Shell £20 of petrol for £10
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Where to start saving
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 debts are more expensive than savings pay them off first
The golden rule is: pay off your debts before starting to save. 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 Should I Repay Debts With Savings?.
With savings rates so low, overpaying on your mortgage could be a better option
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.
Open an ISA before a savings account and save tax free
A cash ISA is simply a savings account you don't pay tax on. Anyone aged 16 or over can put up to £5,760 a year in one during the 2013/14 tax year. If you haven't opened one this tax year (April to April), then it should be the first place to put your cash into. For more, read the full Top Cash ISAs guide.
Can you put money aside each month? Use a high interest regular saver if so.
Then consider regular savings accounts, a specific product for putting £10-£500 in every month. 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 best buys, read the full Regular Savings Accounts guide.
Can you lock the cash away? Fixed savings give you a (slightly) better return.
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.
Usually fixed rates are higher than easy access, so they can be good deals. 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? Put savings in the name of the partner paying less tax.
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 it becomes their cash, not yours. The only extra issue here would be inheritance tax, if one of you dies within seven years.
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.
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...
These are temporary interest hikes to attract new customers. They're actually a good thing for many, as they effectively act as a minimum rate guarantee during the introductory period, promising you at least some interest.
Active consumers can shift the cash to a better payer as soon as the bonus ends. Just ensure you always diarise to ditch and switch when the bonus finishes, so you aren't languishing on a rubbish rate.
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.
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 cash in your hands).
However some accounts require you to give notice to withdraw, perhaps up to 180 days, which means your cash is locked away (unless you pay a penalty to withdraw).
Some accounts limit the number of withdrawals you can make a year. Others won't pay interest in any month a withdrawal is made. This can have a massive impact. For example, you might only withdraw £100, but you'd lose interest on the £100,000 in your account for the whole month.
The terms vary, so always know what taking out your cash will cost you, and if you think you may exceed what's allowed, then go for a more accessible account.
Unless your combined earnings and savings interest are under the £9,440 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 45% for top 'additional rate' taxpayers.
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 and gross interest.
This is a commonly asked question but almost every savings account can be set up as a joint account, so actually the question should just be “what is the best savings account”, which this guide will answer below.
The UK's best savings rates
The 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
- Rate: 3% AER between £3k-£20k, 2% over £2k, 1% AER over £1k
- Min deposit: £500 per month
- Max deposit: N/A
- Access: Online
- Interest paid: Monthly
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 switching to it, and paying in £500/month (equivalent to a pre-tax annual salary of at least £6,000). There is a £2/mth fee, though it also 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.
If you've less than £2,500 to save, Nationwide's FlexDirect* account pays 5% AER in-credit interest up to that limit - see if it's right for you.
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.
Customer services poll (In credit) |
||
|---|---|---|
| Great |  |
63% |
| OK | |
28% |
| Poor | |
9% |
| Date: Feb 2013 | Voters: 484 | ||
Customer service feedback
In our February 2013 poll, Santander's 123 account was one of the best rated, with 63% saying they got great service. The account's fairly new, so we split it out in this poll, but Santander's results have improved overall.
NS&I: 1.76% AER Unlimited withdrawals. Online, phone or post. Min £500.
- Rate: 1.76% AER, clean rate
- Min deposit: £500
- Max deposit: £1 million
- Access: Online, phone or post
- Interest paid: Monthly only
The Income Bond from NS&I pays 1.76% AER on balances over £500 and it allows unlimited withdrawals
Interest is only paid monthly and it allows unlimited withdrawals. The account can be accessed and applied for online, by post or by phone.
NS&I is the only savings provider fully backed by the UK Government, so all money you save in it is protected. See more information about the Savings Safety rules.
Investec: 1.75% AERUnlimited withdrawals. Online. Min £25,000.
- Rate: 1.75% AER
- Min deposit: £25,000
- Max deposit: £250,000
- Access: Online only
- Interest paid: Monthly
The E-asy Access account from Investec pays 1.75% AER, with no bonus, on balances over £25,000 (max £250k). Keep an eye on the rate, and ditch and switch to another account if it drops.
