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.
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 Freedoms Savings Account offers 1.65% AER on a £100 minimum deposit. Accounts must be managed online.
- The Virgin Money Defined Access Saver (Issue 2) pays 1.51% AER on balances between £1 and £250,000, providing you only make up to three withdrawals a year. Take out more and the rate falls to 0.75%.
- The Post Office Online Money Saver (Issue 17) pays 1.5%, including a 0.85% bonus for 12 months, so make a note in your diary to switch. Accounts can be opened with a pound, and the maximum deposit is £2,000,000. As the name suggests, it's online only.
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If you want to make withdrawals but are happy to give your bank or building society notice before you do, then you could get a better rate with a notice account, although recently rates have been disappointing.
- Shawbrook Bank 120 Day Notice Personal Account (Issue 30) pays a rate of 1.9% AER. The account can be opened with £1,000 and you can save up to £500,000. It's available online, by post or online.
- Charter Savings Bank 180 Day Notice Personal Savings Account (Issue 2) pays 1.85% AER. The account must be opened online requires a deposit between £1,000 and £250,000 to earn interest.
- Hampshire Trust 100 Day Notice Account (issue 1) pays 1.81% AER on balances between £1,000 and £250,000. It’s postal only, so you’ll need to give 100 days’ written notice to make a withdrawal.
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. However, bear in mind that withdrawals and further deposits are rarely allowed.
One year/18 months:
- Shawbrook Bank's 1 Year Fixed Rate Saver (Issue 33) holds the top spot, paying 2.15% AER on balances between £1,000 and £2,000,000. No early withdrawals are permitted, and it's available by post or online.
- Charter Saving's Bank's 1 Year Fixed Rate Bond offers 2.07% AER on a minimum opening balance of £1,000. The account must be managed online.
- RCI Bank’s One Year Fixed Term Account pays 2.06% AER on balances between £1,000 and £1,000,000 to people applying online.
- Shawbrook's Two Year Fixed Rate Bond (issue 34) pays 2.45% AER on balances between £1,000 and £2,000,000. You can open the account online or by post.
- Challenger Fidor Savings Bank pays 2.4% AER over two years on its online-only fixed rate bond. Note your savings aren't guaranteed by the Financial Services Compensation Scheme - instead it's covered by the German equivalent, which means deposits of up to €100,000 are protected. You can save between £100 and £100,000.
- RCI Bank 2 Year Fixed Term Account pays 2.35% AER on balances between £1,000 and £1,000,000. It’s online only.
MEDIUM TERM (THREE AND FOUR YEAR TERMS)
- Charter Savings Bank 4 Year Fixed-Rate Bond pays 2.75% AER on balances of £1,000 or more. The account is managed online only. Interest is paid on anniversary.
- Fidor Bank's 36-month savings bond also pays 2.75% AER, and the same terms and caveats apply as the two-year offering.
- RCI Bank’s 3 Year Fixed Rate account pays 2.7% AER on balances between £1,000 and £1,000,000. You’ll have to apply online.
LONG TERM (FIVE YEAR)
- Agri Bank 5 Year Fixed Rate Savings Account offers savers 3.15% AER. The account can be accessed online only. It requires an initial investment of £5,000.
- Secure Trust Bank 5 Year Fixed Rate Deposit Account will pay 3.05% AER for 60 months. You’ll have to deposit between £1,000 and £1,000,000 and no early access is allowed. It’s only available online.
- United Bank UK pays 3.04% AER on balances between £2,000 and £1,000,000. It’s available in branch, by post or online. You’ll need to be sure you won’t need access to the money, as no early withdrawals or closures are 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 6% 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 6% 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.
- The TSB Monthly Saver returns 5% AER on monthly deposits between £25 and £250. The rate is fixed for 12 months and withdrawals have to be paid into a TSB current account, so you’ll need to bank with it already. Unlike M&S Bank and First Direct, TSB offer instant access to your savings without penalty.
CHILDREN'S SAVINGS ACCOUNTS
- Halifax Kids Regular Saver offers a market-leading 6% AER 12-month bond. You can deposit between £10 and £100 in the account each month.
- Nationwide FlexOne Regular Saver pays a fixed headline rate of 3.5% AER on investments of up to £100 per month to children between 11 and 17. The bond can be managed in branch, online or by phone. There’s no access limitations, though you’ll need to be an existing customer.
- Dudley Building Society’s Junior Easy Saver pays 3.5% AER on balances over £10, up to the age of 15. At this point, you’ll be transferred to the instant-access Junior Saver, which pays 1.75% AER.
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.