Ways to Tie Your Wife Up for Easy Access
High interest savings accounts are thin on the ground, but with some banks offering pitiful rates of just 0.01% make sure you are getting the most out of your savings.
If you're shopping for a regular saver account, First Direct offers a market-leading interest rate of 3.50%, but you need to open a current account to get the top rate. We have more information below.
We go into these in more detail in this article, but here's a quick rundown of the best interest rates on savings accounts at the moment:
- Easy access savings account: 1.71%
- Notice account: 2.10%
- Fixed-term bond: 2.83%
- Sharia savings account: 3.25%
- Regular savings account: 3.50%
Also check out our customer experience ratings on banking and savings winners.
Best easy access accounts
Best for: Savers with a lump sum in their bank account which you might need in a hurry.
Why we rate easy access accounts:
Instant access savings accounts are simple types of savings accounts that allow you to withdraw cash without notice. As a result, interest rates are often lower than other types of account.
While easy access accounts are, on the whole, straightforward and easy to understand, there are still some aspects of the terms and conditions of individual accounts to be aware of.
For example:
- Some easy access accounts include introductory bonuses, so the rate paid drops after an initial period.
- Others will restrict the number of penalty free withdrawals allowed per year.
Those who may need to get their hands on their money in a hurry have little choice but to keep it on easy access. But bear in mind that you can earn significantly more from other types of savings products listed later on in this article.
Below are the current top three easy access savings accounts:
Virgin Money offers a savings rate of 1.71% which makes it the top-paying account in the easy-access market.
Based on a deposit of £10,000:
- A rate of 0.01% would give you just £1 in interest all year with a high-street bank
- Although 1.71% still isn't amazing, it does mean you could earn £171 on your £10,000 investment rather than £1 – better in your pocket than in the bank's
If you have come into a windfall and already have your emergency pot of cash savings covered, read our article on how to invest £10,000.
Best notice savings accounts
Best for: Savers who can plan ahead and don't need easy access.
Why we rate notice accounts:
As it says on the tin, notice savings accounts require you to give notice to access your money without a penalty.
The usual notice period ranges from 30 to 120 days. However, there may be some accounts six months or even 12 months' notice.
Below are the current top three notice savings accounts:
Notice accounts are a little less well known and as a result are under-used, especially since none of the high street providers offer this type of account.
- Some accounts give the option to forgo the notice period by paying a penalty, typically a reduction of interest equivalent to the notice period.
- This can be taken from the capital if insufficient interest has built up prior to access, so it's important to plan carefully.
- However, not all accounts allow this option, so you need to check this before opening an account.
Not being able to access your money immediately can help you to resist dipping into you savings. It could also be a way of getting a little more interest on money that you know you will not need straight away.
Best fixed-rate bonds
Best for: Savers who want to be sure of the interest they will earn over the term but don't need access to their cash.
Why we rate fixed-rate bonds:
There are many different names used to describe this type of account, most commonly fixed-rate bonds. They are also known as fixed-rate deposits or fixed-rate savings accounts.
Fixed-term bonds are high interest savings accounts that pay some of the best rates on the market. You are essentially sacrificing access to your money for a slightly better return.
These accounts pay interest at fixed rates for a set term, usually ranging from six months to five years. However, there are some long-term savings bonds that pay fixed interest for as long as seven years.
Normally you cannot access your money until the end of the term, although there are providers that offer some access. Make sure you check the terms and conditions of individual accounts before going ahead.
Below are the fixed-rate bonds paying the highest interest to savers.
While not featured in the list above, if you're looking for a savings account from a high-street name then Nationwide if offering a three-year fixed-rate bond that pays 2.50%. The offer is available to existing Nationwide customers who have a current account, savings account or mortgage.
Nationwide's fixed-rate bond is competitive among high street banks and building societies, but you can find higher rates elsewhere with a shorter term of one year.
Some points on fixed-rate bonds:
- These deals are a great way for banks to entice new customers
- However, the banks will often withdraw their top deals once they have got enough customers on board, meaning the top rates don't hang around for too long
- This means you might need to move fast to grab a top rate
Tip: if you're happy to tie your money up for five years in a long-term savings bond, it might make sense to invest instead to be in with a chance of getting a better return.
Sharia compliant bonds
There are also Sharia-compliant fixed-term bonds, which can often be found paying the best rates on the market. Sharia-compliant savings accounts comply with Islamic law, but are available to any saver.
As Sharia law states that money itself has no intrinsic value, the payment and receipt of interest is forbidden. Instead, these account pay an expected profit rate (EPR).
These accounts have been part of the savings landscape for some time now and while the EPR is not guaranteed, the rates on fixed-term accounts have always been paid as expected.
Below are the current top three Sharia compliant fixed-term bonds:
Best regular savings accounts
Best for: Those who don't have a lump sum but who want to save money on a regular basis.
Why we rate regular savings accounts:
If you don't have a lump sum to invest, you could be a regular saver instead by putting aside a set amount each month.
