In this guide
Where to start saving
Not everyone should just grab the top paying savings account - often you can use spare cash more profitably, depending on your circumstances...
Got debts?
The golden rule is pay off your debts before starting savings, because the interest rate charged on most credit cards and loans is vastly higher than the one you'll get on savings.
For example, if you've £1,000 on a credit card at 18% and £1,000 in savings at 2% after tax, you'd be £160 a year better off by simply repaying the card with the savings.
The only exception is if you have super cheap 0% debts. For much more on this, including whether you should have an emergency fund, read the full Should I Repay Debts With Savings guide.
Got a mortgage?
For some, the best thing to do with your savings is to pay off your mortgage, provided you keep enough cash aside for emergencies. For a full guide to whether this applies to you, including a special calculator to help, read the Should I Repay My Mortgage? guide.
NOT opened an ISA this year?
A cash ISA is simply a savings account you don't pay tax on. Anyone over 16 can put up to £5,640 a year in. If you haven't opened one this tax year (April to April), then it should be the first place to put your cash. For more read the full Top Cash ISAs guide.
Can you put money aside each month?
Then consider regular savings accounts, a specific product for putting £10 - £500 in every month (and if you want to save more than that you can combine a few) - the main advantage is they tend to pay much higher rates of interest.
If you already have a lump sum, simply find the best savings account for the cash you've currently got, then open a regular saver on top and dripfeed money across each month. For more details and the best buys read the full Regular Savings Accounts guide.
Can you lock the cash away?
Consider getting a fixed rate savings account where the amount you earn is guaranteed over a set time period. However, you can't usually access the cash during that time.
Sometimes fixed rates are higher than easy access, so it can be a good deal. However if normal savings rates were to increase during that time you'd be unable to ditch and switch to a better payer. See the full top Fixed Rate Savings section.
Part of a couple?
If one of you pays a lower rate of tax than the other, it's financially worth considering whose name you save in (ignoring issues of trust). Put it in the lower rate taxpayer's name and you'll get more interest. There's nothing stopping married couples (or civil partners) moving money between them.
If you're not married, then there's no tax on giving your partner a 'gift' - though once the money goes across be aware that it's their cash not yours. The only extra issue here is inheritance tax if one of you died within seven years.
If you answered yes to a number of these, to see how they all fit together read the full Starting Saving guide. If you've checked all of the above, and have decided you want somewhere safe to stow your cash, then you're in the right place...
A savings account is a just place to dunk an unlimited amount of unused cash, to earn a higher rate of interest.
Savings accounts have less functionality than normal day-to-day accounts offering neither cheque books nor, with a few exceptions, cash cards.
How safe are your savings?
Bank collapse was once easy to dismiss, then the credit crunch and global market turmoil hit. After the calamities that hit Northern Rock, Bradford & Bingley, Icesave and Kaupthing, every sensible saver should ask "is my money safe?".
The answer is simple. Provided the money is in a UK regulated bank or building society account, it's protected under the Financial Services Compensation Scheme (FSCS) meaning...
up to £85,000 per person, per financial institution is guaranteed.
Sadly the exact rules about what counts as 'UK regulated', the links between institutions, and joint accounts make it more complex. For full info on the rules see the detailed Are Your Savings Safe? guide.
For large savings, to keep it 100% safe, simply spread it in a number of accounts, not putting more than £85,000 in each. In fact, consider spreading money even if you've under £85,000, as if you needed to claim compensation you wouldn't have instant access to your cash.
This guide and best buys
It's impossible to pick "which bank is in trouble?" Even the great names of world banking like Goldman Sachs and Merrill Lynch have been in trouble. Therefore our stance is to not try to judge that, but suggest you rely on the UK savings guarantee. So we report all top rates regardless, but include any 'protection oddities'.
What to watch with savings
While savings are the simplest of products, providers still manageto throw a few wobblers into the mix. Watch out for...
- Introductory 'bonus' rates
These are temporary interest hikes to attract new customers. They are no problem for active consumers, as you can shift the cash to a better payer as soon as the bonus ends. Always diarise to ditch and switch when the bonus finishes.
