If you're looking for the best home for your savings, check out these 25 top accounts...
Let’s face it, in times like these, saving can be difficult. However, if you’re serious about trying to put some money away, one of the best ways is to simply lock that money up in a fixed rate bond.
This will mean you won’t be able to get your hands on your cash for a year or more without paying a penalty. And hopefully this will prevent you from spending that money rather than saving it!
Just bear in mind that with a fixed rate bond, you can’t normally make additional deposits during the term of the bond.
So if you do want to lock your money away, which are the best accounts for doing so?
One year bonds
If you don’t fancy tying up your funds for too long, you might want to consider opting for a one year fixed rate bond.
Here are five of the top one year fixed rate bonds on the market:
|
Provider and account |
Interest rate (AER) |
Minimum deposit |
|
3% |
£1,000 |
|
|
3% |
£1,000 |
|
|
2.9% |
£500 |
|
|
2.82% |
£1,000 |
|
|
2.81% |
£500 |
So both the First Save 1 Year Fixed Rate Bond and the Wesleyan Bank Fixed Rate Deposit Account are offering the best interest rates at 3%.
Two year bonds
Now let’s take a look at what’s on offer for those of you wanting to invest in a two year fixed rate bond:
|
Provider and account |
Interest rate (AER) |
Minimum deposit |
|
3.60% |
£1 |
|
|
3.60% |
£100 |
|
|
3.60%* |
£100 |
|
|
3.60%* |
£100 |
|
|
3.55% |
£500 |
*Rate fixed until 31.08.12
As you can see, two year fixed rate bonds offer slightly higher rates of interest than one year bonds, so if you think you can cope without getting your hands on your cash for an extra year, this might be the way to go.
Three year bonds
However, you might also prefer to plump for a three year bond. In which case, take a look at the following:
|
Provider and account |
Interest rate (AER) |
Minimum deposit |
|
4.15% |
£1,000 |
|
|
4.11% |
£1,000 |
|
|
4.11%* |
£100 |
|
|
4.11%* |
£100 |
|
|
4.10% |
£1 |
*Rate fixed until 31.08.13
Four and five year bonds
Personally, I’d be a little reluctant to tie up my funds for four or five years as interest rates are likely to rise over coming years. As a result, you may find that what you thought was a competitive deal at the time of opening the account no longer is a few years later.
However, if you do want to lock up your money in a four or five year fixed rate bond, here are the best accounts to go for:
|
Provider and account |
Interest rate (AER) |
Term |
Minimum deposit |
|
4.25% |
4 years |
£1,000 |
|
|
4.25% |
4 years |
£1,000 |
|
|
4.20%* |
Rate fixed until 01.08.14 |
£1,000 |
|
|
4.80% |
5 years |
£500 |
|
|
4.75% |
5 years |
£1,000 |
|
|
4.60% |
5 years |
£1 |
Tax-free savings
If you're serious about saving, it’s also a good idea to check out cash ISAs – because this way, the taxman won’t be able to get his grubby mitts on any cash you save.
Sadly, according to recent research from Aldermore, nearly two-thirds of UK taxpayers are not taking up their ISA allowances. In fact, out of 30.2 million individual UK taxpayers, only 11.9 million opened cash ISA accounts during the 2009/10 tax year.
Find out the easy way to invest your ISA and beat the returns on cash
However, you can invest up to £5,100 in a cash ISA in each tax year, as well as up to £5,100 in a stocks and shares ISA. So this really is worth taking advantage of.
So which cash ISA should you go for?
If you’re looking to lock up your money for a year, the Aldermore 1 Year Fixed Rate ISA is offering a rate of 2.80%. You must have a minimum investment of £1,000 and you can transfer funds in from another cash ISA.
Although this interest rate appears to be lower than the rates offered by the top one year fixed rate bonds, don’t forget that cash ISAs are tax-free. So in fact, the First Save 1 Year Fixed Rate Bond I mentioned earlier at 3% is actually only paying 2.40% if you’re a basic tax payer, and 1.80% if you’re a higher rate taxpayer. So the 2.80% offered by the Aldermore 1 Year Fixed Rate ISA is actually considerably better.
Alternatively, the Birmingham Midshires 2 Year Fixed Rate ISA is offering a rate of 3.30% for two years. Again, you can transfer funds in from another cash ISA. But you’ll only need a minimum deposit of £1.
Meanwhile, the Nationwide 3 Year Fixed Rate ISA offers an interest rate of 3.75% for three years. You can transfer funds in and you only need £1 to open it.
You can find out more about cash ISAs in The top 18 cash ISAs.
Tracker bonds
Finally, another option is to lock away your money in a tracker savings bond. A tracker bond is a fixed term account with a return that’s linked to the base rate. So the amount you earn on your savings will depend whether the base rate rises or falls.
In today's video, I'm going to highlight five things you should consider when choosing a savings account.
For example, the Santander One Year Loyalty Tracker Bond is a one year fixed term bond that tracks at 2.75% above the base rate – so right now you can earn a competitive 3.25%. However, to open it you’ll need at least £10,000 and you will also need to have your current account, mortgage or another investment product with Santander.
You can find out more about tracker savings bonds in 3.25% savings that rise with the base rate.
If you have an opinion on this topic, why not start a discussion in our Grow your wealth group about it?
More: Top savings accounts for all amounts | Protect yourself from falling savings rates