The speed at which the pounds in your pocket are losing value has increased again, but there are still lots of places to move your cash if you want to keep ahead of rising inflation.
The rate of price rises has jumped for the second month in a row, putting more pressure on household finances.
The Consumer Prices Index measure of inflation jumped from 2.3% to 2.6% in November, official figures revealed, following on from a huge 0.6% jump in October.
It leaves savers facing a double squeeze: while the Bank of England's Base Rate reductions are pushing down the savings rates on offer, the resultant inflationary increase from those Rate cuts means more and more savers are losing money in real terms.
The good news it is easy enough to beat inflation with your cash provided you're willing to move your funds.
While loyal savers are often left earning miserly rates of interest, switchers can earn up to 8% on small pots of cash and up to 4.95% on larger sums.
So, let's look at the best rates currently available, starting with regular saver accounts.
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Regular savers: up to 8%
Regular savings accounts are generally best for new savers as they don't allow you to deposit a lump sum upfront.
Instead, you make regular monthly contributions, and the money is returned to you with interest after one year.
However, if the rates are generous enough, and you are eligible, they can also work for savers with a pot already built up.
All you do is put your funds in the best-paying easy-access account (which we've listed lower down in this article) and filter some money into a regular saver, or savers, each month.
So, what rates can you get?
Principality Building Society is currently paying 8% on its six-month deal, with a maximum monthly deposit of £200.
Although you aren’t allowed to make penalty-free withdrawals, Principality does permit early closures.
As another favourite, First Direct offers a 7% regular saver, allowing deposits of up to £300 per month when you open a 1st Account.
On top of this, the bank has a £250 interest-free overdraft and regularly tops the tables for customer service.
Current accounts: up to 5%
There are a lot of choices when it comes to a current account, such as whether you’ll need an overdraft, so you’ll need to consider the options.
However, if you’re basing it on interest paid, then you can earn 5% for 12 months from Nationwide on balances of up to £1,500.
You’ll also have access to a regular saver paying 6.5% for one year, and the building society is currently paying a £175 bung to anyone signing up to one of its current accounts.
Find the best alternatives in our roundup of current accounts that pay in-credit interest
Notice accounts: up to 4.95%
With a notice account, you’ll have access to your cash, as long as you let your provider know in advance that you plan to make a withdrawal.
Typically, these accounts offer more attractive rates than their easy-access equivalents.
The top rate currently comes from Recognise Bank, which pays 4.95% on a 95-day notice account and allows deposits of between £1,000 and £85,000.
Next up, QIB Bank pays 4.9% on a 31-day account, allowing deposits of between £1,000 and £85,000.
Cash ISAs: earn up to 4.93%
The Personal Savings Allowance (PSA) has meant that it’s easy to get a tax-free return from your savings even if you don’t use an ISA, though it’s still worthwhile making use of your tax-free ISA allowance.
That’s because any money you put into an ISA will stay tax-free long-term, even if the interest you earn grows beyond the PSA limits.
With the PSA, any interest you earn beyond the £1,000/£500 limit is taxed at your marginal rate.
The best rate on an easy-access Cash ISA right now is from app-only provider Plum, which pays 4.93%, with a minimum £100 deposit.
You'll only be allowed to make three withdrawals a year, so if you need regular access you could consider the Trading 212 ISA instead. It allows unlimited access and pays a marginally lower rate of 4.90%.
Best fixed-rate savings: up to 4.8%
Before we get into the best fixed-rate savings, we wanted to point out an interesting shift we've seen in this part of the market.
In recent years, you were generally rewarded with a higher rate by agreeing to lock your money away for a longer period, with five-year fixes the best-paying accounts.
However, the best rates currently available are actually on shorter-term accounts of one year or less.
Now that we've got that out of the way, let's look at the top fixed-rate deals.
The best rate we could find is 4.8%, which is available on a one-year fix through Ziraat Bank and can be opened with any amount between £1,000 and £85,000.
This product is only available through the savings platform Raisin. If you don't fancy joining just for that account, you can apply directly for a one-year fix with Vida savings and bag a rate of 4.77%.
Looking for a longer-term deal to shield against future Base Rate cuts? Hodge Bank is the current market leader on five-year fixes, paying 4.52% on deposits between £1,000 and £1 million.
Best easy/instant access savings: up to 4.71%
An easy-access account could be a great choice if you need to get hold of money quickly in the event of an emergency, or simply want to access funds regularly.
You can currently bag a rate of 4.85% with Atom Bank on deposits of up to £100,000, although this falls to 3.85% in any month you make a withdrawal.
If you want to make frequent withdrawals, a better option will be the Chetwood Bank easy access account, which offers penalty-free access and pays 4.71% with a maximum deposit of £85,000.
Best savings rates: where to earn the most interest on your cash
Here's a table with all the top deals for you to compare at a glance.
The account you go for will probably be determined by the amount you have to save and whether you want instant access to your money.
Please note that we've only included the highest-paying account from each category.
Remember, sometimes you'll need to open another account with a provider to access certain savings rates.
|
Provider |
Type |
Interest rate |
Maximum/minimum deposit |
|
Principality Building Society |
Regular saver |
8%, fixed for six months |
Max. £200 per month |
| Nationwide | Current account | 5% fixed for 12 months | Min. £1,000 a month deposit / £1,500 max interest |
|
Recognise Bank |
90-day notice account |
4.95% |
Min. £1k / Max. £85k |
|
Plum |
Cash ISA |
4.93% |
Min. £100 |
| Ziraat Bank | One-year fix | 4.8% | £1k / Max £85k |
|
Atom Bank |
Instant access |
4.85% |
Max. £100,000 |
Time to consider investing?
If you are comfortable taking on some risk for potentially better returns, you could consider investing in the stock market (capital at risk).