Fixed Rate Savings Lock in at 2.51% for three years

In October 2008, UK interest rates were 5%. Within a few months, they slumped to a historically low 0.5%, slicing saving rates massively.

One way to boost your rate is to 'fix' your savings, but be prepared to lock your cash away without access to it.

What is a fixed rate?

Most savings accounts are variable - the rate can change both with the Bank of England's base rate and as providers change their competitive stance. It's important to regularly monitor your account's rate. If it plummets, ditch and switch.

Yet there are some alternatives to monitoring interest rates:

Fixed rate savings give a guaranteed rate for a set period, but you can't take your money out during that time.

Therefore, they're only suitable for those who are happy to lock cash away for the entire term. It's also very important to understand the longer you fix for, the more you are RISKING the fact that an unpredictable future could mean this becomes a bad choice. If interest rates were to increase rapidly, you would have lost the flexibility to ditch and switch to a better payer. Plus if the savings safety status of the institution changes, it's more difficult get your cash out.

Yet currently, many lenders are desperate to get hold of your cash, so there are some decent rates available. With fixed rates, they'll know how long they have your money for, thus allowing them to plan their lending strategies better.

Will I definitely get this rate?

Apply now and you should get the rate advertised. However, there is always a chance banks that cut the interest on new fixed rate accounts will attempt to shove you onto a new, lower rate. Be very vigilant during the application procedure, and double-check the rate before moving cash in (maybe even give them a quick call).

How safe are your savings?

Bank collapse was once easy to dismiss, then the credit crunch and global market turmoil hit. After the calamities hitting Northern Rock, Bradford & Bingley, Icesave and Kaupthing, every sensible saver should ask themselves: “is my money safe?"

The answer is simple. Provided your money is in a UK-regulated bank or building society account, it's protected under the Financial Services Compensation Scheme (FSCS) . Here's the golden rule:

£85,000 per person, per financial institution is guaranteed.

Sadly, this is the simple face of savings safety. The exact rules are more complex, involving how different banks are registered and what counts as a financial institution. Also remember, if you did need to claim compensation, that would likely mean you won't have access to that cash for a few months. For full info, read the full Are Your Savings Safe? guide.

How to maximise safety

The techniques to adopt depend on the amount of cash you want to save.

• Over £85,000. For those with bigger savings, in the unlikely event a bank or building society went bust, don't put more than £85,000 in any one institution; spread it around.

• Very large amounts. For those with very large amounts of savings (for example, a house sale or inheritance), you may need lots of accounts. Even if you've too much to stick to the £85,000 limit for each, the general rule of not having all your eggs in one basket still works.

• Less than £85,000. If you've less than £85,000, there's no problem in terms of protection. Yet if you were to have to claim compensation, this takes time, and meanwhile you wouldn't have access to your cash. Thus it's still worth considering spreading money across more than one institution.

For more info see the how to get 100% safety section of the Savings Safety guide.

This guide and best buys

It's impossible to know which bank is in trouble. As well as the UK banks, we've seen great names of world banking like Goldman Sachs and Merrill Lynch hit trouble.

Therefore, the only solution for this site is that we'll report the top rates and explain any protection oddities. So far, world governments have reacted to protect their banks, and no savers have lost money. It's likely (though not certain) this will continue.

Best buys: Top fixed rate savings

The most competitive rates tend to be for shorter terms. This also allows you the flexibility that you're not locked in for too long. In the comparison for the rates below, the top instant access accounts currently pay around 3%.

However, there is a way to beat fixed rate accounts. Regular savings accounts currently pay up to 6% AER, fixed for a year; these let you save up to £250-£500/month, though you can't put large lump sums in one. Also, the money only moves slowly into the account, affecting how much interest you'll earn. For the top accounts and how to use them best, read Regular Savings Accounts.

WARNING! The rate on application should apply, yet these are unprecedented times. When the form arrives in the post, check the rate's the same before putting cash in.

Always double check the rate yourself before applying.
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What about my existing savings?

If you've already got a savings account, what happens in this low base rate environment depends on whether it is fixed or variable. If you've got a fixed rate account, the rate will apply for the set period. However, any other accounts are likely to be variable, and this means the provider can chop the rate whenever it likes.

Always monitor your rate closely. Our Savings Accounts and Cash ISA guides include details on which accounts have already dropped their rates and which haven't. Once you're told about a cut, check your own account and ditch 'n' switch if it's dropped.

Do you live off savings interest?

When using fixed rate savings, you won't usually get paid monthly interest. Therefore many who rely on interest earned from savings as an income stream don't fix, even though they could get higher rates. There's a workaround though.

Here's an example (ignoring tax for ease of explanation)...

This way you can grab the higher fixed rate accounts, but retain access to enough cash in the meantime. Remember though, if you might need to get at the whole lump within the fixed term, this trick won't help and fixed rates may not be for you.