Base rates may be at historic lows but it's still possible to make saving pay. The best buys pay 2.8% easy access but if you can lock cash away, earn up to 4.9% in a fixed savings account.
This step-by-step guide includes daily updated best-buy easy access and fixed account, plus how to compare and choose in safety.
In this guide
Where to start saving
It's not just about finding the top paying account - often that's beatable, depending on your circumstances...
Got debts?
The golden rule is pay off your debts before savings, that's because the interest rate charges on most credit cards and loans is vastly higher than the amount you'll earn in savings.
E.g 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 simply by repaying the card.
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 some cash set 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 a cash ISA this year?
A cash ISA is simply a savings account you don't pay tax on that each adult can put up to £5,100 a year in. If you haven't opened one this tax year (April to April), then it's the first place to put your cash so start 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've a little more than that you can combine a few) - the main advantage is they tend to pay much higher rates of interest.
If you have a lump sum and can put money away each month, simply find the best savings account for the cash you've currently got and open a regular saver on top 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, here the amount you earn is guaranteed over a set time period, yet you usually can't access the cash during that time.
Sometimes rates doing this are higher, so it can be a good deal. However it does mean if rates were to increase during that time you are 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 is a lower rate taxpayer than the other, ignoring issues of 'trust', it's financially worth considering whose name you save in - as put it in the lower rate taxpayers name and you'd 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. Yet if you've done all of the above, and 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.
The difference between savings accounts and normal day to day bank accounts is they've less functionality, 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 hitting 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 £50,000 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 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 £50,000 in each. In fact consider spreading money even if you've under £50,000, as if you needed to claim compensation it takes time, which means you wouldn't have access to your cash. See the get 100% safety section of the savings safety guide for full info.
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 and 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 have still managed to throw a few wobblers into the mix. There are a number of things to watch for...
Introductory ‘bonus' rates.These are temporary interest hikes to attract new customers. For active consumers, as you can shift the cash to a better payer as soon as the bonus ends, it's no problem.
Yet while once a complete negative, since base rates dropped to historic lows, bonus rates haven't been as bad. 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.
-
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 takes a few days to get the cash in your hands).
However some accounts require you to give notice to withdraw money, sometimes of up to 180 days which means your cash is locked away (or you need to pay a penalty to withdraw it).
Withdrawal limits or penalties.
Some accounts limit the number of withdrawals you make a year. Others will not pay interest in any month a withdrawal is made. This can have a massive impact, for example you withdraw £100 but lose interest on all the £100,000 in your account for the whole month.
-
You pay tax on savings
Unless your combined earnings and savings interest are under the £6,475 personal allowance (slightly 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.
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, also check out top cash ISAs and if you can 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 £50,000 per person, per institution rules. Though do check how institutions are linked and other notes in the safe savings guide.
Top rate (min £1) 2.8% inc. 2.3% bonus
The AA, online. 2.8% AER, unlimited access.The AA Internet extra (issue 3) account pays 2.8% AER, yet 2.3% of this is a bonus lasting a year - so you will need to ditch and switch then or the rate will plummet.
The AA's £50,000 UK savings safety guarantee is shared across any accounts you have with the HBOS group - see the Safe Savings guide for full details.
Next top 'with bonus' account is Santander* eSaver (issue 2) paying 2.75% including a 2.25% bonus for 12 months. You can save from £1 and can make unlimited withdrawals. You can apply online or by phone.
Quick AA Stats: Rate: 2.8% variable AER, inc 2.3% bonus. Min. Deposit: £1.Max Deposit: £1,000,000 Access: Online Withdrawal restrictions: None Quick Santander Stats: Rate: 2.75% variable AER, inc 2.25% bonus. Min. Deposit: £1.Max Deposit: £2 million Access: Online Withdrawal restrictions: NoneTop clean-rate account (min. £100): 2.65% AER
Saffron BS. Unlimited withdrawals over £100. If you want to avoid a bonus, the two top rate clean accounts come from Saffron Building Society (2.65%) and Halifax (2.6-2.8%)
Saffron Building Society 2.65% AER
The Saffron BS e-saver account (issue 2) requires £100 to open it and pays 2.65% AER allowing unlimited withdrawals, BUT they have to be in chunks of more than £100 at a time.