The account has no minimum balance, but if it drops below £25,000 then you will only earn 0.5% on your savings. If you've less to save, try NS&I above, or see the spreading cash section for other options.
It is an online-only account and interest is paid monthly.
Investec has the full £85,000 savings safety guarantee. 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).
Derbyshire BS, 1.7% AER. Min £1,000
The NetSaver (issue 11) account from Derbyshire BS (part of Nationwide) pays 1.7% AER, incl a 1.2% bonus until 30 June 2014.
You'll need £1,000 to open it, annoyingly via cheque. After that, the balance can drop to £1. You can make unlimited withdrawals, online.
Derbyshire shares its £85,000 UK savings safety guarantee with Nationwide, Cheshire and Dunfermline Building Societies. See more information about the Savings Safety rules.
Nationwide 1.7% AER. Min £1,000
With only one penalty-free withdrawal a year, Nationwide's MySave Online Plus pays 1.7% AER, including a bonus of 1.2% for the first year. You need £1,000 to open the account, though after the balance can drop to £1.
Make more than one withdrawal and the interest drops to 0.1% in the month of the withdrawal (ie, you lose approx £2 per £1,000 saved). This includes closing the account. To avoid this, time your closure for shortly after you've been paid the monthly interest.
Nationwide shares its £85,000 FSCS protection with Derbyshire, Dunfermline and Cheshire Building Societies. See more information about the Savings Safety rules.
Yorkshire BS 1.65% AER. Min £100
The Yorkshire Building Society Triple Access Saver (issue 3) pays 1.65% on balances over £100, but only allows you to withdraw cash three times a year, so is only ideal if you don't need frequent access to your cash.
Access is in branch or by post and interest is paid annually or monthly
Yorkshire BS shares its £85,000 FSCS protection with Barnsley, Chelsea, N&P Building Societies and Egg. See more information about the Savings Safety rules.
Coventry BS 1.6% AER. Min £1
The Coventry Building Society Online Saver (5) pays 1.6% on balances from £1, but only allows four penalty free withdrawals a year. Further withdrawals will be allowed, but you'll lose 50 days' interest for each.
Access online and interest is paid annually or monthly. If you have more than £250,000 in the account, that portion of the balance will only earn 0.5% AER. This account is not open to anyone who opened Coventry BS's Online Savers (2), (3), or (4).
Coventry BS shares its £85,000 FSCS protection with Stroud & Swindon Building Society. See more information about the Savings Safety rules.
Aldermore, 1.5% AER. Min £1,000
The Easy Access Account (issue 6) from Aldermore pays a clean rate of 1.5% AER. Keep an eye on it and be prepared to ditch and switch if the rate drops.
You can save from £1,000 and open the account online, by phone or post. If your balance drops below £1,000, you'll get 0.5% AER.
Aldermore has the full £85,000 UK 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. But you will miss out on the rates shown above.
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
The self-employed can pay tax early by buying a tax certificate, which covers your liabilities in advance. They pay no interest on deposits of less than £100,000 (up to 0.75% above this), yet there's nowt safer than knowing your tax bill is sorted.
Pay off debts
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 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.
Yorkshire Building Society: 1.4% AER
The Yorkshire BS Internet Saver (issue 3), with optional cash card, pays 1.4% AER. You only need £1 to open it and can save up to £1 million. You can withdraw up to £250 per day.
Yorkshire shares its £85,000 FSCS protection with Chelsea, Norwich & Peterborough and Barnsley building societies, plus ex-Egg Savings customers. See more information about the Savings Safety rules.
Halifax: 1% AER
The Everyday Saver from Halifax pays 1% AER for a year, including a 0.5% 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 info about the Savings Safety rules.
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.
Ultra-ethical 1.5% AER (but no UK protection)
Or UK protected 1.7%
See the graph on the right for what Ethical Consumer's ratings mean.
- 1.5% - most ethical but NO UK PROTECTION.
Triodos Bank’s Online Saver Plus is the highest-rated ethical account with a good interest rate, 1.5% AER (including a fixed 0.5%, 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'd be reliant on the Dutch compensation scheme for your cash. Read more: Are Your Savings Safe? Ethical Consumer score: 15 out of 20. -
1.7% AER - highest-rated ethical account.
