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Where to start saving

Savings starting line

Not everyone should just grab the savings account with the best interest rates - often you can use spare cash more profitably, depending on your circumstances. Read the full Starting Saving guide to see where your money's best used.


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 just a 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.

How safe is your money in a savings account?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 manage to throw a few wobblers into the mix. Click the links to read what to watch out for...

The UK's best savings rates

Calculating a budgetThe best interest rate savings accounts currently available are listed below. Yet if you've not used your tax-free allowance this year, first check out Top Cash ISAs as they are likely to pay you more interest.

The best interest 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 along with the other notes in the Safe Savings guide.

Easy access

Santander* 3% AER - in a CURRENT accountOn £3k-£20k balance. £2/mth fee, plus must pay-in £500/mth

Santander
  • Rate: 3% AER: between £3k-£20k, 2% over £2k, 1% AER over £1k
  • Fee: £2/month
  • Min deposit: £500 per month
  • Max deposit: N/A but only earn interest on £20k
  • Access: Online, branch or by phone
  • Interest paid: Monthly
  • Withdrawal restrictions: Unlimited withdrawals - it is a current account
  • Safety: Shared £85,000 UK protection.
Apply*
3,3000

Now, this is a bit bizarre! The Santander 123* current account is actually the top paying easy-access savings account. If you've between £3,000 and £20,000 in it, you get 3% AER on the whole amount - then if the balance drops, so does the rate.

The rub is, you need to operate it like a normal current account. This means you need to pay in £500/month (equivalent to a pre-tax annual salary of at least £6,000) and have at least two direct debits going out of the account.

You'll also need to pay the £2/mth fee, though it pays a nice 1%-3% cashback on bills such as council tax, phones and energy, which should easily cover that - many make £10/mth or more on top.

For full details of how the cashback works, overdraft costs and how this compares to other current accounts, read our full Best Bank Accounts guide.

Tesco Bank: 1.4% AER* incl 0.65% bonus/year. Allows unlimited withdrawals.

  • Rate: 1.4% AER incl 0.65% bonus for a year
  • Min deposit: £1
  • Max deposit: £1 million
  • Access: Online only
  • Interest paid: Annually
  • Withdrawal restrictions: Unlimited
  • Safety: Full £85,000 UK savings safety guarantee
Apply*
1.4,1

The Internet Saver from Tesco Bank* pays a decent 1.4% AER, including a bonus of 0.65% for the first 12 months. This is a good account if you need regular access to your savings and are happy to manage the account online only.

You can open the account with just £1 and you can make as many penalty-free withdrawals from the account as you want.

The account can only be opened and managed online and interest's paid on 31 March. To make a withdrawal you need to log into your account online and make a transfer to a linked account. After a year on the account's anniversary the rate will drop to 0.75%, as you lose the bonus - make sure you diarise this and transfer out when the rate drops.

Tesco Bank has the full £85,000 FSCS protection. See more information about the Savings Safety rules.

AA Savings*: 1.4% AER incl 0.9% bonus. Allows unlimited withdrawals.

  • Rate: 1.4% AER
  • Min deposit: £1,000
  • Max deposit: £1 million
  • Access: Online only
  • Interest paid: Annually
  • Withdrawal restrictions: Unlimited
  • Safety: Shared £85,000 UK savings safety guarantee
Apply*
1.4,1000

The Internet Extra Account from AA Savings* pays a decent rate of 1.4%, which includes a 0.9% bonus for a year. This means the rate won't drop within the twelve months, but it'll plummet after, so diarise to ditch and switch then.

You need to open the account with at least £1,000 (by cheque) and you can make as many withdrawals from the account as you want. But your balance must stay above £1,000. If it drops below this you'll lose the bonus (meaning you'll get 0.5%) until your balance goes back up to £1,000.

The account can only be opened and managed online. To make a withdrawal you need to log into your account online and make a transfer to a linked account. Interest's paid on the account's anniversary, at which point the rate will drop to 0.5%, as you lose the bonus.

The AA shares its £85,000 UK savings safety guarantee with the rest of the HBOS group, including Halifax, BM Savings and Saga. See more information about the Savings Safety rules.

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Specialised alternatives

Spreading cash for safety The best interest rate accounts if you need to spread savings

As explained in the Savings Safety guide, you're protected up to £85,000 per person per financial institution. If you want max safety on bigger amounts, you must spread cash wider.

The following are the next top payers in the market (or use 100%-protected savings accounts, at a lower rate).

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. But you will miss out on the rates shown above.

Top cash machine access savings Some accounts provide an ATM cash card

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.

Fancy looking locally?

All the rates above 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.

Occasionally cashback websites may give you a sign-up bonus when you open an account, so check 'em too.

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 to list the top-paying accounts that also rate highly on their ethics.