The lack of bonus means it's all genuine rate, but it is still variable so Saffron could choose to lower the interest you earn if it no longer wants to keep this account competitive.
Halifax / Bank of Scotland 2.6%-2.8% AER
The Halifax* Websaver Extra, pays a standard 2.6% AER and allows you to withdraw as much or as little cash as you like. Yet after the first withdrawal a year you lose 30 days interest per withdrawal but only on the actual amount withdrawn, so its likely to be minor.
Those earning over £15,000 who pay their salary into Halifax or Bank of Scotland current accounts get 2.8%, As for those in credit the Halifax* Reward account is one of the best buys (see Best Bank Accounts) this is a good deal.
Halifax has the full £50k UK savings safety guarantee, but if you've money elsewhere in the HBOS group it all counts to that total, see the Safe Savings guide for full details.
Saffron BS Quick Stats: Rate: 2.65% variable AER. Min. Deposit: £100. Access: Online Withdrawal restrictions: Withdrawals must be a min. £100 Halifax/BoS
Quick Stats: Rate: 2.6% variable AER. Min. Deposit: £1. Access: Online Withdrawal restrictions: 1 penalty free per year.
Specialised Alternatives
With safety, introductory bonuses and notice-free access all playing their part in savers' decisions, we've split a selection of extra accounts into sections to make perusing them easier. Click a title to see all the accounts available.
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 £50,000 per person per financial institution. Therefore to keep amounts bigger than this 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).
See full list of accounts.
Birmingham Midshires 2.75% AER.
The telephone extra (issue 2) account from Birmingham Midshires is paying 2.75% including a bonus of 2.25% for a year. The min. balance is £1 and you can make unlimited withdrawals. You can apply online or by phone.
It has the full £50k savings safety, though this protection is spread across the whole HBOS group; read the Safe Savings guide for full details.
Post Office 2.75% AER - Not UK protected though
The Online Saver account from the Post Office* pays 2.75% with a bonus of 1.25% for a year. You can deposit between £1 and £2 million. The account allows unlimited penalty free withdrawals and you can access the account online. However, savings in here are NOT covered by the UK compensation scheme.
Instead it's protected by the Irish safety scheme, as Post Office Savings are run by Bank of Ireland. This covers an unlimited amount of savings until the end of September 2010, when it will be reviewed. However, if it went bust, you would legally be entirely reliant on Ireland's government for any compensation. For full info, read Are Irish Banks Safe? blog and the foreign banks section of our savings safety guide.
ING 2.75% AER - Not UK protected though
New customers to ING* can get 2.75% AER. The rate drops to 0.5% after 12 months, so this is effectively a 2.25% bonus. The minimum deposit is £1 and you can make unlimited withdrawals.
ING is NOT protected by the UK compensation scheme but the Dutch one instead, which covers the first €100,000 (c. £91,000). 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.
Scottish Widows 2.7% AER
The Scottish Widows Internet Saver pays 2.7% including a bonus of 0.69% for 12 months (the bonus is only available to new customers). You can deposit any amount over £1. As the name suggests it is an online account and you can make unlimited withdrawals (max £10,000/day online).
If you've a lot of cash, over the £50,000 amount, and the safety factor worries you, then if you've decided that spreading around multiple accounts isn't for you (see above), there are a few ways to get 100% guarantee on savings, though you will sacrifice the rate earned.
See full list of accounts.
UK Government Owned.
Government-backed bank NS&I is the only normal savings account provider that now guarantees 100% of the money you save in it. Currently its Direct Saver account pays an okay 1.75% AER and lets you deposit up to a huge £2 million in perfect safety. The minimum deposit is just £1 and the account for 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. These do pay interest, though substantially less than a top savings account. 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. 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.
See full list of accounts.
Yorkshire Building Society.
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.
In April 2009, financial strength rating's agency Moodys substantially downgraded a heap of banks and building societies, including Yorkshire (read Building Society Downgrades news) meaning it's more important to be watchful about not going beyond the £50,000 government guarantee. For full info read the Are Your Savings Safe? guide.
Bank of Scotland.
If you don't want an online account, the top clean non-web account for this is Bank of Scotland's Instant Access account, also with optional cash card and min £1, paying 0.5% AER.