Since the base rate dropped to an historic low, bonus rates have shed some of their negative connotations. They effectively act as a 'minimum rate guarantee' during the introductory period, promising you at least some interest. - Suck, slap and flog naming
Some banks suck you in with a high rate, then later slap the rate down, and try to flog another similarly named account so you think you're still earning decent interest. Always know your account's exact name and the interest rate it pays. - Easy access, instant access, no notice & notice accounts
It's also crucial to look at what access you have to your money, as there are a number of different phrases. Easy access refers to both instant access (where you can do an immediate cash withdrawal via a branch) and no-notice accounts (where, as it's an internet/phone account, in practice it can take a few days to get the cash in your hands).
However some accounts require you to give notice to withdraw money, perhaps of up to 180 days which means your cash is locked away (often unless you pay a penalty to withdraw it). - Withdrawal limits or penalties
Some accounts limit the number of withdrawals you can make a year. Others will not pay interest in any month a withdrawal is made. This can have a massive impact, eg, you withdraw £100 but lose interest on all the £100,000 in your account for the whole month.
The terms vary per account, so always know what taking out your cash will cost you. -
You pay tax on savings
Unless your combined earnings and savings interest are under the £8,105 personal allowance (more for over 65s see the income tax checker) you'll pay tax on your savings interest apart from cash ISAs.
Interest rates are usually quoted without tax, but for basic rate taxpayers 20% of the interest earned goes to the taxman; for higher rate taxpayers it's 40% and 50% for top 'additional rate' taxpayers. - Quoting different interest rates
Banks quote one of two different interest rates. The gross rate is the flat amount paid; while the Annual Equivalent Rate (AER) takes into account interest compounded over the year. Check which rate you're being quoted and compare like with like. For a detailed explanation read about the difference between AER & Gross interest.
The UK's Top Rate Savings
Here's a full comparison of the best buy easy access savings accounts. These accounts tend to be no-frills, so the rates are good but customer service may be limited. Use the Savings Calculator to see how much you'll get after tax, plus occassionally cashback websites may give you a sign-up bonus.
However you may be able to earn even more - if you've not used your tax-free allowance this year, first check out top cash ISAs and if you're happy to lock your cash away see the Top Fixed Savings,
The best buy variable rate accounts...
All these deals are variable rate, so you need to monitor them to ensure the rate doesn't drop (switch away if it does). Don't just plump for the highest rate, read the pros and cons then pick one that suits.
Unless stated, all have full protection under the £85,000 per person, per institution rules. Though do check how institutions are linked and other notes in the safe savings guide.
Easy access
Coventry BS: 3.15% AERFour withdrawals/year. Min £1 deposit.
- Rate: 3.15% AER variable inc 1.15% bonus
- Min deposit: £1
- Max deposit: £250,000
- Access: Online
- Interest paid: Annually or monthly
- Withdrawal restrictions: Mid. Up to 4 withdrawals per year.
- Safety: £85,000 UK protection shared with Stroud & Swindon BS
The Coventry BS Online Saver (3) pays 3.15% AER, including a 1.15% bonus for a year. You can save from £1 but you can only make four penalty-free withdrawals a year.
After this you get charged 50 days' worth of interest on the amount withdrawn. If you've got more to save, you can get a slightly better rate with Nationwide below.
Coventry BS shares its £85,000 FSCS protection with Stroud & Swindon BS. See more information about the Savings Safety rules.
Min £25k: Nationwide 3.17% AERYet only 1 penalty-free withdrawal. Min £25,000 deposit
- Rate: 3.17% AER variable inc 1.62% bonus
- Min deposit: Initially £25,000
- Max deposit: £5 million
- Access: Online
- Interest paid: Monthly
- Withdrawal restrictions: Poor. One penalty free withdrawal per year
- Safety: £85,000 UK protection shared with Derbyshire, Cheshire & Dunfermline BS
If you've got a big £25,000 to save, Nationwide's MySave Online Plus pays 3.17% AER with a 1.62% year’s bonus, it only allows one penalty-free withdrawal a year.
Make more than one withdrawal and the interest drops to 0.1% in the month of the withdrawal (ie, you lose approx £2.50 per £1,000 saved). This includes closing the account. To avoid this, time your closure shortly after you've been paid interest.
