Market-leading easy access savings accounts

Check out the best savings rates on the market this month!

Since this article was originally written, the market-leading savings account from Northern Rock paying 3% has been withdrawn. The article has now been amended accordingly.

Admittedly, at this time of year, you’re probably not giving that much thought to your savings account. However, despite all the spending that goes on over the festive period, saving is still important.

Although interest rates on savings accounts have been pretty dire over the last couple of years, if you know where to look, it is still possible to get a competitive return on your savings account. So just what are the best rates on the market?

Top rates

Right now, the most competitive easy access savings account is the Post Office Online Saver Account. This account offers a market-leading interest rate of 2.90%. Given that the top paying one year fixed rate bond (fixed rate bonds traditionally pay a higher rate of interest) is only offering a slightly higher rate of 3.25% (the FirstSave 1 Year Fixed Rate Bond), this is a pretty decent return in the current market.

Of course, you need to bear in mind that the Post Office Online Saver Account includes a bonus rate of 1.25% for 12 months. On the positive side, this guarantees savers a minimum return. But on the negative side, it means the interest rate will drop significantly after the first year and you’ll need to move your savings elsewhere to get a better deal.

However, on the plus side, you can access your savings whenever you want penalty-free and you can also access your account online! And you'll only need a deposit of £1 to open the account.

And if you're concerned about how safe your money will be, the good news is that although Post Office accounts used to be guaranteed by the Irish government, they are now subject to exactly the same Financial Services Compensation Scheme (FSCS) protection as other UK accounts.

What's more, from 31 December 2010, the UK FSCS limit will rise from £50,000 to £85,000. So even more of your savings will be protected, should the worst happen. You can read more about this in New rules will make your savings safer.

The alternatives

So how does the Post Office Online Saver Account compare to the rest of the market? The table below highlights four other competitive easy access savings accounts on the market right now.

So, as you can see, the Post Office Online Saver certainly offers the best rate on the market. However, the Nationwide MySave Online Plus Account also offers a fairly competitive interest rate of 2.78%, with a bonus of 1.25% for the first year. You'll need a slightly larger deposit of £1,000.

You'll also notice that most of these accounts do include bonuses. So if you’d prefer to steer clear of bonus rates, the ING Direct Savings Account offers a guaranteed rate of 2.70% for the first year. Although this rate is lower, you can be reassured that the rate will stay at this level for the full 12 months. However, of course, once that first year is up, the rate drops to 0.50% so you’ll need to find a new home for your savings.

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Fix it

If you’re prepared to lock up your savings, you could consider a fixed rate bond instead. However, as I said earlier, this doesn’t mean you’ll get a significantly higher rate of interest.

If you only want to tie up your funds for a year, the best one year bond is the FirstSave 1 Year Fixed Rate Bond, offering an interest rate of 3.25%. You’ll need a deposit of at least £1,000.

Just remember that you won’t be able to access this money for the full term of the bond (one year). So you need to consider whether you think it’s worth getting an extra 0.35% in interest for this.

Alternatively, if you can survive without access to your funds for two years, the Post Office Growth Bond offers an interest rate of 3.65%, with a minimum deposit of £500. However, again, you need to decide whether earning that extra interest is worth tying up your funds for so long.

Finally, remember, rates like these don’t tend to stick around for long, so if you want to get the best deal, you’d better get your skates on!

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