Archive: MoneySavingExpert's Money Tips Email

Stop the savings rip-off!
Martin: 'If banks won't pass on rate rises, DITCH 'em, and SWITCH to earn 4% easy-access, near 6% fixed'

"The simple message is if you've got savings, check the rate they're paying, as most are crap! Some big banks pay under a pitiful 1%, while most people should be earning at least 4%. So unless your money is locked in... ditch and switch to the top payers where there is competition - just open a new account & move your money across.

"Of course, even top savings pay less than inflation, which means your money's purchasing power is being eroded. Yet that makes it more important to maximise the rate to mitigate the damage."

There's a societal issue at play here too.

"Last week, UK base rates increased for the 13th consecutive time, up to 5%. The full pain has been passed on to mortgage borrowers, yet on average, savers haven't got the full benefit."

"Growing the gap between mortgage and savings rates feels wrong. We, the state / taxpayer, bailed the banks out in 2007. Now that the economy's teetering and inflation is rocketing, they shouldn't be increasing margins.

"During my meet with the Chancellor last week to discuss mortgage help, I asked for him to pressure banks to pass on, in full, rate rises to savers. (Listen at 2hr 34min to the BBC Radio 4 interview I did about it yesterday.)

"We consumers can do our bit too, by not allowing banks to rip us off and pay continually poor rates. So do put your money where it's best paid. To help, below the team run you through the latest deals. As always, all accounts here have the full £85,000 UK savings protection."

The simplest form of savings accounts are easy access. With these you can put money in, including big lump sums, and take it out when you want. That means you get flexibility and can ditch at speed if they no longer pay decently. Though top fixed rates (see below) pay more.

Yet as all easy-access accounts are AER variable, the rates can and do change, which means you need to monitor them. And they're changing rapidly at the moment, so do check our Top savings guide for any changes to the rates below.

• Top unlimited withdrawal accounts. There's a close battle between two here. Both only need £1 to open, both are app-only, and both are good at upping rates when base rates rise.
  
  - Chip has just upped its rate to 4.21% (though it has its quirks, the link goes to our guide which tells you more).
  - Kroo* will pay 4.1% from Saturday (now 3.6%) and, via this link, you get a free £10 Amazon voucher too (ends 11.59pm Fri, 6,000 available). The rate difference between it and Chip is £1.10 per £1,000, so if you're saving under £9,000 and value the voucher, it's a winner. Technically it's a current account, but you can just open it (without switching) and use it for savings. It doesn't do a credit check (just an ID check).
  
  Don't want app-only? Lots more options in our Savings guide.
  
  
• Top BIG NAME easy-access 4.01%. You often tell us you want a name you know. Top is Sainsbury's Bank* at 4.01% (min £1,000), though you're limited to just three penalty-free withdrawals a year. For unlimited withdrawals, it's the Post Office* at 3.86% (includes a 2.68% bonus for first 12mths, so the rate will drop after; min £1).
  
  
• Top 'IF YOU BANK WITH US' accounts 5.12%. For these easy-access accounts, you need to have a specific current account with the bank to open them. The rates are higher, but the amounts you can save are limited.
  
  - Barclays Rainy Day Saver 5.12% on up to £5,000.
  - Nationwide FlexDirect current account 5% on up to £1,500.
  
  
• Saving over £10,000? You may want to consider cash ISAs, as they can protect your interest from tax, which more people will start to pay now rates are higher. See cash ISAs below.
  
  

• Top under 1yr fixes: Monument Bank 6mth 5.15% AER (min £25,000), Allica Bank 6mth 5.1% AER (min £10,000), Hampshire Trust Bank 9mth 5.08% AER (min £1).
• Top 1yr fix: SmartSave 5.86% AER (min £10,000), Close Brothers 5.85% AER (min £10,000), OakNorth Bank 5.78% AER (min £1).
• Top 2yr fix: SmartSave 5.86% AER (min £10,000), Close Brothers 5.85% AER (min £10,000), Recognise Bank 5.8% AER (min £1,000).
• Top 3yr to 5yr fixes: Up to 5.85%, which isn't any more for fixing that much longer - a sign that over that time the markets don't currently expect rates to rise that much more.

Is it worth fixing now? UK base rates are predicted to rise further, some say perhaps they'll peak nearer 6%. Yet fixed rates aren't based on today's base rates, they're based more on the market's view of future rates - and as that's up, we've seen the differential between the top fixes and the top easy access grow again over recent weeks.

So there's a balance between crossing your fingers and leaving your cash earning less in the meantime, in the hope of it rising, and just grabbing what looks a decent rate right now.

A taxing question for fixed rates. The interest on fixes crystallise for tax when you can access it, so some may want it paid monthly so they can spread out the interest over years, rather than get it in one lump which may push you up a tax bracket. Others may want it all paid at the end as, for example, you're retiring and may be a lower taxpayer then. For more, see our fixing: a taxing question help.

The top cash ISA rates are up. Good news for the millions with money in these tax-free savings accounts, or who need to open them. So let's start with Martin's clarion call...

'Everyone with a cash ISA, check what they earn now - even if they're fixed. Don't think they're locked in, millions can transfer and up the rate.'

Who are ISAs best for? The personal savings allowance (PSA) means you get a tax-free amount of interest earnable in ANY savings...

- Basic (20%) taxpayers can earn £1,000/yr of interest tax-free.
- Higher (40%) taxpayers can earn £500/yr of interest tax-free.
- Top (45%) taxpayers don't get a PSA.

Remember, that's the INTEREST you can earn. That means as interest rates have gone up, the amount you can have saved tax-free has gone down. At one point, you needed around £250,000 in top easy-access savings to generate it. Now...

There are a few specialist savings options some can take which pay more. So here's our checklist of other things to look at...

1. Are you on UNIVERSAL CREDIT or Tax Credits? You may be eligible for an unbeatable 50% Help to Save bonus.

2. Do you have existing expensive DEBT? Paying off debt is usually more lucrative than saving. See our Should I pay off my debt? guide, the Should I overpay my mortgage? guide, and use our Mortgage Overpayment Calculator.

3. Are you a wannabe FIRST-TIME BUYER aged 18 to 39? There's a whopping 25% bonus possible via top Lifetime ISAs.

4. Save regularly each month? Earn up to 9% in top regular savings.

5. There's nowt wrong with investing either. With investing, you aim for higher returns, but accept the risk you could lose some or all of your initial investment. We don't talk much about it, not because we're against it, just because it's not our area of expertise.

For many, over the longer run, investing is the right call. For an introduction, see Stocks & shares ISAs, but you'll need more specialised websites for help on what to invest in.