The NetSaver Derbyshire is the highest rated ethical account with a good interest rate. The online-only account pays 1.7% AER on balances over £1,000, including a 1.2% bonus until June 2014 and allows unlimited. Derbyshire shares its £85,000 UK savings safety guarantee with Nationwide, Cheshire and Dunfermline Building Societies. Ethical Consumer score: 12.5 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, 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 in the past, some merged banks have allowed special dispensation for these balances.
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.
Top Fixed Rate Savings
The standard current best buys are so low you should beware locking in for too long, or you'll be stuck if things bounce back.
The best one year fixed rates
If you can spare access to your cash for a year, you can benefit from some higher rates.
Principality 2% AER
Apply online, by post or in branches. Min £500.
- Product & link: Principality
- Rate: 2% AER
- Length of fixed deal: 1 year
- Min deposit: £500
- Max deposit: £2 million
- Savings safety: Full £85,000 FSCS protection
The one-year Fixed Rate Bond (issue 225) from Principality pays 2% AER on balances over £500.
Additional deposits are permitted, while the issue remains open to new customers.
Principality BS has the full £85,000 UK savings safety guarantee. See more information about the Savings Safety rules.
Saffron BS 2% AER
Apply by post or in branches. Min £500.
- Product & link: Saffron BS
- Rate: 2% AER
- Length of fixed deal: 1 year
- Min deposit: £500
- Max deposit: £1 million
- Savings safety: Full £85,000 FSCS protection
Early closure allowed, subject to a 180-day interest penalty on the amount withdrawn.
The Saffron Building Society One Year Fixed Term, Fixed Rate Bond pays 2% AER with a minimum deposit of £500.
The account can be opened by post or in branches, but you can only make one deposit. Interest is paid at maturity for the annual interest option or on the last day of each calendar month for the monthly option.
Saffron Building Society has the full £85,000 savings safety guarantee. See more information about the Savings Safety rules.
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 of a chance there is that rates will rise while your cash is untouchable.
Close Brothers 2.3% AEROnline or by post. Min £10,000.
- Product & link: Close Brothers Fixed Term Rate
- Rate: 2.3% 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 Select Gold account pays 2.3% AER for two years on balances over £10,000, but no additional deposits or withdrawals can be made.
Applications can be made online or by post 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.
Bank of Cyprus 2.25% AER
Apply online or by phone or post. Min £1,000.
- Product & linkBank of Cyprus UK
- Rate: 2.25% AER
- Length of fixed deal: 2 years
- Min deposit: £1,000
- Max deposit: £1 million
- Savings safety: Full £85,000 FSCS protection
You may be wary of Bank of Cyprus given the Cypriot government's use of savings in Cypriot banks to bail out it's economy. Bank of Cyprus UK is registered in the UK and is fully covered by the £85,000 UK FSCS guarantee - the same level of protection as any other UK-registered institution. See the Safe Savings guide for more info.
The two year Fixed Rate Bond from Bank of Cyprus UK pays 2.25% AER for three years, on balances over £1,000. However only one deposit will be accepted and withdrawals are not permitted.
The account can be applied for and operated online, by phone or post or in branch. Interest is paid annually.
Islamic Bank of Britain 2.63% AER
Online, phone or branch. Min £1,000
- Product & link Islamic Bank of Britain
- Rate: 2.63% AER
- Length of fixed deal: 2 years
- Min deposit: £1,000
- Max deposit £100,000
- Savings safety: Full £85,000 FSCS protection
The highest two year rate is from Islamic Bank of Britain. The bank is Sharia'a (Islamic law) compliant, so all interest is banned. Instead, it offers an 'expected profit rate' of 2.6% per year when you save at least £1,000 (which compounds to 2.63%). This ISN'T exactly the same as interest, and there's a chance it may pay less, so please click for all the details.
While marketed as savings, Islamic Bank of Britain gets your return by investing 'ethically'; never in arms, alcohol or drug companies. This means there's an element of risk – you're not 100% guaranteed to get the target rate. In its eight-year history, it's never paid less than the advertised rate, though if you've doubts, put your cash elsewhere.
This rate is effectively the same as an AER, if it was interest instead of profit. So, if you choose to retain and accrue the quarterly profit until maturity, the return will work out at 2.63%.
