Archive: MoneySavingExpert's Money Tips Email

Highest fixed & easy-access savings rates since 2019
Martin: Check your savings rates. If they're less than 1.5% you're being underpaid - don't stand for it

It's estimated UK households put a staggering £180bn extra aside in savings during the pandemic, as many of those who could work from home had far lower costs. Yet rock-bottom interest rates meant they were hardly rewarded for it.

Now the cost of living crisis means the rainy day saved for has arrived for some, as they may need to use those savings. Peeking through all these clouds is what appears to be a ray of light, as top savings rates have recently jumped to their highest levels since July 2019 - and they're more than double those from this time last year...

Yet the true picture is still gloomy, as 30yr high inflation at 7% means interest from even top-paying savings is easily gobbled up by price rises. That means upping savings interest is even more important though, as it's not about helping 'em grow, it's about reducing the rapid erosion of inflation.

For some, investing is a better bet, especially if you can put money away for the longer term. Just be aware that to try for faster growth, you must accept a risk to your capital. I'm going to stick with savings here though - not as a judgement call, just because that's our core expertise.

If you've not switched savings account in the last couple of years, you're likely earning just 0.1% or less. Do check now... I'll wait...

Even if you opened a decent account a few months ago, as rates have increased, you're still likely earning little more than half of what today's top accounts pay. Though of course you know that, as you've already checked... sorry for going on about it.

• The TOP easy-access account - 1.5%. These are the bog-standard savings accounts, where you can add and withdraw money whenever you want - no strings - so the top payer here is the minimum you should be earning.
  
  The standout is giant US bank JP Morgan's new UK Chase savings* paying 1.5% AER variable (min £1). To get it, just open its free app-based current account (you don't need to switch bank to get it), then just open the savings in the app.
  
  We've been raving about it, as the current account debit card also gives 1% cashback for 12 months and cheap spending abroad.
  
  On the back of that, Jo emailed: "I moved all of my savings to Chase as my circumstances require instant access to my money. This will make an extra £480 interest for me this year, plus approx £70 cashback from monthly spending. This means a great deal to me. I am a pensioner and every penny counts. Thank you so, so much."
  
  If you're un(h)appy with app banking, Aldermore (min £1,000) pays the next best rate at 1.25% AER variable though you can only make two withdrawals per year. Full options in Top savings.

Top fixed-rate savings, also known as savings bonds, pay higher interest than easy access and give rate certainty (easy-access rates are 'variable', meaning they can and do change, so keep your eye on them). However, you must be willing to lock your savings away without being able to access your money.

As the graph above shows though, easy-access rates have recently started to catch fixes up, so the differential has shrunk. Though if you've some cash you definitely won't need access to, the higher rate means it's worth it (you can have lots of accounts, so don't be afraid to mix easy access and fixes)...

Updated 3 May with the latest savings rates, though top rates change rapidly, so links go via our guide for the latest info:
- Top 1yr fix. Jordan International Bank pays 2.15% AER (min £10,000).
- Top 2yr fix. Jordan International Bank pays 2.5% AER (min £10,000).
- Top 3yr fix. PCF Bank pays 2.6% AER (min £1,000).

As you can see, the premium for fixing for three years over two is tiny. So beware, with UK interest rates predicted to rise further, the longer you lock into a savings fix, the longer you forgo the ability to ditch it and move money elsewhere if rates improve.

My best guess is one or two-year fixes seem safer (though in these uncertain times, of course things could always reverse, and if rates drop, you could regret not locking in longer).

A cash ISA is just a savings account you're allowed to put up to £20,000 per tax year in, and the interest is always tax-free. And as the new tax year started this month, unless you were super quick, your allowance is unused.

Yet since 2016, the personal savings allowance means few savers actually pay tax on interest, as all basic 20% rate taxpayers can earn up to £1,000 interest in savings before it's taxed (higher 40% taxpayers £500).

Fewer than one in 20 people get close to that, so for everyone else there's no practical cash ISA benefit. Instead the interest rate is what counts, and cash ISAs usually pay less than normal savings.

Updated 3 May with the latest savings rates, though top rates change rapidly, so links go via our guide for the latest info:
- Top easy-access cash ISA: Cynergy is the top payer at 1.05% AER variable, but the top normal savings above is 1.5%.
- Top fixed-rate cash ISA: UBL UK pays 1.5% AER for 1yr and Hampshire Trust Bank pays 1.91% for 2yrs. Both are around 0.6% points below the top equivalent normal savings.

If you do pay tax on savings, you can both open a new ISA for this year and do cash ISA transfers to move existing cash ISAs to the higher rate. Yet for most people, it's better to consider ditching cash ISAs and moving the money to higher interest normal savings - with two caveats:

- If you're near the limit where you'll earn enough interest to pay tax on interest, money in cash ISAs now could protect you from future tax.

- If you're happy to lock cash away but may need to access it, fixed cash ISAs must let you withdraw money (for a big interest penalty).

Some people can earn much more, here's my quick checklist...

• Low income & claiming universal credit/tax credits? Get a 50% savings boost. For those who qualify, Help to Save is unbeatable - it adds a 50% bonus on the highest amount of savings you have in it over 2 years. Many who are eligible rave about it.

• Saving for a first home? Get a free £1,000/yr from the state. If you're aged 18 to 39, open a top Lifetime ISA, which gives a 25% boost on up to £4,000 saved a year (so a max £1,000/yr boost).

• Earn 3%+ with easy(ish) access if you save monthly. As the name suggests, regular savers are for putting money aside each month. They pay higher interest, but generally only on small sums.
  
  Saffron BS 2% AER 1yr fixed regular saver is available to anyone, and you can put in up to £50/mth. However, for those who have a current account with them, NatWest/RBS's linked regular saver pays more, 3.3% AER variable, on up to £150/mth. Some existing customers of Cambridge BS can earn up to 5%.

• Children's savings accounts can pay far more than grown-up ones. Children's savings are a whole category of their own, and often pay far higher rates. Our Top children's savings guide runs you through it.