Best savings rates this week
In this article, Moneywise reviews regular, children's savings, fixed-rate and instant-access accounts with the best savings rates currently on the market.
Remember, these rates are before tax, but from next year most people will be able to earn £1,000 interest from savings tax-free (depending on your income tax rate). In any case, if you haven't used your cash Isa allowance this tax year, getting an Isa should be your first port of call. See our round-up of the best cash Isa rates.
Unless otherwise specified, all these banks are individually licenced by the FCA, so your savings will be covered by the Financial Services Compensation Scheme (FSCS) up to £75,000. For more details on how the FSCS works, see our guide.
If you're looking for an account where you can access your money quickly, then a no-notice deal is a good idea. Just remember, the interest rate on these accounts is variable so it could decrease down the line.
Also, watch out for sneaky terms and conditions - not all instant access accounts offer unlimited withdrawals, so shop carefully.
- RCI Bank pays 1.02% AER on balances between £1 and £1 million, although at least £100 needs to be deposited when opening. This is an online-only account.
- Post Office Online Saver pays 1.01% AER on balances from £1. Note that the rate includes a bonus element of 0.76% for the first 12 months only. Only available online.
- NS&I’s income bond pays 1% AER on balances between £500 and £1 million. Unlike most savings bonds, you can access your money at any time. It’s available by post, online and by email.
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If you are happy to wait a little while before accessing your savings, rates on notice accounts tend to be higher than instant access savings. Some won't allow early access at all, though others may let you withdraw without notice, subject to losing some interest.
- Secure Trust Bank’s 90 Day Notice Account pays 1.32% AER on balances between £1,000 and £1,000,000. It’s available over the phone or by post.
- Charter Savings Bank’s 95 Day Notice Account (Issue 14) pays 1.05% AER on deposits between £1,000 and £250,000. This account is online only.
Fixed-rate savings accounts are normally aimed at people with a lump sum that they wish to lock away for a pre-agreed period of time.
Interest is fixed so your return is guaranteed, unlike instant access and notice accounts, which tend to be variable. However, do bear in mind that withdrawals and further deposits are rarely allowed.
- Atom Bank is one of two of providers paying a very competitive 1.4% AER on its one-year notice account, but you’ll need an Android or Apple smartphone to get one, as the bank is strictly app-only. You can save between £50 and £100,000, but if you want to save more you’re allowed multiple accounts. Bear in mind that if you deposit more than £75,000 with any bank your money won’t be fully covered by the Financial Services Compensation Scheme.
- Ikano Bank’s 1 Year Fixed Term Savings Account will match Atom’s 1.4% AER, if you deposit between £1,000 and £1,000,000. No early access is allowed, and the account is online only. Savings with Ikano Bank are protected by the Swedish deposit protection scheme, though unusually they'll protect up to £75,000 for UK savers instead of €100,000.
- Atom Bank has increased its two-year rate to 1.60% AER, and currently offers the highest rate of return for this term. You’ll need a smartphone to open an account, and the minimum deposit is £50. You can open several accounts, though if you save more than £75,000 your money won’t be fully assured by the FSCS.
- OakNorth Bank is currently paying 1.56% AER on its two year fixed rate bond. The account is covered by the UK FSCS guarantee. Minimum balance is £1,000 and maximum £100,000. This account can be opened via the internet only.
- Ikano Bank’s Fixed Two Year Saver pays 1.55% AER on balances between £1,000 and £1,000,000. It’s only available online. This account is covered by the Swedish deposit protection scheme, covering balances worth up to €100,000.
MEDIUM TERM (THREE / FOUR YEAR)
- Ikano Bank’s Fixed 4 Year Saver pays 1.95% AER on balances between £1,000 and £1,000,000. The bank is covered by the Swedish deposit protection scheme. The account is online only and doesn’t allow early access.
- Vanquis Bank 4 Year Savings Bond pays 1.85% AER on balances between £1,000 and £250,000. It’s online only.
- Ikano Bank’s Fixed 3 Year Saver pays 1.75% AER on balances between £1,000 and £1,000,000. As with the four year bond, it’s online only, allows no early access and is covered by the Swedish deposit protection scheme, up to £75,000.
LONG TERM (FIVE YEAR)
- The Atom Bank Five Year Fixed Saver pays 2.05% AER on balances between £50 and £100,000. The account is only available online, and no early access is allowed.