Nationwide shares its £85,000 FSCS protection with Derbyshire, Dunfermline and Cheshire BS. See more information about the Savings Safety rules.
Derbyshire BS: Easy access 3.06% AERUnlimited withdrawals. Min £1,000 deposit.
- Rate: 3.06% AER variable inc 2.06% bonus
- Min deposit: £1,000
- Max deposit: £1 million
- Access: Online
- Interest paid: Annually (on 30 Jun)
- Withdrawal restrictions: Good. Unlimited withdrawals.
- Safety: £85,000 UK protection shared with Nationwide, Cheshire and Dunfermline Building Societies
For unlimited withdrawals the NetSaver (issue 3) from Derbyshire BS* pays 3.06% AER including a 2.06% bonus until 30 Jun 2013. You need £1,000 to open it.
Annoyingly the initial deposit must be made by cheque. After this, deposits and withdrawals can be made via your nominated account. Once you've opened the account, the balance can drop to £1.
For more savings options, see Spreading Cash for Safety below.
Derbyshire BS shares its £85,000 per person savings protection with Nationwide, Cheshire and Dunfermline Building Societies. See more information about the Savings Safety rules.
Top 'clean' easy access accounts
Aldermore: No bonus, 2.75% AER Unlimited withdrawals. Online. Min £1,000
- Rate: 2.75% AER variable
- Min Deposit: £1,000
- Max Deposit: £1 million
- Access: Online
- Interest paid: Monthly or annually
- Withdrawal restrictions: Good. Unlimited withdrawals.
- Safety: Full £85,000 UK protection
The 'clean' Easy Access account from Aldermore* pays 2.75% AER on balances over £1,000.
The rate doesn't include a bonus, although it is variable, and is guaranteed to remain 1.7% above base rate until 1 Mar 2013.
Aldermore has the full £85,000 FSCS protection. See more information about the Savings Safety rules.
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Specialised Alternatives
Spreading cash for safety The top accounts if you need spread savings
If you're concerned about getting maximum safety on your savings, then, as explained in the Savings Safety guide, they're only protected up to £85,000 per person per financial institution. So to keep bigger amounts safe you need to spread the cash around.
The following are the remaining top payers in the market (or use the next alternative; 100% protected savings accounts, at a lower rate).
ING 3.1% AER, NOT UK PROTECTED
New customers to ING* can get its Direct Savings Account paying 3.1% AER on balances up to £1 million. This includes a massive 2.6% bonus for 12 months, so ensure you ditch and switch after that time. You can save from just £1 and manage the account online and by phone.
ING is NOT protected by the UK compensation scheme but the Dutch one instead, which covers the first €100,000 (c. £85,000). This means in the event ING went bust, you would be entirely reliant on the Dutch government. Read full info on how the protection works in the Savings Safety guide.
Skipton 3.05% AER
The Online Bonus Saver from Skipton BS pays 3.05% AER including a 1.55% bonus for a year. You can save from £1,000 up to £1 million and you can make unlimited penalty-free withdrawals. Interest is paid annually.
Skipton BS shares its £85,000 FSCS protection with Scarborough BS and Capital One/Castle Money. See more information about the Savings Safety rules.
Post Office 3.01% AER
The Post Office* Online Saver (issue 4) pays 3.01% AER including a 1.36% bonus for a year. The minimum balance is £1 and you can make unlimited withdrawals. Interest can be paid annually or monthly.
Bank of Ireland UK and Post Office Savings are part of the Bank of Ireland Group, and since 1 November 2010 have been covered by the UK's £85,000 FSCS protection, shared across the two brands. See more information about the Savings Safety rules and Post Office goes UK news for full details.
Principality 3.01% AER
The e-Saver (issue 5) account from Principality pays 3.01% AER, including a 1.36% bonus for a year, on balances over £1. You can make unlimited withdrawals and save up to £1 million. It is an online-only account and interest is paid annually.
Principality has the full £85,000 savings safety guarantee. See more information about the Savings Safety rules.
100% protected savings For more than £85,000 in one place.
If you've got more than the protected £85,000, and the safety factor worries you, plus you've decided that spreading around multiple accounts isn't for you (see above), there are a few ways to get a 100% guarantee on savings. Though you will sacrifice the rate earned.
