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.
Remember, these rates are before tax, but from next year most people will be able to earn £1,000 interest from savings tax-free (depending on your income tax rate). In any case, if you haven't used your cash Isa allowance this tax year, getting an Isa should be your first port of call. See our round-up of the best cash Isa rates.
Unless otherwise specified, all these banks are individually licenced by the FCA, so your savings will be covered by the Financial Services Compensation Scheme (FSCS) up to £75,000. For more details on how the FSCS works, see our guide.
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’s Freedom Saving Account pays 1.45% AER on balances over £100. The maximum balance is £1,000,000. You can open an account with £1, but sub-£100 balances won’t earn any interest. RCI Bank is covered by the French deposit protection scheme, so savings up to €100,000 are covered.
- National Savings & Investments’ (NS&I) Income Bond pays 1.26% AER, but this will fall to 1% in June. Balances must be between £500 and £1,000,000. Unusually, savings with NS&I are fully guaranteed by the Treasury, while the Financial Services Compensation Scheme only protects first £75,000 with most banks. The account can be opened by post, online, or over the phone.
- Virgin Money’s Defined Access E-Saver (Issue 6) pays 1.26% AER on balances between £1 and £250,000. The rate will fall to 0.5% AER if you make more than three withdrawals in a year. This account is online only, though an identical version of the account is available for people who want to sign up in branch, by post or over the phone.
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If you are happy to wait a little while before accessing your savings, rates on notice accounts tend to be higher than instant access savings. Some won't allow early access at all, though others may let you withdraw without notice, subject to losing some interest.
- Turkish Bank UK’s 90 Day Notice Account pays 1.71% AER on balances between £1,000 (minimum deposit) and £250,000. Accounts can be opened by post or in branch, and once set up transactions can be managed online too. Turkish Bank UK also has a 60 day notice account paying 1.6% AER, which has the same account restrictions aside from the notice period. Turkish Bank UK has its own licence from the FCA.
- Raphaels Bank’s 12 month Sapphire Notice Account pays 1.7% AER. That’s less than you’ll get on a one-year fixed rate bond, but it allows one penalty-free withdrawal per year, which must be no more than 10% of the amount in the account. It’s available in branch or by post.
- Shawbrook Bank’s 120 Day Notice Personal Account (Issue 34) pays 1.7% AER. Deposits are accepted between £1,000 and £500,000. You must provide 120 days’ notice to withdraw money or close your account. There is no option to withdraw money immediately and forfeit some interest. Savers can open an account online or over the phone.
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, unlike instant access and notice accounts, which tend to be variable. However, do bear in mind that withdrawals and further deposits are rarely allowed.
- Turkish Bank UK’s 1 Year Fixed Term Deposit pays 1.8% AER, fixed for 12 months. Savers can deposit between £5,000 and £250,000. It’s only available in branch and savers have no early access to their money.
- Fidor Savings Bank pays 1.8% AER on its online-only one year bond on deposits up to £100,000, with a £100 minimum deposit. 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. Online only.
- Close Brothers’ 1 Year Fixed Term Deposit pays 1.7% AER on deposits over £10,000 and under £2,000,000. No early access is allowed, and the account is only available by post.
- Fidor Savings Bank pays 2.2% AER on its 24 month savings bond on balances over £100. The account is only available online and there is a £100,000 maximum balance. No early access is allowed.
- Punjab National Bank pays 2.2% AER over two years to people who deposit between £500 and £2,500,000. You can’t make early withdrawals, but can close the account in full, if you’re willing to forfeit future interest. Accounts can be opened by post or by post.
- Turkish Bank UK’s Two Year Fixed Term Account pays 2.15% AER on deposits between £5,000 and £250,000. Deposits outside these parameters aren't accepted. Accounts can be opened by post, online or by phone. No early access is permitted.
MEDIUM TERM (THREE AND FOUR YEAR)
- Punjab National Bank’s Four Year Bond pays 2.6% AER. Savers must deposit at least £500 and the maximum balance is £2,500,000. No early withdrawals are allowed, but can close the account early. The account is available in branch or by post.
- Turkish Bank UK’s 3 Year Bond pays 2.5% AER, on balances between the minimum £5,000 and maximum £250,000. It’s available by post, online or by phone. No early withdrawals allowed.
- My Community Bank’s 3 Year Fixed Term Deposit pays 2.5% AER. Savers can deposit between £5,000 and £15,000. No early access is allowed. The account is online only.
LONG TERM (FIVE YEAR)
- Punjab National Bank’s Five Year Fixed Rate Deposit pays 2.75% AER, fixed for 60 months. Deposits must be between £500 and £2,500,000. Early withdrawals aren’t allowed, but the account can be closed in full early, if you’re willing to forfeit future interest. Accounts are available in branch or by post.
- Tesco Bank’s 5 Year Fixed Rate Saver pays 2.5% AER. You can deposit between £2,000 and £5,000,000. No early access is allowed, and the account is only available by phone. Depositors can opt for monthly or annual interest.
- Union Bank of India’s 5 Year Fixed Rate Deposit pays 2.5% AER. There’s a £1,000 minimum deposit and no upper limit. The account is available in branch or by post.
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.
- Saffron Building Society pays 4% AER on its instant-access children’s regular savings account. It’s available in branch or by post. It can be held for a year, by anyone up to 15. You can save £100 a month. When the account matues, savings are transferred to an account paying 0.5% AER, so remember to make a note to switch.
- 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.
The Financial Services Compensation Scheme is the compensation fund of last resort for customers of authorised financial services firms. If a firm becomes insolvent or ceases trading, the FSCS may be able to pay compensation to its customers. Limits apply to how much compensation the FSCS is able to pay, and those limits vary between different types of financial products. However, to qualify for compensation, the firm you were dealing with must be authorised by the Financial Services Authority (FSA).