Top savings accounts: where to find the best rates for your cash

As savings rates continue to plummet, we highlight the best of a bad bunch.

The Bank of England's decision to slash interest rates to a record low last year and the economic fallout of the COVID-19 pandemic continues to hammer savers desperate to earn a decent return on their cash.

While there were a handful of banks and building societies willing to pay you up to 5% on your cash in 2020, they have all been pulled or drastically cut.

The only small comfort for savers is that inflation is fairly low at present – 0.4% - so for the time being it is at least fairly easy to stop your savings from losing value in real terms.

Here, we round up the best savings rates available today. Be warned: it makes for painful reading!

Savings made simple: the best savings platforms

Current accounts: earn up to 2.02%

Perhaps the biggest rate cuts have been seen in the current account market, which has long been a popular option for savers with small pots of money.

As we mentioned earlier, rates of 5% were available at the start of 2020. Now, Virgin Money offers the best rate of just 2.02%, which is only available on the first £1,000 held in the account.

It’s worth stressing that, like most current accounts, the rate is variable so it can be changed at any time.

Nationwide’s FlexDirect account offers 2% on the first £1,500 in your account, with the rate falling to 0.25% after 12 months. To qualify, you'll need to pay in at least £1,000 a month.

Best fixed-rate savings

If you're willing to lock your money away for a while, Hodge Bank offers a rate of 1.3% on its five-year bond.

That's right, the best fixed-rate on the market today is just 1.3% – last year, you could at least have locked into a 2% rate.

Charter Savings Bank offers the second-highest rate of 1.26% on its five-year bond.

Of course, five years is a long time to not have access to your funds, so you might want to consider a shorter fixed-rate deal (which will sadly come with an even lower rate).

Ahli United Bank currently offers the best one-year fixed rate on the market, with an interest rate of 0.65%; you'll need a minimum deposit of £1,000.

The Bank of London and the Middle East (BLME) and QIB UK both offer the best two-year fixed rate, with an expected profit rate of 0.8%; the minimum deposit is £1,000.

Note that these bonds are offered by Shariah-compliant banks, which means they pay an expected profit rate rather than a guaranteed savings rate.

That said, such firms have an excellent track record when paying interest, and your savings are still covered by the FSCS, which protects funds up to £85,000.

Alternatively, DF Capital offers 0.76% on its two-year fixed-rate bond, but you’ll need to deposit at least £1,000.

Instant access savings: get up to 0.4%

In April 2020, the top easy access account offered 1.31%, but this has now fallen to a miserly 0.4%.

You can get this rate via Marcus, Saga or RCI Bank – all these accounts let you withdraw money whenever you want.

Notice accounts: get up to 0.6%

Similar to other savings accounts, notice accounts have suffered rate cuts as the top rate available is now 0.6%, down from 1.6% in April last year.

Moneybox offers 0.6% and you’ll only need £1 to open an account, but you’ll need to give 95 days’ notice to access your money.

Alternatively, you can get a rate of 0.5% with Close Brothers Savings and only have to give 35 days’ notice, but you’ll have to put £10,000 into the account.

Manage all your savings in one place with the Raisin UK savings platform

Cash ISAs: earn up to 1.1%

While the Personal Savings Allowance (PSA) has effectively made all savings accounts tax-free, you should still consider using your tax-free ISA allowance (which is £20,000 for 2021/22).

That’s because any money you put into an ISA will stay tax-free long term, even if the interest you earn grows beyond the PSA limits.

With the PSA, any interest you earn beyond the £1,000/£500 limit is taxed at your marginal rate.

The best rate on an easy access Cash ISA has fallen dramatically from 1.21% in April to 0.4% from Paragon Bank, Yorkshire Building Society or Charter Savings Bank.

You’ll need £1 to open the account with Paragon, but you’ll need £5,000 or £10,000 to open an account with Charter Savings Bank or Yorkshire Building Society, respectively.

It’s worth checking how many withdrawals you can get in a year as Charter Savings Bank allows you to withdraw at any time, while the other accounts are more restrictive.

Savers are normally only allowed to open one Cash ISA account per tax year, which usually means having to choose between the flexibility of an easy access deal and a better rate by locking into a fixed-rate deal.

Unfortunately, in the current savings environment, fixed Cash ISAs offer dismal returns, unless you lock your money away for longer.

The best one-year deal can be found with Paragon Bank and Yorkshire Building Society, which both offer 0.45%, a sharp drop from the top rate (1.35%) on offer last year.

The top rate for five-year Cash ISAs is now 1.1% (down from 1.4%), which you can get with Shawbrook Bank.

Where to earn the most interest on your cash

Here's a table with all the top deals for you to compare at a glance.

The account you go for will probably be determined by the amount you have to save and whether you want instant access to your money.

Please note that we've only included the highest-paying account from each category (i.e. five-year bond, instant access ISA).

Account

Type

Interest rate

Minimum deposit

Virgin Money

Current account

2.02% on up to £1,000

N/A

Hodge Bank

Five-year fixed-rate bond

1.3%

£1,000

Hodge Bank

Three-year fixed-rate bond

0.9%

£1,000

Cynergy Bank

Three-year fixed-rate bond

0.9%

£10,000

The Bank of London and the Middle East

Two-year fixed-rate bond

0.8%*

 £1,000

QIB UK

Two-year fixed-rate bond

0.8%*

£1,000

Ahli United Bank

One-year fixed-rate bond

0.65%

£1,000

Marcus

Instant access account

0.4%

£1

Saga

Instant access account

0.4%

£1

RCI Bank UK

Instant access account

0.4%

£100

Paragon Bank

Easy access Cash ISA

0.4%

£1

Charter Savings Bank

Easy access Cash ISA

0.4%

£5,000

Yorkshire Building Society

Easy access Cash ISA

0.4%

£10,000

Shawbrook Bank

Five-year fixed-rate ISA

1.1%

£1,000

Close Brothers Savings

Three-year fixed-rate ISA

0.7%

£10,000

Moneybox

95-day notice account

0.6%

£1

 Hampshire Trust Bank

Two-year fixed-rate ISA

0.6%

£1

Tipton Building Society

Two-year fixed-rate ISA

0.6%

£1,000

Paragon Bank

One-year fixed rate ISA

0.45%

£500

Yorkshire Building Society

One-year fixed rate ISA

0.45%

£100

Yorkshire Building Society

Regular savings account**

3.5% AER (variable)

Can save up to £500 a month for a year

*Anticipated profit rate (read more here)
** You must have had a continuous membership with Yorkshire Building Society starting on or before 1 January 2020

What's clear though is that if you want a better return on your money in the longer term, you're better off looking beyond traditional savings accounts right now.

If you are willing to take on some risk for potentially better returns, you could consider investing in the stock market (capital at risk).

Rates are correct at the time of publication; this article is regularly updated.

*This article contains affiliate links, which means we may receive a commission on any sales of products or services we write about. This article was written completely independently.

 

 

 

 

Comments


Be the first to comment

Do you want to comment on this article? You need to be signed in for this feature

Copyright © lovemoney.com All rights reserved.