Twelve seriously sexy savings accounts

Looking for a better home for your savings? Then look no further than these 12 seriously sexy savings accounts..

What a difference a year makes, hey. If you were looking for a best buy savings account this time last year, you might have been rewarded with an interest rate of almost 7%. Today you'll be lucky to find an account paying half that rate.

Thanks to a constant stream of interest rate cuts over recent months, savers are seriously suffering. And, being one of them, I'm not impressed.

But on the bright side -- yes, there is one, just -- it's still possible to secure a savings rate of 4% AER. Admittedly, this looks fairly pathetic against last year's 7%, but in the current climate it really is pretty good.

And don't forget that inflation is coming down. In fact, just this week, it was revealed that one measure of inflation, the Retail Price Index (RPI), has fallen to zero for the first time in 49 years. Although this might not be good news in the long run, it could provide a brief respite for savers who will still be able to earn a real return on their savings.

Locking in

If you're desperately searching for a higher paying savings account, your best bet might be to lock into a fixed rate bond. You will of course need to be disciplined if you choose this option, because once that money is tied up, you won't be able to withdraw it until the bond matures. What's more, you won't be able to keep adding to your savings -- fixed rate bonds are more suitable for those of you with a lump sum to invest.

But on the plus side, because the interest rate is fixed, you'll know the rate isn't suddenly going to deteriorate.

The chart below shows six of the best fixed rate bonds currently available.

* Rate drops to 4% if you lock funds away for 4 years, or 3.8% for 3 years.

ICICI's HiSave Fixed Rate Bond has been top of the class for a while now, and yep, it's still doing well. Offering a fabulous rate of 4.10%, it's certainly hard to beat. In fact, only the Nationwide Fixed Rate e-Bond has topped it with its slightly higher rate of 4.15% -- although you'll need to lock up your funds for an extra three years to qualify for this rate.

Of course, the drawback to ICICI's account is that you'll need at least £1,000 to open it, and this may not be practical for everyone. You'll also need to be prepared to tie up your funds for two years -- although ICICI also offers a one year bond at 3.90%, which is still very competitive.

ICICI is an Indian bank, but your money is fully covered by the UK Financial Services Compensation Scheme, as long as you invest £50,000 or less.

You may have noticed that five out of the six accounts mentioned above require you to tie up your funds for more than one year, and offer slightly higher rates as compensation. But I'm rather wary of these bonds as I don't think they're high enough to warrant risking locking up your funds for that long.

Personally, I think you'd be better off avoiding longer term bonds all together right now. Although interest rates are down in the dumps, they're likely to start rising again in the not too distant future. And if you've locked into a three, four, or five year bond, you might find that what you thought was a competitive deal no longer seems quite so competitive in a few years' time.

So on that note, I think the ICICI one year bond and the AA Internet Fixed Rate Bond all offer a great rate for short term savings. Alternatively, Birmingham Midshires Internet is offering an 11 month fixed rate bond at a fabulous 3.73%.

Instant access

If tying up your money for any length of time is simply not an option, you'd probably prefer to open an instant access account. The great thing about these accounts is that they do what they say on the tin -- you can access your funds whenever you like. The downside is that they offer a variable interest rate -- and in the current climate that's going to work to your disadvantage, not advantage.

The chart below shows six of the best easy access savings accounts:

The rates might not be as high as they are for fixed rate bonds, but given that you can access your money whenever you want, the rates are still pretty good.

You'll also see that four out of the six savings accounts offer a variable bonus rate for around a year. You should view these rates with a certain amount of caution. Because the bonus is variable, it could be cut at any time -- which kind of defeats the point of having a bonus, don't you think?

So that's why I like the ING Direct Savings Account. It offers a fixed bonus rate of 1.48% for 12 months. So even if the overall rate drops during that time, you can rely on the fact that you'll be getting at least 1.48%, if not more.

But if you'd prefer to avoid bonus rates all together, the Yorkshire's Internet Saver or ICICI's HiSave Savings account might be more your cup of tea.

Whichever account you go for, don't waste any more time -- if you're earning next to nothing on your current savings account, switch to a superior one today!

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