Archive: MoneySavingExpert's Money Tips Email

News. Cash ISA limit to be cut to £12,000 for U65s
How to max the interest on every penny of your savings, earn 4.5%
Includes full savings, fixes & cash ISA best buys... 

Last week's Budget announcements on savings will likely reshape how many save in the coming years, so we'll start with Martin's explainer of what the Budget changes for savers mean, then it's on to:

- Martin's 3 things to consider before saving.
- Top 4.52% easy-access savings: Withdraw when you want.
- Top 4.5% fixed savings: Lock money away at a guaranteed rate.
- 3 ways to boost interest to up to 50%.
- 2 ways to minimise tax: Cash ISAs & Premium Bonds.

...Remember, you can pick 'n' mix as many savings accounts as you want to combine terms that suit you.

While building up savings, especially for emergencies, is a crucial aim for everyone, it isn't necessarily always the first thing to do...

1. Got costly debt? If so, it's usually best to use spare cash to clear it first. A grand's debt on a credit card at a typical 25% costs £250/yr, while the same saved at 5% earns £50. Pay off the debt with the savings and you're £200/yr better off. For more on how to do this safely, see Should I pay debt with savings?
   
   
2. Mortgage rate the same or higher than you can earn in savings? If so, check our Mortgage Overpayment Calc to see whether it's worth you overpaying (though do always keep a savings emergency fund of a few months' worth of bills). Most can overpay 10% a year penalty-free, but do check. Full help in our Should I overpay my mortgage? guide.
   
   
3. Putting away money for 5+ years? Consider INVESTING. On the balance of probability, investing in a wide spread of assets will likely substantially outperform saving. We Brits often make the mistake of putting all our eggs in the safety basket, rather than investing some for greater growth. 
   
   And, ultimately, this is why the Chancellor's trying to make saving less attractive in the Budget (I'd have preferred her to make investing more attractive). Next week on Tue 9 Dec, 8pm, I'll be doing my first-ever ITV show on how to invest. Plus, there's help now in our our Investment ISA guide.

Now, with the changes coming all set out above, below is the key info from my recent savings masterclass, which the brilliant MSE team have updated for me with the latest rates (as I'm prepping for my TV show).

With savings, it's important to ask yourself: 'Do I want an easy life with good rates, or am I prepared to put in more work to maximise the interest on every penny?' Be honest with yourself. Don't set out to become a SuperSaver if you won't keep it up - as then it's better to play safe and first focus on these two simple, less-effort routes...

PS: All the rates we show here are AERs (annual equivalent rate).

1. Top bog-standard EASY-ACCESS savings pay 4.52% (variable). Easy-access is the simplest form of savings, and right now the highest-paying form of savings, so...

...if you do nowt else, put all cash you don't imminently need in a top easy-access account.

That's far better than leaving it lingering at a low rate in a poor standard savings account, or worse, a zero-interest current account.

- Pros: You can put money in and take it out when you want, giving total flexibility. Plus, when you need to switch, it's easy - just withdraw from your existing account and put it in the new one. 
- Cons: Rates are variable, so they move, often with Bank of England base rates (and a cut is likely soon), but many do also often drop them after a while, hoping you won't react. So, monitor the rate (at least every few months) and be prepared to ditch & switch if needed.

Below are the current best buys. As rates can change, updates go in our top easy-access savings & top cash ISAs guides. Which is right for you depends, so read down till you find one that suits...

• Top tax-free 4.52% easy-access cash ISA. A cash ISA is just a savings account you can put up to £20,000 per tax year in, where the interest's NEVER taxed. Right now, the top payer has a better rate than the top normal savings, so if you haven't used this year's ISA allowance, you may as well grab it, even if you won't get any tax gain (unless you plan to use your ISA allowance this tax year for shares).
  