UK Government Owned
Government-backed bank NS&I is the only normal savings account provider that guarantees 100% of the money you save in it. Currently its Direct Saver pays an okay 1.5% AER and lets you deposit up to a huge £2 million in perfect safety. The minimum deposit is just £1 and the account can be applied for and operated either online or over the phone.
Buy a tax certificate
Those who are self employed can pay tax early by buying what's called a tax certificate for your liabilities in advance. They pay no interest yet there's nothing safer than knowing your tax bill is sorted.
Pay off debts
To reiterate the information at the start of this guide, paying off debts or mortgages is one extremely safe use of your money provided you have enough left if an emergency hits. See the Should I Repay Debts? guide.
Top cash machine access savings Some accounts provide an ATM cashcard.
The easy way to assure yourself 24-hour access to your cash is to get a savings account that gives you a cash machine card and allows free withdrawals from any Link machine.
Yorkshire Building Society: 2.1% AER
The Yorkshire BS Internet Saver, with optional cash card, pays 2.1% AER. You only need £1 to open it and can save up to £1 million. You can withdraw up to £250 per day.
Yorkshire BS shares its £85,000 FSCS protection with Chelsea, Norwich & P'boro and Barnsley BSs, plus ex-Egg Savings customers. See more information about the Savings Safety rules.
Halifax / Bank of Scotland: 2% AER
The Everyday Saver from Halifax and the Access Saver from the Bank of Scotland both pay 2% AER for a year, including a 1.5% bonus, on a mininum balance of £1 (£10 deposit needed to get the cash card). You can withdraw up to £300 per day from cash machines and interest is paid annually.
Halifax has the full £85,000 UK savings safety guarantee, but if you've money elsewhere in the HBOS group it all counts to that total. See more information about the Savings Safety rules.
Fancy looking locally?
All the above rates are available to anyone. However some small building societies occasionally offer special rates to people who live in the local area, or to existing members. It's always worth checking yours.
Top ethical easy access savings
Ethical savings accounts - where providers behave ethically in terms of the environment, human rights and more - have jumped in popularity. Our main focus always is telling you the top savings rates, but to match demand we've worked with Ethical Consumer magazine to list the top-paying accounts that also rate highly on their ethics.
3.15% AER in ethical bank Or ultra-ethical 2.5% AER (but no UK protection)
See the graph on the right for what Ethical Consumer's ratings mean.
2.5% AER - most ethical but NO UK PROTECTION.
Triodos Bank’s Online Saver Plus is highest-rated ethical account with a good interest rate, 2.5% AER (including a fixed 1.5%, 12-month bonus) and allows three penalty-free withdrawals per year (min £1).
However, it DOES NOT have UK savings protection - if it went bust you're reliant on Dutch compensation scheme for your cash - read more Are your savings safe? Ethical consumer score: 15.5 out of 20.-
3.15% - highest paying ethical account.
The Coventry BS Online Saver (3), pays 3.15% AER incl first year bonus of 1.15%. It shares its £85,000 UK savings guarantee with Stroud & Swindon BS. Ethiscore: 13.5 out of 20.
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Fixed rate savings
Most savings accounts are variable, meaning the rate can change both with the Bank of England's base rate and as providers change their competitive stance - so to keep earning well you need to actively monitor your accounts. Yet there is an alternative...
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.
However, this means you can bag some decent rates, with banks after your cash for longer, as
How long to fix for?
The longer you fix for, the more you are RISKING the fact that an unpredictable future means this could be a bad choice.
If interest rates were to increase rapidly, you would've lost the flexibility to ditch and switch to a better payer. As at Nov 2011, pundits were predicting the base rate would stay low for another year or so - but no one can know for sure, so it's important to go into fixed rate savings with your eyes open.
Another thing to consider is if the savings safety status of the institution changes, it'd be more difficult to get your cash out - though some merged banks in the past have allowed special dispensation for these balances.
Top Fixed Rate Savings
Some fixed accounts require you to set up a 'feeder' account, normally a non-fixed savings account, in order to get the money in. If that's the case, it's often speedier to do it at a bank you already have an account with.
