The best savings accounts
If you're not getting much interest on your savings, you may want to consider switching your account. Here are the savings accounts offering the best rates now.
The Bank of England’s decision to cut the base rate to 0.1% has meant that interest rates on savings accounts have plummeted. There are now more than 100 savings accounts paying just 0.01% interest. “Based on the average cash Isa [individual savings account] balance of £5,144, it would take a saver 20 years to earn £10 from an account that paid 0.01% interest,” says Adam Williams in The Sunday Telegraph.
Rates have been slashed on more than 600 savings accounts, but while many accounts are paying just 0.01%, there are still some worth considering.
For example, Investec Bank’s E-asy Access Account pays 1.2%, but you do need to deposit at least £10,000. For smaller amounts Marcus pays 1.2% too. Both those accounts have to be opened and managed online. If you prefer telephone or postal banking, then National Savings & Investments’ Income Bonds pay 1.16%.
The top savings accounts with notice periods
If you don’t need to have instant access to your cash, then you can boost your returns by opting for a notice account. These still allow you to access your money as often as you want, but you have to plan and give a set number of days’ notice before you withdraw your money.
In return for 95 days’ notice both ICICI Bank and Investec Bank will pay you 1.6% interest with a minimum opening balance of £1,000 or £10,000 respectively (though ICICI Bank's rate is due to fall to 1.4% from 15 June 2020, and you must hold a current account with them). Secure Trust has a 30-day notice account that pays 1.31% if you can’t plan three months in advance.
The absolute best interest rate available on a savings account at present is from UBL UK at 1.95%. But it is a seven-year bond. That’s a long time to lock your money away at a rate that is only marginally better than you can get on a 90-day notice account. A better option may be Vanquis Bank’s one-year bond paying 1.6%.
If you are looking for a new home for a cash Isa, Shawbrook Bank is paying 1.19% on instant-access Isas. You can only get a better return with a one-year bond – the best is 1.3% from the Post Office. There is a minimum investment of £500, you may make just one deposit, and if you withdraw after 14 days you will incur a breakage charge.
Finally, don’t overlook Premium Bonds. “National Savings & Investments... has cancelled a planned cut to the prize rate on Premium Bonds,” notes Leke Oso Alabi in the Financial Times. The prize rate – the annual return an averagely lucky bond holder should achieve – will remain at 1.4%, with the odds of winning a prize (between £25 and £1m) in the monthly draw staying at 24,500 to one. Premium Bonds “can be a useful place to keep your emergency savings”, says Sarah Coles, personal finance analyst at Hargreaves Lansdown. “It’s easy to get hold of your cash, they offer the chance of a prize and there’s [the] hope that your sensible safety net will win you £1m.”