The most reliable savings accounts

Rachel Wait reveals which lenders have increased their rates the most since the base rate cut, and which lenders have slashed them.

I really don’t need to tell you that in the current climate of record low interest-rates, many savers are feeling pretty cheesed off. I think it's pretty obvious why. Market-leading easy access savings accounts pay less than 3% these days. Given that just a couple of years ago, you could get rates of around 6% or 7%, this makes for pretty depressing reading.

What’s even more frustrating is that despite the base rate remaining at 0.5% since March 2009, some lenders have been cheeky enough to keep reducing the interest rates on their savings accounts. So even though there has been no movement in the base rate, savings rates have continued to plummet.

However, certain lenders have been worse than others. So here, I’m going to take a closer look at the savings providers that have changed their average savings rate the most since the base rate was kept on hold.

The worst offenders

The table below highlights the savings providers which have cut their rates the most since the base rate was held at 0.5%. These figures are based on a savings amount of £10,000.

Variable rate accounts

Source: Moneyfacts

So as you can see, Citibank, Smile and Egg are the very worst offenders, having cut their average savings rates by 1.73%, 1.52% and 1.47% respectively. Remember, given the base rate hasn’t moved from 0.5% since March 2009, these are pretty significant reductions to have implemented since then. In fact, the average interest rate for Smile is now just 0.19% - even lower than the base rate.

As a result, you might want to move your savings out of accounts with these providers - or at least check whether you are still earning a decent rate.

Now, let's take a look at the worst offenders when it comes to one-year fixed rate bonds:

One year fixed rate bonds

Source: Moneyfacts

In the case of one year fixed rate bonds, the biggest offenders are West Bromwich BS, Cheltenham & Gloucester and United National Bank – all of which have reduced their average savings rates by more than 1%. Again, if you're saving with these providers, check whether your savings are still earning a decent rate. If not, you might want to go elsewhere.

The lenders to love

So now we’ve established which savings providers to avoid, let’s take a look at the providers which are more reliable - and could even be termed 'generous' in this climate!

The table below highlights three providers that have increased their rates the most since the base rate was kept on hold. Again, these figures are based on a savings amount of £10,000.

Variable rate accounts

Source: Moneyfacts

The Post Office takes the top spot, having boosted the average interest rate on its variable savings accounts by 1.63% since last June. Now that’s more like it! SAGA comes in next, with an increase of 1.57% and Northern Rock isn’t far behind with a rise of 1.54%.

What about the one-year fixed rate bond providers?

One year fixed rate bonds

Source: Moneyfacts

In the case of one year fixed rate bonds, Scottish Widows comes up trumps, having increased its average savings rate by 1.20%. The Co-operative isn’t far behind, with a rise of 1.16%, and Marks & Spencer Money has increased its average rate by 1.07%.

Top marks to these savings providers for increasing their interest rates in these troubled times, rather than kicking savers when they are down.

Of course, although these providers have increased their rates the most and their average rates are generally higher than for those lenders that have cut their rates, this doesn’t necessarily mean they are offering the market-leading accounts. You may be able to do even better if you shop around.

In fact, to save you time, I've done it for you! Here are the top paying savings accounts on the market.

Best for variable

The table below highlights the best easy access savings accounts offered by the three top lenders mentioned earlier.

As you can see, as well as being the lender that’s increased its variable rate the most, the Post Office also offers the best paying account out of the three lenders, with its Online Saver paying a competitive 2.90%.

If you want to know how that compares to the rest of the market, the market-leading easy access variable savings account is the Nationwide BS MySave Online Plus Account, offering a slightly higher interest rate of 2.99%.

However, with this account, you’ll need a larger deposit of £1,000 and you can only make one penalty-free withdrawal a year. If you make more than that, you’ll lose your bonus rate and you’ll only receive an interest rate of 0.10% for that month.

So overall, I think a big gold star should go to the Post Office. After all, if it’s reliability and a decent interest rate you’re after, I definitely think the Post Office is worth considering.

Best for bonds

Of course, reliability doesn’t matter quite as much when it comes to one year fixed rate bonds, purely because these rates are fixed for a year – so your bank can’t suddenly decide to reduce the rate.

But it’s still worth comparing the best accounts offered by the more reliable lenders. Note that I haven’t included Scottish Widows Bank in the table below as its one year bond is no longer available for new customers.

So how do these rates compare to those across the rest of the market? Well, they actually compare pretty well.

The top paying one year fixed rate bond comes from Coventry BS at 3.11% - although, if you want to get down to the nitty gritty, this actually requires you to lock in for slightly longer than a year as the term of the bond is until 31 December 2011.

But you can see that the two accounts in the above table aren’t far behind in terms of interest rates. So these accounts are certainly worth considering if reliability is a priority.

Happy saving!

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