UK households are always looking for ways to make their money go further amid the cost of living crisis, and savings accounts can help.
After years of low rates, high-yield savings accounts are still having a moment even after the Bank of England (BoE) held interest rates at 4.5% in March. While homeowners face lofty mortgage rates, there is a silver lining in higher borrowing costs, and consumers can find UK savings accounts offering rates above inflation.
Experts urge savers to shop around for the best deals and review their accounts regularly, as many may still be sitting on products that fail to beat inflation.
Victor Trokoudes, founder and CEO of smart money app Plum, said: "A continued high base rate means banks will continue to offer decent rates on savings for a while longer. Don’t assume your high street bank will give you a good deal though — it’s essential to shop around to find the highest interest rates. Fintechs and smaller providers are often able to be more flexible on rates and may even be offering special deals to help boost your savings.
"As the financial year comes to a close, ensure your interest is protected from tax by saving into an ISA. With best-buy cash ISA rates above 5% currently, there’s no excuse not to be using a tax wrapper."
The UK inflation rate fell to 2.8% in the year to February, according to the Office for National Statistics (ONS). February’s figure was the first negative annual rate since October 2021, as retailers offered more discounts as they tried to shift stock.
Savers should shop around to find the best deals and check what rate they are on. Providers have already started to lower rates as interest rates fall, so consumers need to check if their money is well-placed for higher returns.
Alice Haine, personal finance expert at Bestinvest, said: “Keeping the base rate on hold at 4.5% will deliver some respite for savers who have seen average savings rates fall steadily over the past few months. Those that want to preserve the bumper returns they have enjoyed in recent years should act quickly though.
“With the potential for further interest rate cuts this year, anyone with money idling in an account offering an ultra-low return should hunt out a better deal while interest rates remain relatively competitive.
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The main factor you should be aware of when choosing a savings account is the difference between easy-access and fixed-term.
Easy-access accounts allow you to access your money when you need it. Fixed-term means you can’t access your cash for the duration of the deal. They usually offer better rates, but you must be comfortable not touching your savings for an extended period, usually between one and five years.
The Family Building Society offers 4.67% for one year. The key condition is you need at least £10,000 to open the account and can invest up to £250,000.
Cynergy Bank pays 4.65% for one year, with interest paid on maturity, which is at the end of 12 months. You can open the account with £1,000 and invest up to £1m.
Secure Trust offers 4.63% for 12 months. The key condition is that you need at least £1,000 to open the account, with deposits capped at £1m.
Online banks typically offer higher rates than traditional bricks-and-mortar branches, which translate into better returns, giving you a more efficient way to save and reach financial goals.
Digital-only banking use has grown for the second year in a row, according to research from personal finance comparison site Finder, with superior interest rates the biggest factor driving adoption.
If you prefer to go with a familiar name, the high-street lenders have slightly lower offers, but are still above inflation.
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Tesco (TSCO.L) Bank offers the highest rate among high-street lenders, with a one-year fixed-rate savings account that pays 4.35%, with the minimum balance required being £2,000. However, you can invest up to £5m.
Nationwide (NBS.L) has a fixed-rate savings product offering 4.15% for one year. The minimum deposit is just £1 and interest will be paid on the anniversary of the date you opened your account (regardless of when the account was funded), at the end of the term, and on the day your account closes.
Unlike easy-access products, where interest rates can vary, fixed-rate accounts earn a set rate of interest for the period you choose, whether that's six months or several years. Those are the most common deals, but some offers go up to 10 years and over.
You must leave your initial deposit for a fixed period without making withdrawals. If you touch your money, you forfeit any interest.
Easy-access savings accounts let you withdraw your money without notice. With that ease of access come lower interest rates, but they are a good option for those who think they might need their money in a hurry.
Be aware that rates on these accounts are variable, which means they can go up or down. You will be notified of any change ahead of time.
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Sidekick has a 4.84% deal available that comes with unlimited next day withdrawals, meaning you can access your money whenever you need it, without restriction or loss of interest. The deal includes a 0.55% savings bonus and a 0.25% investor bonus — customers who have both savings and investments — for 12 months on balances up to £35,000.
Chip has a 4.76% deal that can be accessed with £1 and you can invest up to £1m. After three months the interest drops to 3.5%.
Monument pays 4.75% but you need at least £25,000 to open the account, with deposits limited to £2m. You are allowed a maximum of three withdrawals per year.
There are even higher-paying easy-access accounts, but they are not for new customers. Santander's (BNC.L) Edge Saver, for instance, offers 6%, but is only available to current account holders.
Can’t decide on whether you want to put your money away and not touch it for a long time or keep it accessible at all times? Maybe you should consider a notice savings account.
Notice savings accounts require you to give notice to your savings provider before you can withdraw your funds.
These are ideal for those who know when they might need their cash but don’t want to face the temptation of dipping into it at any time.
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You need to give the bank or building society a set advance warning before you can withdraw your money — usually between 30 and 120 days.
OakNorth Bank via Prosper has a 95-day product that pays 5% in which 4.61% is paid daily into the account an 0.39% is a boost paid annually into the nominated account. You’ll need at least £20,000 to open it and can deposit up to £250,000.
Santander (BNC.L) via Prosper has a 185-day product that pays 4.83%. same conditions as above.
Oxbury has made a push in to the notice accounts arena, with top rates across 90, 60 and 35 days. The conditions are the same across all three offers: you need at least £1,000 to open the account and can invest up to £500,000. It pays 4.80%, 4.76% and 4.65% respectively.
Interest rates with notice accounts are variable, which means they could go up or down over time.
For those looking to make the most of their cash savings, regular savings accounts offer up to 8% returns.
Most regular savings accounts require you to put money away each month with interest paid yearly. It is not uncommon for the offer to be available only to current customers.
Principality offers 7.5% in a six-month regular saver account, after dropping its 8% deal. You open an account and pay in up to £200 each month. Interest is calculated on the money in the account each day and paid six months after opening.
The Co-operative Bank has a 7% deal for existing customers. Fixed for one year, you can save up to £250 per month and can skip months without penalties.
First Direct also has a deal that pays 7%. You can open this account with £25, which is the same amount required to go into it every month. The maximum per month is capped at £300.
Every deal mentioned here is covered by the Financial Services Compensation Scheme, so you are protected up to £85,000 or double that if it’s a joint account.
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