Fancy looking locally?
All the above rates are available to anyone, yet 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.
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 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.
Yet that's balanced out because there are some decent rates available as lenders are desperate to get hold of your cash to lend it out at high rates during the
How long to fix for?
The longer you fix for, the more you are RISKING the fact that an unpredicatable 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. Plus if the savings safety status of the institution changes, it'd be more difficult to get your cash out.
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'll get a slightly higher rate than instant-access accounts offer:
Bank of Baroda 3.15% AER
Online, min £500
The highest rate for one year is from the Indian owned Bank of Baroda*, paying 3.15% AER on its online Baroda MAX 1 year fixed rate bond (exclusively via comparison site Moneysupermarket - the link above takes you there) for balances over £500, with a maximum of £200,000.
This is a fully UK registered institution, meaning that if it went bust, it has the full UK savings safety up to £50,000 per person, the same as any other UK bank. Read full info on how the protection works in the Savings Safety guide
Quick Stats: Rate: 3.15% AER Length of fixed deal: 1 yrs Min. Deposit: £500 Max Deposit: £200,000 Access: Online
Punjab National Bank 3.1% AER
UK protected, from £1.
Another Indian owned bank, Punjab National Bank's fixed deposit account paying 3.1% AER on deposits between £1 and £100,000. You can apply by post or in branches (although there are only 5).
This is the international arm of the Indian institution Punjab National Bank and is protected by the FSCS and so it has full UK savings safety up to £50,000 per person. Read full info on how the protection works in the Savings Safety guide.
Quick Stats: Rate: 3.1% AER Length of fixed deal: 1 yrs Min. Deposit: £1 Max Deposit: £100,000 Access: Post/Branch
Aldermore 3.01% AER
Online, Phone, Post. min £1,000
The fixed rate account from Aldermore is paying 3.01% AER on its one year bond, for balances over £1,000, up to £1 million. You can operate the account online, by phone or post.
You may not have heard of it, but Aldermore is the new name for private bank Ruffler, it is covered by the usual £50,000 FSCS protection.
The Best Two Year Fixed Rates
By saving for a bit longer, the rates available can jump. Always remember that the longer you lock cash away for, the more of a chance there is that rates will rise while your cash is untouchable. Currently, many economists predict rates will stay low into 2010, but after that who knows.
Bank of Baroda 3.8% AER.
Online, min £500
The highest paying account is from the Indian owned bank, Bank of Baroda*, pays 3.8% AER on its online Baroda MAX 2 year fixed rate bond (exclusively via comparison site Moneysupermarket - the link above takes you there) for balances over £500, with a maximum of £200,000.
This is a fully UK registered institution, meaning that if it went bust, it has the full UK savings safety up to £50,000 per person, the same as any other UK bank. Read full info on how the protection works in the Savings Safety guide
Quick Stats: Rate: 3.8% AER Length of fixed deal: 2 yrs Min. Deposit: £500 Max Deposit: £200,000 Access: Online
Nottingham Building Society 3.75% AER.
Post, min £1,000
Alternatively, the Nottingham BS Fixed Rate savings account (issue 91) pays 3.75% AER until 2 September 2012 on deposits between £1,000 and £250,000. You can apply by post only; request an application pack by calling 0845 434 7634.
Nottingham BS has the full £50,000 UK savings protection. For a full explanation see the ‘Are Your Savings safe?’ guide.
Quick Stats: Rate: 3.75% AER Length of fixed deal: until 2 Sept 2012 Min. Deposit: £1,000 Max Deposit: £250,000 Access: Post
Aldermore 3.75% AER.
Online, Phone, Post. min £1,000
The fixed rate account from Aldermore is paying 3.75% AER on its two year bond, for balances over £1,000, up to £1 million. You can operate the account online, by phone or post.
You may not have heard of it, but Aldermore is the new name for private bank Ruffler, it is covered by the usual £50,000 FSCS protection.
Quick Stats: Rate: 3.75% AER Length of fixed deal: 2 years Min. Deposit: £1,000 Max Deposit: £1 million Access: Online/Phone/Post
The Best Three Year Fixed Rates
It's possible to push the rate up even further, by sacrificing access to the cash for longer. Yet you'll be taking a bigger gamble on rates staying low for a long period; if UK interest rates recover between now and 2013, you could lose out as your cash is stuck at this rate.
