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.
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 Freedoms Savings Account offers 1.65% AER on a £100 minimum deposit. Accounts must be managed online, with a £1,000,000 maximum balance. This account is covered by the French, rather than UK deposit protection scheme, so savings of up to €100,000 are guaranteed, rather than £75,000.
- Shawbrook Bank pays 1.45% AER on balances between £1,000 and £50,000. It's available by post or online, and you can opt for monthly or annual interest.
- Virgin Money’s Defined Access Saver (Issue 4) pays 1.41% AER on balances between £1 and £250,000. However, if you make four or withdrawals in a year the interest rate drops to 0.75%. The account is available in branch, by post, by phone or online.
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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.
- Charter Savings Bank’s 100 Day Notice Personal Savings Account (Issue 1) pays 1.85% AER. The account must be opened online and needs a deposit between £1,000 and £250,000 to earn interest. No early withdrawals are allowed.
- The Hampshire Trust 100 Day Notice Account (Issue 2) pays 1.76% AER on balances between £1,000 and £250,000. It’s a postal account, and no early access is allowed.
- Shawbrook Bank’s 120 Day Notice Personal Savings Account (Issue 31) pays 1.75% AER on balances between £1,000 and £500,000. Early withdrawals are allowed, but you’ll lose 30 days’ interest. The account is available online or by post.
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.
One year/18 months:
- RCI's 1 Year Fixed Rate Bond offers 2.06% AER on a minimum opening balance of £1,000, up to £1,000,000. The account must be managed online and no early access is allowed. Again RCI is licenced by the French regulator, so savings worth up to €100,000 are protected, rather than £75,000.
- Fidor Savings Bank pays 2% AER on its online-only one year bond on deposits between £100 and £100,000. 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.
- Punjab National Bank offers 2% AER for people depositing between £500 and £2,500,000. Accounts can be opened in branch or by post. Punjab National Bank is licened by the FCA, so deposits are protected by the Financial Services Compensation Scheme (FSCS).
- Fidor Savings Bank pays 2.4% AER over two years on its online-only fixed rate bond. You can save between £100 and £100,000. This account is also covered by the German, rather than UK, savings protection scheme.
- RCI Bank 2 Year Fixed Term Account pays 2.35% AER on balances between £1,000 and £1,000,000. It’s online only, and covered by the French deposit protection scheme, so up to €100,000 is guaranteed, rather than £75,000.
- Punjab National Bank's 2 Year Fixed Term Account pays 2.3% AER on balances between £500 and £2,500,000. It's available in branch or by post.
MEDIUM TERM (THREE AND FOUR YEAR)
- Turkish Bank UK’s 3 Year Bond pays 2.75% AER, on balances between £5,000 and £250,000. It’s available by post, online or by phone. Though you may not be familiar with the bank, it’s fully licened by the UK regulator, so covered by the FSCS.
- Fidor Bank's 36 Month Savings Bond pays 2.75% AER, and comes with the same terms and caveats apply as the two-year offering, so beware it’s covered by the German, rather than UK, savings protection scheme.
- 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. Be aware this bank is registered in Malta, so you’re relying on the Maltese government to guarantee your savings.
- Secure Trust Bank 5 Year Fixed Rate Deposit Account will pay 3.11% 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.
- First Save’s 5 Year Bond (10th Issue) will pay 3.06% AER on balances between £1,000 and £2,000,000. It’s online only.
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 account. It’s available in branch or by post. The account can be held until the child is 15, at which point the money gets 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).