonus which only lasts a year. After than the rate plummets to 0.25%.
With French-owned RCI, your money is covered by the French compensation scheme which gives €100,000 (around £85,000) if the bank runs into trouble rather than the UK scheme, which covers you up to £75,000.
Other top deals
Virgin Money pays a slightly lower 0.95% on its Defined Access Saver 9, available online, through its branches or by post. You are limited to three withdrawals a year - make more and the rate drops to 0.25%.
Leeds Building Society pays 1.3% fixed until 2 April next year and gives you access to half your cash in the bond during the term without paying a penalty.
On easy-access cash Isas the top rate comes from National Savings & Investments Direct Isa at 1%. You can't transfer your existing cash Isas into these accounts.
The best deal for transfers is Virgin Money Defined Access Isa, available online, through its branches or by post, at 0.95%.
But on this account you are limited to making three withdrawals a year. If you make more, then your rate drops to 0.5%.
Family Building Society Market Tracker Isa pays 0.9% with no withdrawal restrictions and accepts transfers.
This story was originally written for our sister magazine, Money Observer.
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.
This is a mutual organisation owned by its members and not by shareholders. These societies offer a range of financial services but have historically concentrated on taking deposits from savers and lending the money to borrowers as mortgages, hence the name. In the mid-1990s many societies “demutualised” and became banks. One academic study (Heffernan, 2003) found demutualised societies’ pricing on deposits and mortgages was more favourable to shareholders than to customers, with the remaining mutual building societies offering consistently better rates. In 1900, there were 2,286 building societies in the UK; in 2011, there are just 51.
Also referred to as the bank rate or the minimum lending rate, the Bank of England base rate is the lowest rate the Bank uses to discount bills of exchange. This affects consumers as it is used by mainstream lenders and banks as the basis for calculating interest rates on mortgages, loans and savings.