EthicalConsumerScale

Ethical top pick: 1.4% AER

Both have limited withdrawals though

See the graph on the right for what Ethical Consumer's ratings mean.

  • 1.4% AER - 12 withdrawals/year, postal access
    Ethical 13.5/20 Rating
    The PostSave Easy Access (2) from Coventry BS pays 1.4% on balances from £500, and allows 12 penalty-free withdrawals a year. Further withdrawals will be allowed, but you'll lose 30 days interest for each.

    Coventry BS shares its £85,000 FSCS protection with Stroud & Swindon Building Society.
    Ethical Consumer score: 13.5 out of 20.
  • 1.25% AER - Unlimited withdrawals, online/post/branch access
    Ethical 13.5/20 Rating
    The Easy Access Savings account from Kent Reliance pays a clean 1.25% AER rate and allows you to make unlimited withdrawals. You need to open the account with £1,000 but the balance can drop to £1 afterwards. The account can be opened and managed online, by post or in branch.

    Kent Reliance has the full £85,000 savings safety guarantee.
    Ethical Consumer score: 13.5 out of 20.

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Notice savings accounts

You can often boost the interest rate from the easy access accounts above if you’re able to wait a little while to get your hands on your savings. Generally, the more notice you can give, the better the rate you’ll get.

Secure Trust: 1.91% AER Beats the rate on the top one-year fix

  • Rate: 1.91% AER variable
  • Min deposit: £1,000
  • Max deposit: £1 million
  • Access: Post or phone
  • Interest paid: Quarterly
  • Withdrawal restrictions: Must give 120 days' notice
  • Safety: Full £85,000 UK savings safety guarantee
Apply

Normally if you fix you get a higher interest rate, but strangely this 120 day notice account from Secure Trust is paying a higher rate than the top one-year fixes. It also allows you to access your cash should you need to – providing you can give 120 days’ notice before you withdraw.

The only catch is that the interest rate is variable, meaning Secure Trust can change it when they wish, so you don't get the rate certainty you would with a one-year fix.

The other important consideration is whether you think you'll need access to your cash. Four months is a long time to wait if you do, so if you think you might need your money at a moment's notice then it may be better to opt for an easy-access account, even though you'll get a much worse rate.

You can apply for the account online only, but if you need to make a withdrawal you must request this by post. You can only make three withdrawals from the account during each year, but you can separately withdraw the interest that is paid quarterly in March, June, September and December.

Secure Trust Bank has the full £85,000 UK savings safety guarantee. See more information about the Savings Safety rules.

Shawbrook Bank: 1.85% AER Must give 120 days' notice to make a withdrawal

  • Rate: 1.85% AER
  • Min deposit: £1,000
  • Max deposit: £500,000
  • Access: Online or by post
  • Interest paid: Annually
  • Withdrawal restrictions: Must give 120 days' notice
  • Safety: Full £85,000 UK savings safety guarantee
Apply

Shawbrook Bank's 120 day notice account allows you to boost rates to beat easy access deals, but the catch – as the name suggests – is that you need to wait four months for cash when you withdraw. So, if the boiler broke, consider if you've enough accessible cash elsewhere to be able to pay before you opt for this account.

Because you have to give so much notice, you need to check two things. Four months is a long time to wait for your money, so you'll need to be organised. And you need to be sure - once you've made a request to withdraw cash, it can't be cancelled if you find you no longer need it (although you could just pay it straight back in).

Be aware that if your withdrawals take the account balance below £1,000, you'll only get 0.05% in interest until you can get the balance back above £1,000.

Shawbrook Bank has the full £85,000 UK savings safety guarantee. See more information about the Savings Safety rules.

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.

The dice don't have all the answers Is now the right time to fix savings?

In August 2013, it was expected the Bank of England base rate wouldn't rise for several years. But now, over a year later, Mark Carney, the Bank of England boss, has suggested we'll see the first rate rise in late 2015, and that the base rate could be as high as 2.5% by early 2017.

So, although it's probable that interest rates are unlikely to improve significantly in the very near future, fixing for too long could mean you lose out if the base rate does rise.

Currently, the top fixes beat easy access, so if you can lock cash away, you can boost your rate. But, of course, if rates did rise from 2015 (and no one has a crystal ball - though Carney's suggestion is pretty strong) by fixing you would've lost the flexibility to ditch and switch to a better payer, so it's important to go into fixed rate savings with your eyes open.

Special accounts for people 65 or over are being launched in January - they're expected to bust rates found below, although they will be limited in terms of how much you can invest. We'll update rates here, and in our Pensioner Bonds guide when we know where they are.

If savings safety status of banks change (eg, via mergers) it's harder to get at your cash

You may need to set up another account, in order to pay money in

1 Year

The best one-year fixed rates

If you can spare access to your cash for a year, you can benefit from some higher rates.