Bank of Baroda 4.3% AER.
Online, min £500
The highest paying account is Bank of Baroda's* online Baroda MAX 3 year fixed rate bond (exclusively via comparison site Moneysupermarket - the link above takes you there). The minimum balance is £500 and has a maximum of £200,000.
This is the UK arm of the Indian institution Bank of Baroda, and as such is fully protected by the UK FSCS, meaning that if it went bust, the UK government would protect the first £50,000 per person, the same as any other UK bank. Read full info on how the protection works in the Savings Safety guide
Quick Stats: Rate: 4.3% AER Length of fixed deal: 3 yrs Min. Deposit: £500 Max Deposit: £200,000 Access: Online
ICICI / alDERMORE 4.15% AER.
Online, from £1,000
The UK subsidiary of Indian owned bank, ICICI*, is paying 4.15% AER on its three year fixed rate account, for balances over £1,000, with no maximum. ICICI is a full UK subsidiary and thus in the event the bank went bust, you have the full protection up to the usual £50,000 per person, per financial institution.
Some concerns were raised over its parent bank's stability, yet our policy is to include ALL the top rates. Remember that saving over £50,000 in ANY one institution constitutes a potential risk. If you are considering putting money in, ensure you read both the foreign banks section of the Are Your Savings Safe? guide and Martin's specific ICICI: How Safe is it? blog.
Alternatively, Aldermore is paying the same rate on its three year fixed account, for deposits over £1,000. You can operate the account online, by phone or post. You may not have heard of it, but Aldermore is the new name for private bank Ruffler, it is covered by the usual £50,000 FSCS protection.
ICICI Quick Stats: Rate: 4.15% AER Length of fixed deal: 3 yrs Min. Deposit: £1,000 Max Deposit: n/a Access: Online
The AA 4.1% AER.
3 years. Apply online
Alternatively, The AA fixed rate savings account pays 4.1% AER for 3 years, on balances over £1. The account can be opened online or by post.
With The AA the £50,000 UK savings safety guarantee is shared across any accounts you have with the HBOS group - see the Safe Savings guide for full details.
Quick Stats: Rate: 4.1% AER Length of fixed deal: 3 years Min. Deposit: £1 Max Deposit: £5 million Access: Online/Post
The Best Four Year Fixed Rates
There are not currently any accounts offering a top rate when saving for four years.
The best option is to choose between the top three year accounts above or five year accounts below based on how long you want to lock your cash away.
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, though this is risking rates staying low until 2015.
five year fixed account with some access
state bank of india, 4.5% over term. min £1,000
A stepped savings account is a fixed rate account, but the rate that is paid changes each year. The Step Up fixed deposit account from State Bank of India pays an average of 4.5% over the 5 year term.
The real bonus here is that you can withdraw your money, however you can only do this at specific times. Withdrawals are allowed on the anniversary date of account opening (from year two onwards). Here are the rates you'd get if you withdrew after:
- Year 2: 3.63% AER
- Year 3: 3.92% AER
- Year 4: 4.19% AER
- Year 5 (end of term): 4.5% AER
You’ll need to instruct the bank to do this within the preceding month and the money will be switched to your nominated account on the anniversary date. The bank'll then send an email reminder one month before each anniversary date.
The actual rates for each year are 3.25% in year one, 4% in year two, 4.5% in year three, 5% in year four and 5.75% in the final year.
The minimum deposit you can make is £1,000 and the account can be applied for by post or in branches (although there are only seven).
The State Bank of India is the UK subsidiary of an Indian bank, and as such you get the usual £50,000 UK FSCS protection;see the full Safe Savings guide for more.
Quick Stats: Rate: Yr 1: 3.25% AER Yr 2: 4% Yr 3: 4.5% Yr 4: 5% Yr 5: 5.75%. Withdrawals allowed?: Only on the 2nd, 3rd & 4th anniversary of account opening. Min. Deposit: £1,000. Max Deposit: £2 million
Bank of Baroda 4.9% AER.