Islamic Bank is UK-registered, and is covered by the full FSCS £85,000 protection. 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.
Vanquis Bank 2.51% AER
Apply online or by phone. Min £1,000.
- Product & linkVanquis Bank
- Rate: 2.51% AER
- Length of fixed deal: 3 years
- Min deposit: £1,000
- Max deposit: £250,000
- Savings safety: Full £85,000 FSCS protection
You may have heard of Vanquis because of its hideously expensive credit cards. Its move to savings is quite recent, yet it is fully covered by the £85,000 UK FSCS guarantee - the same level of protection as any other UK-registered institution. See the Safe Savings guide for more info.
The three year Fixed Rate Bond from Vanquis Bank pays 2.51% AER for three years, on balances over £1,000. However only one deposit will be accepted and withdrawals are not permitted.
The account can be applied for online and operated by phone. Interest is paid annually.
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
The Fixed Rate Bond (issue 9) from Shawbrook Bank pays 2.5% AER for three years on balances over £5,000. Additional deposits can be made into the account after opening while the account is still available to new customers.
You can apply online or by post, but it can only be operated by post. Interest is paid on 31 Dec and at maturity.
Shawbrook Bank has the full £85,000 savings safety guarantee. See more information about the Savings Safety rules.
Close Brothers 2.5% AEROnline or by post. Min £10,000.
- Product & link: Close Brothers Fixed Term Rate
- Rate: 2.5% 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 Select Gold account pays 2.5% AER for three years on balances over £10,000, but no additional deposits or withdrawals can be made.
Applications can be made online or by post 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.
The best four year fixed rates
Decent choices are limited when saving for four years, and you'll get only slightly less in a three year account so you may want to consider a shorter fix. The longer you fix for, the more you risk rates increasing in the meantime.
Shawbrook Bank 2.55% AER Apply online or by post. Min £5,000.
- Product & linkShawbrook Bank
- Rate: 2.55% AER
- Length of fixed deal: 4 years
- Min deposit: £5,000
- Max deposit: £2 million
- Savings safety: Full £85,000 FSCS protection
The Fixed Rate Bond (issue 6) from Shawbrook Bank pays 2.55% AER for four years on balances over £5,000. Additional deposits can be made into the account after opening while the account is still available to new customers.
You can apply online or by post, but it can only be operated by post. Interest is paid at maturity.
Shawbrook Bank has the full £85,000 savings safety guarantee. See more information about the Savings Safety rules.
The best five year fixed rates
Fixing for longer usually boosts rates further, but at the moment rates are similar to three year fixes. If you want to lock money away for longer, these are the best rates on offer.
Virgin Money 3% AER
Apply online. Min £1.
- Product & linkVirgin Money
- Rate: 3% AER
- Length of fixed deal: to 20 May 2018
- Min deposit: £1
- Max deposit: £1 million
- Savings safety: Full £85,000 FSCS protection
The Fixed Rate E-Bond (issue 43) from Virgin Money pays 3% AER until 20 May 2018, on balances from £1. Additional deposits can be made into the account after opening but no withdrawals are allowed.
The account is opened and operated online. Interest can be paid annually or monthly.
Virgin Money has the full £85,000 savings safety guarantee. See more information about the Savings Safety rules.
FirstSave 2.9% AER
Apply online. Min £1,000
- Product & link First Save Fixed Rate Bond
- Rate: 2.9% AER
- Length of fixed deal: 5 years
- Min deposit: £1,000
- Max deposit £2 million
- Savings safety: Full £85,000 UK protection
The Fixed Rate Bond from First Save (2nd issue) pays 2.9% AER for five years, on balances over £1,000. Withdrawals are not permitted until maturity.
Interest is paid annually or monthly, although you'll need a minimum balance of £5,000 for monthly interest.
First Save has the full £85,000 savings safety protection. See more information about the Savings Safety rules.
Shawbrook Bank 2.75% AER
Apply online or by post. Min £5,000.