The best one year fixed rates
If you can spare access to your cash for a year, you can benefit from some higher rates.
Cahoot UK 3.6% AER Online. Min £25,000.
- Product Link:Cahoot Fixed Rate Bond*
- Rate: 3.6% AER
- Length of fixed deal: 1 year
- Min. deposit:£25,000
- Max. deposit £2 million
- Savings safety: Shared £85,000 FSCS
If you have a big £25,000 to save, the Cahoot* fixed rate bond pays 3.6% AER. However, no additional deposits or withdrawals can be made after opening. You can open and operate the account online and interest is paid annually.
Cahoot shares its £85,000 protection between Santander, Bradford & Bingley, A&L and Asda. If you have more than one account with these institutions, the excess won't be covered. See more information about the Savings Safety rules. Also, read more on Is Santander impacted by the eurozone crisis?
United National Bank 3.45% AER
Post or branch. Min £2,000.
- Product & linkUnited National Bank
- Rate: 3.45% AER
- Length of fixed deal: 1 year
- Min deposit: £2,000
- Max deposit: £1 million
- Savings safety: Full £85,000 FSCS protection
The one-year Fixed Deposit account from United National Bank pays 3.45% AER on balances over £2,000, but no additional deposits can be made. You can open and operate the account by post or in one of its six branches. Interest can be paid annually or monthly.
You may not have heard of United National Bank - it specialises in Islamic banking products - but it has the full £85,000 savings safety guarantee. See more information about the Savings Safety rules.
The best two year fixed rates
By saving for a bit longer, the rates available can jump. Always remember the longer you lock cash away for, the more of a chance there is that rates will rise while your cash is untouchable.
Investec 3.8% AER Online, post or phone. Min £25,000
- Product & link: Investec Fixed Term Deposit
- Rate: 3.8% AER
- Length of fixed deal: 2 years
- Min deposit: £25,000
- Max deposit: £1 million
- Savings safety: Full £85,000 FSCS protection
If you have a big £25,000 to save, the Fixed Rate Deposit Account from Investec pays 3.8% AER for two years. You can apply for and operate the account online, by post or phone. Additional deposits aren't allowed. Interest is paid at maturity.
Investec has the full £85,000 savings safety guarantee. See more information about the Savings Safety rules.
Close Brothers Savings 3.75% AER Apply by post. Min £10,000.
- Product & link:Close Brothers Savings
- Rate: 3.75% AER
- Length of fixed deal: 2 years
- Min deposit: £10,000
- Max deposit £2 million
- Savings safety: Full £85,000 FSCS protection
The Close Brothers Savings Premium Gold account pays 3.75% AER for three years on balances over £10,000, but no additional deposits or withdrawals can be made. Applications can be made by post only and interest is paid on the account anniversary and at maturity.
Close Brothers has the full £85,000 UK saving safety guarantee, see more information about the Savings Safety rules.
Allied Irish Bank (GB) 3.7% AER Post or phone. Min £1,000
- Product & linkAllied Irish Bank (GB)*
- Rate: 3.7% AER
- Length of fixed deal: 2 years
- Min deposit: £1,000
- Max deposit: £2 million
- Savings safety: Full £85,000 FSCS protection
The Fixed Rate Bond from Allied Irish Bank (GB)* pays 3.7% AER for two years. You can apply for and operate the account by post or by phone, but only one deposit can be made. Interest is paid annually on the account anniversary and at maturity.
Allied Irish Bank (GB) is part of the Allied Irish Group and shares its £85,000 savings safety guarantee with First Trust Bank. See more information about the Savings Safety rules.
The best three year fixed rates
If you're happy locking your cash away for longer, you can get more in a three year account. However if interest rates recover between now and the end of the fixed term, you could lose out so make sure you're prepared to take the gamble.
Close Brothers Savings 4% AER Apply by post. Min £10,000.
- Product & link:Close Brothers Savings
- Rate: 4% AER
- Length of fixed deal: 3 years
- Min deposit: £10,000
- Max deposit £2 million
- Savings safety: Full £85,000 FSCS protection
The Close Brothers Savings Premium Gold account pays 4% AER for three years on balances over £10,000, but no additional deposits or withdrawals can be made. Applications can be made by post only and interest is paid on the account anniversary and at maturity.