Online, min £500
The highest paying account is Bank of Baroda's* online Baroda MAX 5 year fixed rate bond (exclusively via comparison site Moneysupermarket - the link above takes you there). The minimum balance is £500 and has a maximum of £200,000.
This is the UK arm of the Indian institution Bank of Baroda, and as such is fully protected by the UK FSCS, meaning that if it went bust, the UK government would protect the first £50,000 per person, the same as any other UK bank. Read full info on how the protection works in the Savings Safety guide.
Quick Stats: Rate: 4.9% AER Length of fixed deal: 5 yrs Min. Deposit: £500 Max Deposit: £200,000 Access: Online
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.
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 work-around.
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.
Guaranteed good rates - Base rate trackers
Savers who are willing to lock money away and want to know they are getting a decent (if not table topping rate) can open bonds that track the Bank of England base rate, ie, they are guaranteed to stay a set amount above it, and your savings rate rises or falls in line with it. Base rate is at an historic low of 0.5%, so the likelihood of further falls is dwarfed by possible future rises.
It's important to be aware that if base rate stays at 0.5% you could be missing out higher rates available now with a fixed savings account (see below), but if rates rise these could leave you quids in - it is a gamble (though your cash is safe!).
Santander: 3% AER (base rate + 2.5%)
Min £10k. Existing customers get 3.25% (base rate + 2.75%) The Tracker Bond from Santander is paying 3% AER, tracking 2.5% above base rate until 1 September 2011.
Those Santander customers who hold one of its current accounts, mortgages or investments can get the Loyalty Tracker bond at a higher 3.25% AER (2.75% above base rate), but only over the phone on 0800 681 6691, or in branches..
You cannot access the money, or add extra money after the initial deposit of a minimum £10,000, before the one year term is up, and the maximum balance is £100,000. This makes it essentially a fixed rate bond, where the rate could change. Check the one year fixed accounts section to see how this compares.
It's important to note the rate only changes on the first day of the month after a base rate change. As announcements are usually early in the month, you could be waiting more than three weeks for an increase.
Santander shares its £50k savings safety protection with A&L, Asda, Bradford & Bingley and Cahoot, meaning if you've more than that saved across all those banks, the extra isn't protected - see the Safe Savings guide for more details.
Santander Quick Stats: Current Rate: 3% AER. (existing customers: 3.25%) Tracks base rate at: +2.5% (existing customers +2.75%) Min. Deposit: £10,000. Max Deposit: £100,000 Access: Online/Branch/Phone 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 one of these accounts, 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' 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 £50,000 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 do 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 are dropping as 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 (not too sunny then...). Inflation is at 5.0% and the best savings account pays 6.5% (ie. basic rate taxpayers get 5.2%). Sally Saver has £10,000 in her account, enough to buy a nominal 100 shopping trollies 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 trollies 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.
Glossary
Ask A Question / Discuss
Spotted out of date info/broken links?
Email brokenlink@moneysavingexpert.com to let us know
Always double check the product details before signing up to them
LINKS THAT HELP THIS SITE (all have a * in above article)
(this has no impact on product or pick - see explanation below)
Halifax reward account, Halifax Websaver, ICICI, ING, MoneySupermarket, Post Office, Santander
Explanation (of * links)
How this site is funded. Two types of contacts are listed. The first, which all have a * within the main body of the articles, help MoneySavingExpert.com stay ad-free and free to use, as they're ‘affiliated links' which invisibly take you usually via affiliate linkage or commercial money sites, which then pay this site. The second type doesn't help and therefore doesn't have a *.You shouldn't notice any difference, the links don't impact the product at all and the editorial line (the things we write) is NEVER impacted by the revenue. If it isn't possible to get an affiliate link for the best product, it is still included in exactly the same way. For more details read how this site is financed.
LINKS THAT DON'T HELP THIS SITE
(please only use if necessary)
No * Link Available: Aldermore, Bank of Scotland, Birmingham Midshires, Moneyfacts, Nottingham BS, NS&I, Punjab National bank, Saffron BS, Scottish Widows, State Bank of India, The AA, Yorkshire BS
Duplicate links of the * links above for the sake of transparency, but this version doesn't help MoneySavingExpert.com:
Halifax reward account, Halifax Websaver, ICICI, ING, MoneySupermarket, Post Office, Santander