  - Trading 212's 4.52%* (min £1) allows unlimited withdrawals. The rate includes a 1yr 0.67% bonus for new Trading 212 customers. 
  - Plum 4.49% (min £1) which includes a 1yr 1.7% bonus.
  - For a better-known, non-app-based option there's Bank of Ireland 4.11%* (min £100) which includes a year-long 3.11% bonus, meaning for a year a strong rate's guaranteed, but you'll need to ditch & switch after.
  
  
• Top 4.51% easy-access savings. For normal taxable savings, the top payer is Chase (part of JPMorgan) 4.5%* (min £1, max £3m) but only for new customers to Chase bank, as the rate includes a 1yr 2% newbies bonus. You have to get it via its app-only current account (which anyone can get as it doesn't do a hard credit-check). If you've over £25,000 to save, it's beaten by app-only Monument Bank's 4.51%. 
  
  The top savings account that's both open to all and has no high min deposit is Cahoot (part of Santander) 4.4% (min £1, max £500k) though the account matures after a year (ie, it's moved to a low-interest account, so you'll need to ditch & switch). Alternatively, Kent Reliance 4.17% (min £1k, max £500k) is just a straightforward rate. 
  
  
• Top notice account 4.54% variable, but no instant withdrawals. This is a notice NOT easy-access account, but the rate is strong and otherwise it's simple. OakNorth Bank's 4.54% variable (min £1, max £500k) requires 95 days' notice to withdraw cash, so as long as you will know in advance when you'll need it (eg, buying a house), it's a useful option as it pays more than easy access.
  
  
• New. A top-paying ethical option. Zero's Planet Safe Saver 3.66% (min £1, max £1m) is the highest-paying 'ethical' saver (ie, avoids funding fossil fuels, weapons, tobacco and similar sectors), something we're often asked about, but the rates are normally awful - so this having an OK rate is an improvement.
  
  The savings account has full FSCS safety protection, newly increased to £120,000 per person (see below). However, to get it you need to open Zero's app-only current account (there's no hard credit check) and money in that is safeguarded but doesn't have FSCS protection, so don't keep large amounts there. More in Zero Planet Safe Saver.
  

2. Top FIXED-RATE savings pay 4.5% and here the rate is guaranteed not to drop.

If you want the certainty of a guaranteed rate that won't change, without needing to monitor it, this is for you. Yet you have to lock the money away to do that (except in ISAs), so most people are best to have some easy-access savings and some fixed to get the best of both worlds. With fixes...

- Pros: Certainty. Base rate drops won't affect you. So while easy-access rates are currently higher, if the UK base rate drops as predicted, fix now and the rate you're locked in to may look very good.
- Cons: The money is usually locked away without access, so only put money in you definitely don't need to touch within that time. Plus, if rates rise elsewhere (not seen as imminently likely), you'd be stuck with this till the fix ends.

Is now a good time to fix and how long for? Martin: "The markets seem to be convinced base rates will fall at the Bank of England's next meeting on 18 December. So, if rate certainty is important to you, a fix seems like a decent bet. 

"Provided you're comfortable locking the money away, the more you value certainty, the longer you should fix. Though, as you can see, the highest rates are currently paid for shorter fixes, foretelling the market's prediction that, over a longer time period, rates will drop. 

"Also, do remember that while fixed rates are fixed, if UK interest rates fall and don't look like rising, the rate you'll be able to fix at in future will drop. So grabbing a decent fix now may look like a very good move in hindsight if that were to happen."

The basic savings building blocks are the easy-access and fixed accounts above. Yet there are some savings products paying more that either:

a) limit who can get them; or 
b) limit the amount you can put in. 

If they apply to you, they're worth having. Think of this like a savings 'champagne' fountain. You pour your cash into the best possible product, then when it's full, move to the next one down and so on. So let's run through this in order of maximum returns...

1. Help to Save: An unbeatable 50% boost on what you save, if you work & are on Universal Credit

If you're on Universal Credit and earn anything from work, you can open a Help to Save account via Gov.uk and keep using it, even if you're no longer eligible for UC. 

You can save up to £50/mth, and after two years, you get a 50% bonus based on the highest balance you reached - even if you'd withdrawn the money. You can then repeat it for another two years for a second 50% boost. 