Close Brothers has the full £85,000 UK saving safety guarantee, see more information about the Savings Safety rules.
Yorkshire Bank/Clydesdale Bank 3.9% AER Online, post or branch. Min £2,000
- Product & linkYorkshire Bank/Clydesdale Bank
- Rate: 3.9% AER
- Length of fixed deal: 3 years
- Min deposit: £2,000
- Max deposit: £5 million
- Savings safety: Shared £85,000 FSCS protection
The Fixed Term Deposit account from Yorkshire Bank/Clydesdale Bank pays 3.9% AER for three years. You can apply for and operate the account online, by post or in branches, but only one deposit can be made. Interest can be paid annually or monthly.
Yorkshire and Clydesdale Banks share the £85,000 savings safety guarantee. See more information about the Savings Safety rules.
Halifax 3.85% AER
Online. Min £500
- Product & link:Halifax*
- Rate: 3.85% AER
- Length of fixed deal: 3 years
- Min deposit: £500
- Max deposit: £5 million
- Savings safety: Shared £85,000 FSCS protection with HBOS group
The Halifax* Fixed Online Saver pays 3.85% AER for three years on balances over £500 but no additional deposits can be made after opening. It's an online only account and interest can be paid annually or monthly. Withdrawals are not permitted, however you can close the account early, but a huge 270 day interest penalty will apply.
Halifax shares its £85,000 UK savings safety guarantee with the rest of the HBOS group. See more information about the Savings Safety rules.
The best four year fixed rates
It's possible to increase the rate further by locking away your cash for longer. However, you're gambling on rates staying low for a long period. If UK interest rates recover between now and 2016, you could lose out as your cash is stuck at this rate.
Halifax 4.05% AER
Online. Min £500
- Product & link:Halifax*
- Rate: 4.05% AER
- Length of fixed deal: 4 years
- Min deposit: £500
- Max deposit: £5 million
- Savings safety: Shared £85,000 FSCS protection with HBOS group
The Halifax* Fixed Online Saver pays 4.05% AER for four years on balances over £500 but no additional deposits can be made after opening. It's an online only account and interest can be paid annually or monthly. Withdrawals are not permitted, however you can close the account early, but a massive 320 day interest penalty will apply.
Halifax shares its £85,000 UK savings safety guarantee with the rest of the HBOS group. See more information about the Savings Safety rules.
The best five year fixed rates
If you're happy to lock your cash away for up to five years it's possible that by sacrificing access for longer, you could up the rate slightly. This depends on rates staying low until 2017, though.
AA Savings 4.4% AER
Postal. Min £1
- Product & linkAA Savings
- Rate: 4.4% AER
- Length of fixed deal: 5 years
- Min deposit: £1
- Max deposit £5 million
- Savings safety: Shared £85,000 FSCS protection with HBOS group
The fixed rate account from AA Savings is paying 4.4% AER on its five year bond, for balances over £1. You can open the account online but can only operate it by post. Interest is paid annually on the account anniversary.
The AA shares its £85,000 UK savings safety guarantee with the rest of the HBOS group. For more info see the Safe Savings guide.
Yorkshire Bank/Clydesdale Bank 4.25% AER Online, post or branch. Min £2,000
- Product & linkYorkshire Bank/Clydesdale Bank
- Rate: 4.25% AER
- Length of fixed deal: 5 years
- Min deposit: £2,000
- Max deposit: £5 million
- Savings safety: Shared £85,000 FSCS protection
The Fixed Term Deposit account from Yorkshire Bank/Clydesdale Bank pays 4.25% AER for five years. You can apply for and operate the account online, by post or in branches, but only one deposit can be made. Interest can be paid annually or monthly.
Yorkshire and Clydesdale Banks share the £85,000 savings safety guarantee. See more information about the Savings Safety rules.
Use the net to compare top rates
For other lengths of fixed rates, and a full list of fixed rate savings accounts use the MoneySupermarket* and Moneyfacts comparisons, in conjunction with the Savings Safety guide to examine the protection for any accounts. However, with these it's crucial you double check the rates on the banks' own websites before applying, as the comparison tables are NOT continually updated.
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