Each month on Independent Money, we round up the best places to open new savings accounts if you’re looking for the highest interest rates available on a range of account types.
With a little effort on your part, your money can work harder for you and be a form of passive income - remember, whether you’re starting to grow your savings pot or have a large lump sum available, protecting the value of your cash is important.
Seeking out good interest rates for your money is a tool which can help counteract one of the forces which works against how much your cash is worth in future: inflation, in other words, the cost of buying things going up.
Additionally, the Bank of England cut the base rate this month so overall savings rates have already started to decrease, making it even more important to be diligent about where your money goes.
Rates below are correct at the time of going to press but are always subject to change, while different account types let you access your money in different ways or at specified times, so be sure to check which is right for your circumstances. As always, read the terms and conditions if you are considering using any of these accounts, as they may also have different requirements and stipulations to get the indicated rates. Always remember to note when bonus rates expire too, to switch your money to an account with a better rate.
Important to know: Gross interest is the rate of interest before income tax is deducted. AER stands for Annual Equivalent Rate and shows what the interest rate would be if interest was paid and compounded once each year. This makes it easier to compare rates across accounts of different types and lengths. Your own income and circumstances will determine whether you pay tax on interest earned. Rates are correct at time of publishing but are subject to withdrawal or change.
Easy access or current accounts
Post Office are currently offering a bonus rate for 12 months, on top of their standard rate, meaning savers can get a total rate of 4.4 per cent AER variable, with interest paid out monthly. You cannot access or withdraw money in the first eight days after opening the account but you get unlimited withdrawals after that point.
For bigger rates with potentially lesser-known names, the Chip app offers 4.58 per cent including a six-month bonus using the code WELCOME, and Monument Bank offer 4.75 per cent which allows you three penalty-free withdrawals a year - but note you need at least £25,000 in savings to open it.
There are plenty of other banks and building societies offering accounts which offer 4.3 per cent and over, so search around for the one which suits your circumstances including withdrawals you might need, how you want to manage the account (online, app, etc) and how much you have to put in to open it. Tesco Bank, Yorkshire Building Society and Charter Savings Bank are all options here.
Fixed term or regular savers
If you want a fixed-term account instead - you put your money in and get an agreed amount of interest on it at the end of the term, but usually can’t access it beforehand - then there are options for three and six months too if you hunt them down.
But for 12 month fixed-term options, Co-Op Bank are paying monthly at a 4.62 per cent AER, for those with a minimum of £1000 initial deposit. That seems to be about the most competitive rate right now and even two-year fixed term options are about the same - RCI Bank offer 4.6 per cent with interest paid upon maturity, while Tesco Bank offer 4.2 per cent for 18 months.
The trade-off to locking away savings for longer is that across the next 12 months, interest rates are expected to lower further (but won’t definitely do that) so you’d be securing a higher rate now for your money, which might not be available in a year’s time.
Cash ISAs
As a reminder, a Cash ISA can operate just like a normal savings account for you, with a maximum of £20,000 you can save into your ISAs each financial year (including stocks and shares and other types of ISA). As with other accounts, some come with limitations on withdrawals so check what’s right for you.
Trading 212 right now offer new customers 5.03 per cent on their money, a deal which is available for new clients only. Existing clients still earn 4.9 per cent, but the additional bonus for new sign-ups is valid for 12 months.
Plum will allow you as a new user to benefit from a slightly more generous 5.05 per cent rate, but the trade-off there is a maximum of three withdrawals penalty–free per year. Trading 212’s product gives unlimited withdrawals at present.
Remember, no tax is due on gains made from within any ISA wrapper.
When investing, your capital is at risk and you may get back less than invested. Past performance doesn’t guarantee future results.
