Best savings accounts and ISAs to start 2014

Here's where to find the best returns on cash right now, including a couple of less obvious options.

Savings rates have been in the doldrums for some quite some time now, due to a combination of factors, but there are signs that this could be a happier new year.

For one thing, the Funding for Lending scheme is being refocused away from mortgage borrowers and onto small businesses. This has been a major contributor to driving savings rates down, as banks and building societies took advantage of cheap money from the Bank of England, meaning they didn’t need savings deposits.

Already we’re seeing rates rising, albeit mostly on longer-term fixed rate accounts.

In the meantime, it’s worth considering a couple of less obvious places for your savings, in addition to looking at the best high street savings accounts and ISAs.

Current accounts

The first is current accounts. Several current accounts are paying far higher rates than the top instant access savings account at 1.60%, as the table below illustrates.

Many of these accounts require minimum monthly funding in order to earn the top interest rates, but a few direct debits should easily solve that.

Compare high-interest current accounts

Peer-to-peer lending

A fast-growing area, peer-to-peer websites allow you to lend your money to other individual borrowers or small businesses. There is an element of risk, as these sites aren't covered by the Financial Services Compensation Scheme, which covers savings of up to £85,000 with financial institutions.

However, the rewards are generally far greater than those offered by high street savings accounts, even if you lock your money away.

For example, FundingCircle, which facilitates lending between individuals and small businesses, is advertising an average return of 5.70%. Meanwhile, RateSetter, which deals with individuals, is returning an average of 5.5% on its five-year deposits.

Compare returns from peer-to-peer companies

High street savings accounts

The returns on high street savings accounts aren't great at the moment, but if that's where you want to put your money then here are the best rates, starting with instant access savings accounts.

The good news with the top-paying instant access accounts at the moment is that only one of them has a bonus artificially boosting their rate. But you should still keep an eye on your rate and what else comes onto the market.

Now here are the top fixed rate accounts across different time periods. For a complete round-up, head to The best fixed rate savings accounts.

*Anticipated profit rate

If you want to dripfeed your money in over a period of time, here are the top regular savings rates that don't require you to have a specific current account.

And, finally, here are the top notice accounts.

*Anticipated profit rate

Cash ISAs

Instant access Cash ISA rates are better than those on instant access savings accounts at the moment, so you should think about using your 2013/14 allowance (£5,670) if you haven't already.

Of course, you could opt to lock your money away in a fixed rate ISA for a better return.

For a full round-up of rates, go to The best Cash ISAs.

The long-term gamble

While the Bank of England's Base Rate is still at a record low of 0.5%, there are signs that it will potentially shift next year, if not this year. Therefore, locking your money away for a long time is a gamble. However, if you need the income now, you might consider it a gamble worth taking.

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More New Year money:

Best credit cards for 2014

How to save £2,014 in 2014

How to make £2,014 in 2014

Ten things to ditch this New Year