- Ikano Bank’s Fixed Five Year Saver pays 2.05% AER on balances between £1,000 and £1,000,000. The account is only available online, and no early access is allowed. The Swedish deposit protection scheme covers UK savings up to £75,000.
- Masthaven Bank’s 5 Year Savings Bond pays 2.01% AER on balances between £500 and £250,000. Covered by the UK Financial Services compensation Scheme. It’s online only, and no early access to the balance is permitted.
The current economic backdrop has not only highlighted the importance of saving, but means more people would like to do it little and often.
- First Direct Regular Saver pays 5% AER on deposits between £25 and £300 per month. The rate is fixed for 12 months and is only available to existing customers.
- M&S Bank’s Monthly Saver offers 5% AER on deposits between £25 and £300 to its current account holders. The interest is paid annually, and the rate is fixed for 12 months. After this, the money will either be transferred to your current account or transferred to the everyday savings account, which pays 0.35% AER so you’ll need to make a note in your diary to switch in a year.
- Nationwide’s Flexclusive Regular Saver pays 5% AER. However, it’s only available to people with a Nationwide Flex current account. Savers can deposit up to £500 per month. It’s available in branch or online.
- The best option not linked to a current account is the Saffron Building Society 12 Month Fixed Rate Regular Saver (Issue 3). This pays 3.5% AER on balances up to £200 per month. This account is available in branch and over the phone.
CHILDREN'S SAVINGS ACCOUNTS
- Halifax Kids Regular Saver offers a market-leading 4% AER 12-month bond. You can deposit between £10 and £100 in the account each month.
- Saffron Building Society pays 4% AER on its instant-access children’s regular savings account. It’s available in branch or by post. It can be held for a year, by anyone up to 15. You can save £100 a month. When the account matures, savings are transferred to an account paying 0.5% AER, so remember to make a note to switch.
We look across as much of the of the savings market as possible to find the best deals using industry data from Defaqto.
All our picks are nationally available. We try and pick products that are available to both new and existing customers, but we’ll highlight some offers for existing customers if they’re much better than what else is on offer.
Unless rates are significantly higher than on other accounts, we avoid products that pay an initial bonus (which is normally a euphemism for a rate cut after 12 months), or those with tiered rates (these may not pay the advertised interest rate if your balance rises above or falls below a set amount).
All these savings accounts are covered by the FSCS unless otherwise specified. If your bank is licenced by another European country, savings up to €100,000 will be protected, but by the government where the bank is headquartered, rather than the UK authorities.
We will never include a savings account that isn’t covered by a European deposit protection scheme.
To see all the savings accounts we consider, visit our savings and Isa comparison tools.
There are limits to how much you can invest in any tax year. For 2011/12, the limit is £10,680. Of that, the maximum you can invest in cash is £5,340 and the balance of £5,340 can be invested in shares (individual company shares or investment funds). If you don’t take the cash ISA allowance, you can invest up to £10,680 into a stocks and shares ISA.
A savings account on which the account holder is required to give a period of notice before making a withdrawal or face a penalty, usually a loss of a specific number of days’ interest or pay a fee. Notice periods of 30, 60 or 90 days are common. These accounts usually pay higher than average interest rates and require large initial deposits (£1,000 minimum) so the notice period and penalties are there to discourage withdrawals. Some of these accounts will only allow a certain number of withdrawals a year.
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.
An account opened with a clearing bank (few building societies offer current accounts) that provides the ability to draw cash (usually via a debit card) or cheques from the account. Some pay fairly minimal rates of interest if the account is in credit. Most current accounts insist your monthly income (salary or pension) is paid directly in each month and they offer a number of optional services – such as overdrafts and charge cards – which are negotiable but will incur fees.
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.
Where APR is the rate charged for money borrowed, Annual equivalent rate is how interest is calculated on money saved. The AER takes into account the frequency the product pays interest and how that interest compounds. So, if two savings products pay the same rate of interest but one pays interest more frequently, that account compounds the interest more frequently and will have a higher AER.
The Financial Services Compensation Scheme is the compensation fund of last resort for customers of authorised financial services firms. If a firm becomes insolvent or ceases trading, the FSCS may be able to pay compensation to its customers. Limits apply to how much compensation the FSCS is able to pay, and those limits vary between different types of financial products. However, to qualify for compensation, the firm you were dealing with must be authorised by the Financial Services Authority (FSA).