It's unbeatable if you can get it. In the Budget, it was confirmed that the scheme is now permanent (it was due to end next year) and that from 2028, around 1.5m more people on Universal Credit will be eligible. For full info on Help to Save, see Martin's briefing in last week's email. 

2. Lifetime ISA (LISA): A 25% boost for first-time buyers aged 18 to 39

Martin. "The Budget may've signalled the beginning of the end for LISAs. The Govt said it will launch a consultation in early 2026 on replacing it with a first-time buyer product, so any new scheme is still likely some way off.

"The Chancellor also told me that this will include looking at raising the £450,000 property-price cap on existing LISAs (and I'll be pushing hard that, if the new product ends up better, people should be able to transfer their existing LISA (and Help to Buy ISA) money into it.

"For now, though, I'd still say if you're a first-time buyer looking to buy a house worth under £450,000 within the next few years (but not within a year if you haven't got one open), then the LISA is still incredibly lucrative and you should look at it. See our Top Lifetime ISA guide for full step-by-step help on if its for you, and of course best buys)."

3. Regular savings accounts. Earn 7% on smaller amounts (plus a possible free £175)

As the name suggests, the Top regular savings accounts give high interest on money put aside each month. You can have multiple regular savers in different places, so you can save a combined £1,000+/mth.

Some of the best rates are with savers linked to current accounts (ie, you usually must have a provider's current account to open it). These are likely loss leaders to win or keep your banking custom - affordable for the banks, as the amounts are small.

If you've got lump-sum savings and want these rates, just arrange to move the max amount from those savings into these each month. 

Why regular payers' interest often feels less than it is. In simple terms, it's because you drip-feed money in there rather than having a lump sum all year. See Martin's why regular savers are the best payers, but it won't be that much explanation.

We've mentioned how tax works above, but here's a bit more... 

1. You can save £20,000 tax-free each year - this is on top of other allowances. 

Cash ISAs are just savings accounts where the interest is NEVER taxed and it doesn't count towards your Starting Savings Rate or Personal Savings Allowance, so it's an extra on top of those. 

It's a crucial extra allowance, which anyone who earns or saves enough to pay tax on savings interest (or thinks they may do in future) should take advantage of. Imagine £20,000 that would otherwise be taxed, over a year, on the top easy-access accounts...

And, crucially, once you've put money in a cash ISA, it stays tax-free year after year. So you could have put £20,000 in last year, £20,000 in this tax year, and £20,000 again next tax year, after which, since the Budget, the limit will drop to £12,000/yr for under-65s. Even so, year-on-year, it can end up being a huge sum.

Don't let your money fester in poor cash ISA rates

Too many think they put their money in a cash ISA and it's stuck there. It's not - you've a right to transfer it to a new top payer. Yet don't just withdraw the cash - you'll lose its ISA status. Instead, apply for a new cash ISA, and as part of the application, you'll be asked whether you want them to transfer your existing cash ISA over...

- You don't need to be adding any money to do this.
- It doesn't use up your £20,000 allowance, only new money does that.
- Got an old fixed-rate cash ISA? See whether it's worth paying the penalty to move it via our 'Should I ditch my fixed ISA?' calc.
- Most of the top fixed & top easy-access cash ISAs allow transfers, though you don't usually get any newbie bonus.

2. You can put £50,000 tax-free in Premium Bonds - the prize fund rate is now 3.6%

We're not the biggest fan of Premium Bonds for most people. The vast majority of those with typical luck will do better just putting money in top savings. Premium Bonds' tax-free nature, though, does mean they come into their own for people who pay tax on savings and have used up their ISA allowance.

In that case, provided you're putting a larger amount in (as you need to do that to have a decent chance of winning closer to the published prize rate), they can be a good option. For a full explanation, listen to Martin's is it time to ditch Premium Bonds? new podcast, or read the full Are Premium Bonds worth it? guide. Related: How much will you likely win on Premium Bonds calc.