UK households are often looking for ways to make their money go further amid the cost of living crisis, and savings accounts can help after an Autumn Budget that increased taxes.
The Bank of England’s (BoE) decision to keep interest rates at 4% in November was good news for savers as this influences the rates banks and building societies set on their products.
Inflation data showed Britain’s consumer price index (CPI) fell to 3.6% in October from 3.8% in September.
This raised expectations that the BoE could cut rates in December. Markets are pricing in a 90% chance the BoE will cut rates by 0.25% this month, up from 85% earlier in the week before the budget.
Experts are urging savers to look for the best deals and review their accounts regularly, as many may still have products that are failing to beat inflation.
Mark Hicks, head of active savings at Hargreaves Lansdown, said: “Inflation may have eased but it’s still ahead of savings on the street.”
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He said it was “more important than ever to shop around and consider online banks and savings platforms as there are still plenty of accounts leading the pack, well ahead of inflation”.
“For money you won’t need for a period of time, it’s worth considering locking in a fixed-rate deal now,” added Hicks.
Reeves announced changes to savings income. From 2027-28, the basic savings rate will rise by 2 percentage points to 22%, the higher savings rate will rise by 2 percentage points to 42% and the additional savings rate will rise by 2 percentage points to 47%. It will enter into force from April 6, 2027.
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Gary Smith, senior partner in financial planning at wealth management firm Evelyn Partners, said: “With the current freeze on personal savings allowances and upcoming ISA reforms, savers in particular may be wondering what to do with their cash.
“Income flows from cash deposits are already being reduced by falling interest rates, so the net return if savings are exposed to tax could end up being poor indeed.”
Easy access accounts allow you to access your money when you need it. The fixed term means you cannot access your cash for the duration of the transaction. They usually offer better rates, but you have to be comfortable not touching your savings for a long period of time, usually between one and five years.
Until recently, savers could earn a market-leading 5% for three months, but the best deal is 4.5% from Investec over a one-year term. Interest is paid on maturity and a minimum investment of £5,000 is required.
GB Bank through the Prosper investment platform has a transaction of 4.5% for one year. Interest is paid monthly or on maturity and you can invest between £20,000 and £100,000.
LVH Bank pays 4.46% for a one-year transaction. Interest is paid on maturity and you can invest anywhere between £1,000 and £1,000,000.
Online banks typically offer higher rates than traditional brick-and-mortar branches, which translates into better returns, giving you a more efficient way to save and reach your financial goals.
If you prefer to go with a familiar name, high street lenders have slightly lower offers but are still above inflation.
Tesco ( TSCO.L ) Bank offers the highest rate among high street lenders, with a one-year fixed rate savings account paying 4.21% p.a., with a minimum balance requirement of £2,000. However, you can invest up to £5 million.
NatWest ( NWG.L ) has a fixed term savings account offering 3.7% for one year. The minimum deposit is just £1 and interest will be paid on the first working day of each month and on the due date.
Unlike easy access products, where interest rates can vary, fixed interest accounts earn a fixed rate of interest for the period you choose, be it six months or several years. These are the most common deals, but some deals go up to 10 years or more.
You must leave the initial deposit for a specified period without making withdrawals. If you touch your money, you lose any interest.
Easy access savings accounts allow you to withdraw your money without notice. With this ease of access come lower interest rates, but they’re a good option for those who think they might need their money in a hurry.
Note that the rates on these accounts are variable, meaning they can go up or down. You will be notified in advance of any changes.
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Monument has launched a market-leading 4.51% deal, but you need at least £25,000 to open the account. Interest is paid monthly and you can invest up to £2 million.
Chase (JPM) has an offer of 4.5% for 12 months that you can access for just £1.
Cahoot has a 4.40% offer that you can open from £1 and save up to £2,000,000. If you were to put £1,000 into this account, your balance after 12 months would be £1,044.
There are also higher paid Easy Access accounts, but they are not for new customers. Santander’s ( BNC.L ) Edge Saver, for example, offers 6% but is only available to current account holders.
Can’t decide if you want to put your money away and not touch it for a long time or keep it accessible at all times? Perhaps you should consider a notified savings account.
Notice savings accounts require you to notify your savings provider before you can withdraw your funds.
These are ideal for those who know when they might need their money, but don’t want to be tempted to dip into it at any time.
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You must give the bank or building society a set advance warning before you can withdraw your money. It usually takes between 30 and 120 days, although it can be longer.
OakNorth has the best deal this week with a 4.54% offer that only takes a pound to access. The notice period is 95 days.
Earl Shilton BS pays 4.50% on a 180 day notice period with a minimum deposit of £5,000.
StreamBank offers 4.45% on a 90-day offer that can be accessed with £1,000.
Interest rates with notice accounts are variable, meaning they could go up or down over time.
For those looking to make the most of their cash savings, regular savings accounts can offer returns of 7.5%.
Most regular savings accounts require you to put money aside each month, with interest paid annually. It is not unusual for the offer to be available only to current customers.
The principality offers 7.5% on a regular savings account for six months. Open an account and pay up to £200 every month. Interest is calculated on the money in the account every day and is paid six months after opening.
Zopa pays 7.1% on monthly deposits of up to £300. Account holders also get 2% AER interest on all balances and 2% cashback on bill payments, and there’s no minimum monthly deposit.
Progressive Building Society offers 7% on its regular savings account, allowing deposits of up to £300 per month.
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Co-operative Bank has a 7% deal for existing customers. Fixed for a year, you can save up to £250 a month and skip months without penalty.
First Direct pays the same 7% but you can save £300 every month.
Every transaction mentioned here is covered by the Financial Services Compensation Scheme, so you’re protected up to £85,000, or double if it’s a joint account.
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