ICICI ICICI Bank UK 1.85% AER Apply online or by phone. Min £1,000

  • Product & link ICICI Bank UK
  • Rate: 1.85% AER
  • Length of fixed deal: 1 year
  • Min deposit: £1,000
  • Max deposit: No maximum
  • Savings safety: Full £85,000 FSCS protection
Full detailsApply

Shawbrook Post Office 1.8% AER Apply in branch/phone. Min £500.

  • Product & linkPost Office
  • Rate: 1.8% AER
  • Length of fixed deal: 1 year
  • Min deposit: £500
  • Max deposit: £2 million
  • Savings safety: Full £85,000 FSCS protection
Full detailsApply
2 Years

The best two-year fixed rates

Rates are higher in a two-year account. But always remember, the longer you lock cash away for, the more chance there is that rates will rise while your cash is untouchable.

first trust Secure Trust Bank 2.33% AER Apply online. Min £1,000

  • Product & link: Secure Trust Bank
  • Rate: 2.33% AER
  • Length of fixed deal: Till 31 January 2017
  • Min deposit: £1,000
  • Max deposit £1 million
  • Savings safety: Full £85,000 FSCS protection
Full detailsApply

Shawbrook Shawbrook Bank 2.25% AER Apply online or by post. Min £1,000.

  • Product & linkShawbrook Bank
  • Rate: 2.25% AER
  • Length of fixed deal: 2 years
  • Min deposit: £1,000
  • Max deposit: £2 million
  • Savings safety: Full £85,000 FSCS protection
Full detailsApply

3 Years

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. But if interest rates recover in the next three years, you could lose out. So you need to think carefully about if you want to fix for this length of time.

secure trust Secure Trust Bank 2.51% AER Apply online. Min £1,000

  • Product & link: Secure Trust Bank
  • Rate: 2.51% AER
  • Length of fixed deal: To 31 January 2018
  • Min deposit: £1,000
  • Max deposit £1 million
  • Savings safety: Full £85,000 FSCS protection
Full detailsApply

Shawbrook Shawbrook Bank 2.5% AER Apply online or by post. Min £5,000.

  • Product & linkShawbrook Bank
  • Rate: 2.5% AER
  • Length of fixed deal: 3 years
  • Min deposit: £5,000
  • Max deposit: £2 million
  • Savings safety: Full £85,000 FSCS protection
Full detailsApply
4 Years

The best four-year fixed rates

Decent choices are limited when saving for four years. You’ll only get slightly more than a three-year account and the longer you fix for, the more you risk rates increasing in the meantime. So you may want to consider a shorter fix.

Shawbrook Shawbrook Bank 2.85% AER Apply online or by post. Min £5,000.

  • Product & linkShawbrook Bank
  • Rate: 2.85% AER
  • Length of fixed deal: 4 years
  • Min deposit: £5,000
  • Max deposit: £2 million
  • Savings safety: Full £85,000 FSCS protection
Full detailsApply

Aldermore Aldermore 2.75% AER* Apply online, post or phone. Min £1,000.

  • Product & linkAldermore*
  • Rate: 2.75% AER
  • Length of fixed deal: 4 years
  • Min deposit: £1,000
  • Max deposit: £1 million
  • Savings safety: Full £85,000 FSCS protection
Full detailsApply*
5 Years

The best five-year fixed rates

Fixing for longer usually boosts rates. If you want to lock money away for longer, these are the best rates on offer.

first trust Secure Trust Bank 3.01% AER Apply online. Min £1,000

  • Product & link: Secure Trust Bank
  • Rate: 3.01% AER
  • Length of fixed deal: To 31 January 2020
  • Min deposit: £1,000
  • Max deposit £1 million
  • Savings safety: Full £85,000 FSCS protection
Full detailsApply

Clydesdale Clydesdale Bank 3% AER Apply by post, on the phone or in branch. Min £2,000.

  • Product & link: Clydesdale Bank
  • Rate: 3% AER
  • Length of fixed deal: 5 years
  • Min deposit: £2,000
  • Max deposit: £5 million
  • Savings safety: Shared £85,000 FSCS protection
Full detailsApply
7+ Years

The best longer-term fixed rates

Though the rate is higher than the five year options, locking in for seven years can be risky. If rates rise by even 2% during this time then your savings rate may not look so great. Consider going for a shorter fix if you don't need regular income from your savings.

first trust Secure Trust Bank 3.25% AER Apply online. Min £1,000

  • Product & link Secure Trust Bank
  • Rate: 3.25% AER
  • Length of fixed deal: To 31 January 2022
  • Min deposit: £1,000
  • Max deposit £1 million
  • Savings safety: Full £85,000 FSCS protection
Full detailsApply

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. 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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Top ethical fixed savings

Ethical savings accounts - where providers behave ethically in terms of the environment, human rights and more - have jumped in popularity. Our main focus is always telling you the top savings rates, but to match demand we've worked with Ethical Consumer to list the top-paying accounts that also rate highly on their ethics.