You can do this into a normal easy access or notice account, or you can take advantage of a regular savings account.
About regular savings accounts:
- These often pay some of the best rates on the market. However, you are normally restricted on how much you can save into them each month
- There are terms and conditions to watch out for when you open one
- The high rates on offer tend to be 12 monthly introductory rates after which time they drop, so you may need to move your money
- Banks and building societies tend to offer them to existing customers with bank accounts already
They are a great way to get into the savings habit and build up a pot of cash with an account paying a decent rate of interest.
First Direct's regular saver account beats the market with a rate of 3.50%. However, you will need to open a current account with the bank to take advantage of this top regular saver.
A few things to note about First Direct's account:
- You can save up to £300 a month, or £3,600 a year
- Interest is paid annually
- With a rate of 3.50%, you can earn up to £68 over the year
- You will need a current account with First Direct to qualify
- If you're new to the bank it will pay you £150 to switch from your existing current account
First Direct isn't the only provider to give existing customers better interest rates. For more information, check out the top 'linked' regular savings accounts.
Saffron Building Society offers the top regular saver that's open to anyone, so it's a good option if you don't want to open a new current account. It pays annual interest of 2% on deposits of up to £50 a month for a year.
Below are the best regular savings accounts.
If you set up a direct debit from your bank account, for the day after you are paid, they can become like another bill but one you will benefit from in the future.
Will savings rates go up in 2022?
Interest rates on savings accounts have been on an upwards trajectory since the Bank of England increased the base rate five times since December.
In June 2022, the base rate increased to 1.25% from 1%. This followed four consecutive increases since December when it was at a record low of 0.1%.
This affected the interest rate on savings accounts; the average rate across the easy access market increased to 0.59% in July 2022, up from 0.39% in May, according to Moneyfacts. The average rate was 0.19% in November last year.
If you are wondering when interest rates will rise again and what the impact on your personal finances will be, read our article.
While this is bad news for borrowers, there is a silver lining for savers in that it could prompt an increase in the interest they can earn on savings accounts.
But the banks don't tend to pass on the full rate rise to savers so the difference will be marginal (and don't expect the rate to increase automatically on your savings account either).
It's worth keeping an eye on the top-paying accounts listed above so you can switch to a better deal if your savings aren't performing very well.
How to get the most interest on your savings
Even if savings rates do nudge up, they aren't likely to get anywhere near beating inflation but it is important to be vigilant with your savings.
Make sure you:
- Shop around for the best savings accounts
- Move your money to a better rate when your current rate ends
- Check whether your cash is protected by the Financial Services Compensation Scheme
- Check that your provider is authorised and regulated by the Financial Conduct Authority
- Think about the different savings accounts options available
Tip: Regular savings accounts usually offer the highest interest rates. You usually have to deposit a certain amount of cash every month.
Is my money protected?
When opening a savings account it's important to make sure that your money is protected by the Financial Services Compensation Scheme (FSCS). This is in place to protect savers and compensate savers if their chosen provider ceases trading and is unable to return their funds.
The FSCS is in effect a "last resort" fund for savers, if their bank or building society goes bust. It is funded by the industry in the form of a levy paid by each UK-authorised financial services firm.
Bear in mind that there is a limit as to how much of your deposits are protected by the FSCS. For savings this currently stands at £85,000 per person, per banking licence.
Those with joint accounts would be protected up to £170,000 in total.
Remember that if you hold £85,000 each in two banks that are part of the same institution. So if you hold money with both Halifax and Bank of Scotland, which are both owned by Lloyds Banking Group, only £85,000 will be protected, not £170,000.
National Savings bonds
Another popular option with savers are Premium Bonds from National Savings & Investment which offer the chance to win monthly cash prizes between £25 and £1m.
You can invest from as little as £25 in Premium Bonds and hold a maximum of £50,000. This would give you 50,000 entries in the monthly prize draw.
In June 2022 the odds of winning a prize increased to 1.40% from 1%. An extra 1.4 million prizes were paid out in the June prize draw.
NS&I also offers other savings products. In July 2022, NS&I interest rates for its Direct Saver and Income Bonds increased to 1.20% from 0.50%
The Treasury-backed bank NS&I also launched Green Savings Bond at the end of October 2021. It now pays a rate of 1.30% per year, though you have to tie your money up for three years. We have more information about NS&I's Green Savings Bond.
A bit about our independent ratings
It is best to use independent, whole-of-market best-buy tables to compare savings rates. This article uses tables produced by SavingsChampion.co.uk.
The accounts included are those that are currently available to all savers; this means some accounts that are open only to existing customers are not included.
Savings Champion monitors all the savings accounts available in the UK. It puts the top five from each category into its best-buy tables based on merit – not because of commercial links.
The best way to beat inflation eroding your cash savings is to consider investing. Check out our Investing for beginners guide.
Source: https://www.thetimes.co.uk/money-mentor/article/best-savings-accounts-in-2022/