Savings update: only five banks paying top 1% on easy-access accounts
Earning 1% before tax on your easy-access savings is becoming increasingly difficult as providers cut their rates.
Once banks and building socieities find themselves at the top of the best buy tables they tend to drop their rates to stem the flow of money in.
Those paying the top 1% are now limited to just Shawbrook Bank Easy Access 5, Coventry Building Society Easy Access 3, Kent Reliance Easy Access 16, Paragon Bank Easy Access Issue 2, and Sainsbury’s Bank’s eSaver Special.
National Savings & Investments easy-access Income Bonds also pay 1% with interest added each month. But these variable rates could well be cut.
On fixed-rate deals the best one-year rate comes from internet-based Charter Savings Bank at 1.38%. The bank pays a higher 1.4% if you are willing to tie your money up for 18 months.
On easy-access tax-free cash Isas, top rates include 1.1% from Coventry Building Society but you can't transfer your existing Isa savings into this account. Family Building Society’s Market Tracker Isa pays 1.09% and accepts transfers.
The best one-year fixed rate cash Isa from Shawbrook, Aldermore, and Kent Reliance banks at 1.1%. For two years Shawbrook and Julian Hodge banks pay 1.2%.
Ikano Bank Fixed 1 Year Saver pays a higher 1.3% but you are covered by the Swedish compensation scheme, which pays out up to €100,000 (around £86,000) in the event the bank fails. You’re not covered by our home Financial Services Compensation Scheme, which gives up to £75,000 per financial institution in protection.
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.
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.