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

With UK inflation currently at 1.9%, it's vital your savings are earning at least this much to avoid losing money in real terms. Here are your best options.

When it comes to savings goals, the very least you need to aim for is beating inflation.

Thankfully, that's fairly easy to do these days, as our round-up of the best savings rates will show you.

For example, If you're happy to lock your money away for five years, Gatehouse Bank offers a none-too-shabby rate of 2.75%, but you should think twice about fixing for such an extended period.

Elsewhere, Al Rayan Bank has raised expected profit rates on their 18-monthtwo-year and three-year fixed term deposit accounts to 2.32%, 2.42% and 2.52% respectively, with the two-year fixed rate account leading the market.

However, it is possible to get a rate of 5% (for a year) without locking your money away at all.

Before we reveal the top deals, it's worth flagging two key developments that should change the way you think about savings.

A new savings landscape

The first is the Personal Savings Allowance (PSA).

Launched in April 2016, the PSA allows basic rate taxpayers to earn up to £1,000 and higher rate taxpayers to earn up to £500 in savings interest tax-free. Additional rate taxpayers do not have a PSA.

This means instant access, notice and fixed-rate bonds are now far more lucrative as providers will stop taxing savings interest at the source.

Not just about traditional savings accounts

The second change is the dramatic rise of current accounts as a viable home for your savings.

While banks have traditionally offered terrible rates of interest on in-credit current account balances (and many still do!), some are luring new customers by offering rates that comfortably beat the best buy savings accounts.

And, as they’re also included in the PSA, you get the same tax benefits to boot.

Let's look at all of these and more to see what rates you can get and where the best place to put your cash is.

Current accounts

As we’ve just mentioned, some current accounts offer inflation-busting rates.

The downside is they have pretty miserly deposit limits, and increasingly require you to jump through a few hoops to qualify for the headline rate.

Nationwide’s FlexDirect account pays 5% interest on balances of up to £2,500 for the first 12 months, but you'll need to pay in at least £1,000 a month.

One upside of the TSB IT chaos is that TSB's Classic Plus account pays 5% on balances of up to £1,500, provided you credit the account with £500 a month. 

Unfortunately, TSB’s generous rate will not stick around as it will fall to 3% from 2 July 2019. 

Lloyds Bank is offering the Club Lloyds account, the interest rate of which has been reduced to 1.5% on balances between £1 and £5,000, as long as you credit the account with £1,500 a month and set up two direct debits from it.

The Bank of Scotland's Classic Account with Vantage also pays 1.5%.

If you don't want to spread your money around, Santander's 123 account pays 1.5% on balances of up to £20,000. You need to pay in £500 a month and set up at least two direct debits. 

There's also a £5 a month fee on the account but you can earn cashback on some of your direct debits for household bills, which can help cover that.

Now let's look at how traditional savings accounts fare.

Make sure you're earning a top rate: compare savings accounts, Cash ISAs and P2P investments

Instant access savings accounts

While you can't beat inflation, access savings accounts are far more generous than a couple of years ago.

At the moment, the top rate of interest on an easy access account is currently 1.5% from Marcus, which is part of Goldman Sachs. You will need to renew the rate after a year, otherwise the interest rate drops to 1.35%.

Tesco Bank also has an easy access account with 1.45% interest (for 12 months) for balances of up to £1 million.

Notice accounts

If you can wait for your cash for 180 days, you can get a rate of 1.86% from Secure Trust Bank, but you’ll need a sizeable £1,000 to open it.

Make sure your savings are earning a top rate: compare accounts

Cash ISAs

While the PSA has effectively made all savings accounts tax-free, you should still consider using your tax-free ISA allowance (which will remain at £20,000 for 2019/20).

That’s because any money you put into an ISA will stay tax-free long term, even if the interest you earn grows. 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 is available with Coventry Building Society, offering 1.5% interest with a minimum deposit of £1.

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

The best one-year deal can be found with Charter Savings Bank which offers an interest rate of 1.62%. However, you’ll need £5,000 to open an account.

Shawbrook Bank is now at the top of the five-year ISA best buy tables with 2.3% interest rate, currently beating inflation, although as we have mentioned staying fixed in this long can be risky.

Fixed-rate bonds/Shariah bonds

The Bank of London and the Middle East offers the best one-year fixed rate on the market, with an expected profit rate of 2.2%; you'll need a minimum deposit of £1,000: opt for QIB’s 2.05% rate instead and you’ll only need £1,000.

If you're a Virgin frequent flyer, take a look at the Virgin Atlantic 1 Year Flying Club Savings Account, which pays Flying Club miles instead of interest (read more about earning airmiles here).

Al Rayan Bank offers the best two-year fixed rate, with an expected profit rate of 2.42%; the minimum deposit is £1,000 over two years.

Gatehouse Bank tops the table for its five-year bonds, with an expected profit rate of 2.75%.

The best rates of all await the most patient savers: Bank of London and the Middle East will give you a rate of 2.75% on at least £1,000, but you won't be able to access your money for seven years.

It's a heck of a long time to lock your money away (more on why that's a risky decision here), so make sure you can live without it for that long!

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-interest accounts from each category (i.e. five-year bond, instant access ISA).

Account

Type

Interest rate

Minimum deposit

Nationwide FlexDirect

Current account

5% (one year only)

£1,000 per month (max: £2,500)

Bank of London and the Middle East

Seven-year fixed-rate bond

2.75%*

£1,000

 Gatehouse Bank

Five-year fixed-rate bond

2.75%*

£1,000

Secure Trust Bank

Four-year fixed-rate bond

2.5%

£1,000

Bank of London and the Middle East

Four-year fixed-rate bond

2.5%

£1,000

Gatehouse Bank

Three-year fixed-rate bond

2.55%*

£1,000

Al Rayan Bank

Two-year fixed-rate bond

2.42%*

 £1,000 (over two years)

Bank of London and the Middle East

One-year fixed-rate bond

2.2%*

£1,000

Shawbrook Bank

Five-year fixed-rate ISA

2.30%

£1,000

State Bank of India

Three-year fixed-rate ISA

2.05%

£5,000

Secure Trust Bank

180-day notice account

1.86%

£1,000

Virgin Money

Two-year fixed-rate E-ISA

1.82%

£2

United Trust Bank

Four-year fixed-rate ISA

2.20%

£15,000

Charter Savings Bank

One-year fixed rate ISA

1.62%

£5,000

Marcus

Easy access account

1.5%

£1

Coventry Building Society

Easy access ISA

1.5%

£1

*Anticipated profit rate (read more here)

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.

Willing to take on some risk for a higher rate? You could visit our investment centre or have a look at the peer-to-peer tab in our savings tables

This article is regularly updated with the latest rates

 

 

 

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