EthicalConsumerScale

Earn up to 2.5% AER fixed in an ethical bank

All the accounts below have the full £85,000 UK guarantee. See the graph on the right for what Ethical Consumer's ratings mean.

  • 1.75% AER fixed for one year
    Rating 13.5/20
    The Kent Reliance one-year Fixed Rate Bond pays 1.75% AER on balances over £1,000. You can apply online, by post or in branches.
    Ethical score: 13.5 out of 20.
  • 2.05% AER fixed for two years
    Rating 13.5/20
    The two-year Fixed Rate Bond from Kent Reliance pays 2.05% AER, on balances over £1,000. You can apply by post, online or in branches.
    Ethical score: 13.5 out of 20.
  • 2.4% AER fixed for three years
    Rating 12.5/20
    The Norwich & Peterborough BS e-Bond pays 2.4% AER from date of account opening, on balances from £1,000. You can apply online or by post. Interest is paid annually.
    Ethical score: 12.5 out of 20.
  • 2.5% AER fixed for five years
    Rating 13.5/20
    The Fixed Rate Bond from Leeds BS pays 2.5% AER for five years on balances over £10,000. You can apply online, by post or in branch. Interest is paid monthly and at maturity into a nominated account.
    Ethical score: 13.5 out of 20.

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're paying higher rates. Yet there's a workaround.

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

You've £100,000, and can get 5% in a year-long fixed account and 3% in an instant access account. You'd like roughly £5,000 of interest from these savings to supplement your income.

Put £95,000 in the fixed account, and £5,000 in the instant access. Then spend the instant access money over the year, knowing the £4,750 interest earned in the fixed account will make up for it. Then you're effectively getting the high rate and spending the interest.

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.

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Top small business savings accounts

If you have a business current account, the chances are it pays roughly 0% interest. So any businesses that have cash stored, even just to pay the taxman, are missing out on interest.

Who needs a business account?

There are two main types of small business structure; whether this works for you depends on yours.

  • Sole traders

    While you can open a business account, there's little point. Normal savings accounts pay far higher rates, so you would be better off opening an account in your own name and putting your business's cash in there.
  • Limited companies.

    This is the prime reason for small business accounts. For limited company business owners to move money into their own name requires a form of payment from the company to the individual. which will trigger a tax liability. Therefore business savings accounts are a way of earning interest on money in the company's name.

Savings safety

If you have a company with turnover under a million pounds, money in the bank has the same £85,000 per person (company) UK Savings Safety protection as private individuals. However if you have larger turnover, you're not protected.

Many of the accounts are specifically for small businesses. If you're larger, then check there are no turnover restrictions before applying for an account.

For the current top rates, read the Small Business MoneySaving guide.

The Savings Calculator

Simply enter all the details, remembering to choose the level of tax you pay. For the most accurate answer use the AER (Annual Equivalent Rate), which should be listed on your statement. Obviously as most accounts' interest rates are variable, the calculations will change if the rate does, but it should give you a good idea.

The calculator assumes you put money in at the beginning of each month, so if this isn't how you do it, the answers will be ever so slightly out. If you don't make regular deposits but put lump sums in, figure out the monthly equivalent for a rough answer. Feel free to play with the results to see how it impacts your savings.

Savings Calculator

Pick your question...

How much do you already have? £

How much can you save a month? £

What's the interest rate? (before tax) %

How far ahead do you want to look? years and months time.

How much tax do you pay? No Tax Basic Rate Higher Rate
Additional





How inflation hits your savings

To really know how well your savings are doing, you have to look at it compared to the rate of inflation. Inflation is the measure of the rate at which prices increase, so if savings don't beat inflation after tax, they're losing you money.

Ensure your savings aren't losings...

A savings account that pays less than the rate of inflation is eroding your wealth. An example using simple numbers should help...

Imagine inflation is 5% ...things costing £1 this year will then cost £1.05 next year

You have £1 in a savings account at 2% interest after tax ...by next year it will have grown to £1.02

Therefore saving's reduced your spending power by 3p/pound ...it's a losings not a savings account.

Of course sometimes prices drop - as happened in 2009 - and you get negative inflation, known as deflation. This can sometimes be positive for savings - read about the impact of deflation on savings.


Glossary

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Duplicate links of the * links above for the sake of transparency, but this version doesn't help MoneySavingExpert.com: Aldermore 4 yr, MoneySupermarket, Santander 123, Tesco Bank

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