- Product & linkShawbrook Bank
- Rate: 2.75% AER
- Length of fixed deal: 5 years
- Min deposit: £5,000
- Max deposit: £2 million
- Savings safety: Full £85,000 FSCS protection
The Fixed Rate Bond (issue 6) from Shawbrook Bank pays 2.75% AER for five years on balances over £5,000. Additional deposits can be made into the account after opening while the account is still available to new customers.
You can apply online or by post, but it can only be operated by post. Interest is paid on 31 Dec and at maturity.
Shawbrook Bank has the full £85,000 savings safety guarantee. See more information about the Savings Safety rules.
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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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.
Earn up to 3% 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.
- 2% AER fixed for one year
The Principality BS one-year Fixed Rate Bond (issue 225) pays 2% AER on balances over £500.
Ethical Consumer score: 13.5 out of 20. - 2.1% AER fixed for two years
The Kent Reliance two-year Fixed Rate Bond (issue 13) pays 2.1% AER with a min deposit of £1,000. Ethical score: 13 out of 20. - 2.2% AER fixed for three years
The Yorkshire BS three-year Fixed Rate e-Bond pays 2.2% AER, less than the two year account above so you may want to opt for a shorter fix. The min deposit is £1,000. Ethical score: 13 out of 20. - 2.5% AER fixed for four years
The Kent Reliance four-year Fixed Rate Bond (issue 7) pays 2.5% AER on balances over £500. Plus, as an added bonus, it's supporting Great Ormond Street Hospital, pledging 0.25% of the average monthly balance. Ethical score: 13 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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Guaranteed good rates
An alternative to fixing is to get an account that gives you a rate guarantee for a certain period if you lock your cash away - that way you know exactly what the deal will be. There are a few different types; accounts that track base rate, or pay the average of the top savings accounts. Both of these are listed below. Or there's those linked to inflation (see Inflation-Linked Savings).
Investec: 2% AER. Min £25,000 deposit3 mths notice to withdraw. Pays average of top 10 accounts.
- Rate: 2% AER variable
- Min Deposit: £25,000
- Max Deposit: £100,000
- Access: Online, post or phone.
- Interest paid: Annually or monthly
The High 10 account from Investec pays the average of the 10 highest savings rates in the market, currently 2% AER (it's decided by price comparison site Moneyfacts, and updated every Tuesday).
The catches are that you need to save over £25,000 and give three months' notice to withdraw any money, so only open this if you don't need instant access to your cash. It may also be worth you comparing with the fixed savings accounts section.
There's also a High 5 (issue 2) version of the account which pays the average of the highest 5 savings rates, currently 2.08% AER. However, you need to give six months' notice to withdraw from it. Again, the minimum deposit is £25,000.
Investec has the full £85,000 FSCS protection. See more information about the Savings Safety rules.
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.
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.
What about when there's deflation?
Deflation is when the rate of inflation goes negative, meaning overall prices are lower than a year ago. This, or very low inflation, can actually be a boon to savers. Look at the contrast between inflation and deflation...
When inflation's high
Imagine it's July 2008. Inflation is at 5.0% and the best savings account pays 6.5% (so basic rate taxpayers get 5.2%). Sally Saver has £10,000 in her account, enough to buy a nominal 100 shopping trolleys of food/shoes/washing machines.
Calculating over a year for ease, her savings would grow to £10,520. Yet inflation means the shopping basket has increased in price to £10,500. Thus Sally's spending power has only increased by £20; her real interest rate was just 0.2%.
When there's a deflationary period....
Deflation has set in, with the inflation rate at minus 2%, while savings rates have further slumped too, offering just 1.5% interest after tax. Here, after a year Sally's ten grand's only grown to £10,150, yet deflation means the shopping trolleys now only cost £9,800.
This means she could buy them and have £350 left over, giving a real interest rate of roughly 3.5%. So even though her interest's plummeted, she's actually better off.
This has remarkable consequences. Far too many have a concrete savings mindset that shouts "don't spend your capital!" Yet in a deflationary environment that's too rigid; anyone living off savings interest would face huge cuts in their income, and not spending capital would actually be penalising yourself.
Personal rates of inflation do vary, yet if you're experiencing deflation, and need to spend from your savings pot, you can do so without hurting your savings pile. Take the capital out at the rate of deflation, and you're not losing anything as your purchasing power is retained.
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