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


Updated on 19 November 2019 | 10 Comments

With UK inflation currently at 1.5%, it's vital your savings are earning at least this much to avoid losing money in real terms. Here are your best options.

It's no secret that even the best savings rates on the market are a far cry from the deals you could get before the financial crisis struck.

While the 'best buy' savings tables can sometimes look like a cruel joke, it's important not to get disheartened.

At the very least, savers must aim to beat inflation (currently 1.5%) to avoid their money actually losing value in real terms.

Thankfully this is fairly easy to do, 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, United Bank UK offers a rate of 2.36%, but you should think carefully before fixing for such an extended period.

You don’t necessarily have to lock your money away as it's possible to get a rate of 5% for a year on small sums.

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.

TSB's Classic Plus account pays 3% on balances of up to £1,500, provided you credit the account with £500 a month and register for internet banking and paperless billing.

Club Lloyds (from Lloyds Bank) and Bank of Scotland’s Classic Account with Vantage recently cut their rates from 1.5% to 1% for balances between £1 and £4,000, but you can earn 2% on balances between £4,000 and £5,000.

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 have two Direct Debits. 

There's also a £5 monthly 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 and are close to at least keeping up with inflation.

At the time of writing, Marcuswhich is part of Goldman Sachs, Virgin Money and Cynergy Bank all offer the best rate of 1.45%.

Marcus’ easy access account is probably the best option as it allows unlimited withdrawals unlike Virgin's Double Take E-Saver, which is limited to two in a year.

Meanwhile, the Cynergy account comes with a hefty 0.7% bonus which disappears after one year, whereas Marcus will fall by just 0.1%.

Handily, you can actually renew your rate after one year to avoid your Marcus rate dropping to 1.35%.

To do so, you simply log in to your account, select 'review your savings' and then click on 'renew your bonus'.

Notice accounts

PCF Bank offers one of the best notice accounts at the time of writing at 1.85% although you have to wait 180 days to access your money and you need at least £1,000 to open an account.

If you would prefer a shorter wait for your cash, PCF Bank also offers a 100-day notice account with a slightly lower rate of 1.80%. You would still need £1,000 to open an account.

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

Cash ISAs

While the Personal Savings Allowance 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 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 is available from Virgin Money.

But Virgin Money’s Double Take E-ISA only allows you to withdraw money two times per calendar year, so it’s questionable whether it’s truly an easy access account.

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 Al Rayan Bank with an expected profit rate of 1.60%. While this is not guaranteed, Sharia-compliant banks tend to have a good track record when paying interest and savings are covered by the FSCS, which protects funds up to £85,000.

You’ll need at least £1,000 to open the account.

The second best one-year rate on the market is 1.50%, which Aldermore offers.

United Bank UK is now at the top of the five-year Cash ISA best buy tables with a rate of 2.01%. As we have mentioned before, staying fixed in this long can be risky.

Fixed-rate bonds/Shariah bonds

Bank of London and the Middle East offers the best one-year fixed rate on the market, with an expected profit rate of 1.90%; you'll need a minimum deposit of £1,000.

Not interested in a Shariah-compliant bank? An alternative one-year fixed rate of 1.80% is available from Metro Bank.

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).

So, the fixed interest rate of 1.36% is essentially converted into airmiles after a year.

Both Bank of London and the Middle East and Gatehouse Bank offer the best two-year fixed rate, with an expected profit rate of 2.10%; the minimum deposit for either is £1,000.

United Bank UK tops the table for its five-year bonds at 2.36%.

It used to be that the best rates of all await the most patient savers, but this may not be the case.

PCF Bank will give you a rate of 2.15% 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, 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 (interest paid on first £2,500)

PCF Bank

Seven-year fixed-rate bond

2.15%

£1,000

 United Bank UK

Five-year fixed-rate bond

2.36%

£2,000

Bank of London and the Middle East

Four-year fixed-rate bond

2.10%*

£1,000

Bank of London and the Middle East

Three-year fixed-rate bond

2.20%*

£1,000

United Bank UK

Three-year fixed-rate bond

2.20%

£2,000

Bank of London and the Middle East

Two-year fixed-rate bond

2.10%*

 £1,000

Gatehouse Bank

Two-year fixed-rate bond

2.10%*

£1,000

Bank of London and the Middle East

One-year fixed-rate bond

1.90%*

£1,000

Marcus

Easy access account

1.45%

£1

Virgin Money

Easy access account**

1.45%

£1

Cynergy Bank

Easy access account***

1.45%

£1

Virgin Money

Easy access Cash ISA

1.36%

£1

United Bank UK

Five-year fixed-rate ISA

2.01%

£2,000

Hinkley & Rugby Building Society

Three-year fixed-rate ISA

1.76%

£500

United Bank UK

Three-year fixed-rate ISA

1.76%

£2,000

PCF Bank

180-day notice account

1.85%

£1,000

United Bank UK

Two-year fixed-rate ISA

1.67%

£2,000

Al Rayan Bank

One-year fixed rate ISA*

1.60%

£1,000

M&S Bank

Regular savings account****

2.75%

Can save between £25 and £250 a month

First Direct

Regular savings account****

2.75%

Can save between £25 and £300 a month, up to £3,600 a year

HSBC

Regular savings account****

2.75%

Can save between £25 and £250 a month, up to £3,000 a year

*Anticipated profit rate (read more here)
**Restricted to two withdrawals per calendar year, rate includes 0.70% bonus for the first 12 months
***Only available to existing customers. Rate falls by 0.7% after one year.
****Must have linked current account

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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