Many savings accounts and ISAs have been revamped to coincide with the new tax year. So where should you be putting your cash?
With many savings accounts linked to the tax year, starting 6 April each year, it's about this time many of us think about our savings. With that in mind, here are the best savings accounts and ISAs currently available.
As usual, I have compared every account and included the highest paying with the best guarantees, while missing out those that have onerous small print or a requirement to hold additional products. Today I have also excluded accounts that you can't manage online.
Easy-access savings accounts
It's best to place emergency savings, and savings you expect to spend inside 12 months, in an easy-access account:
|
Account |
Interest rate |
Guarantees |
Comments |
|
3% fixed |
Fixed for 1 year |
Deposit £1-£50,000 at this interest rate |
|
|
2.9% variable |
Will pay at least 1.65% for 1 year |
Deposit £1+ |
|
|
2.8% variable |
Will pay at least 2.3% for 1 year |
Deposit £1+ |
|
|
2.8% variable |
No guarantees |
Deposit £1+ |
Data from Moneyfacts, lovemoney.com and the individual banks.
Other accounts not mentioned pay 3% or thereabouts, but since the guarantees are much worse or non-existent, they're out.John Fitzsimons writes:It pays to fix your savings. ING's account is worth elaborating on: banks try to lower rates as soon as they can, so a fixed rate with penalty-free easy access is a great combination.
All the above products are available to new customers only – which is standard for easy access accounts – except the AA Internet Extra savings account. Existing Internet Extra customers who want this new rate should call the AA on 01422 380880.
Read about a 253% jump in easy-access savings rates.
Easy-access cash ISAs
ISAs are exactly like 'normal' savings accounts, except they're tax free and there are limits to how much you can save in them. Here are the top easy-access ones:
|
Account |
Interest rate |
Guarantees |
Comments |
|
3.35% variable |
Will pay at least 1.65% for 1 year |
Deposit £500+ |
|
|
3.3% tracker |
Will pay at least 3.3% for 1 year, and will track the Bank of England base rate upwards, staying 2.8% above |
Deposit £1+ |
|
|
3% variable |
None |
Deposit £1+. |
|
|
2.8% variable |
Will pay at least 1% for 1 year |
Deposit £1+. |
Although other easy-access ISAs pay as much or more in interest, they have more suspect or restricting terms and conditions. Most, for example, charge a big penalty when you come to transfer your money out again.
Term savings accounts
Some accounts pay a fixed rate of interest for one to five years, but your money is tied up for the whole period. These, called 'term accounts', are suitable for longer-term savings only. Below are term accounts fixed for one year:
|
Account |
Interest rate |
Comments |
|
3.5% fixed |
Deposit £100+ |
|
|
3.35% fixed |
Deposit £500+ |
|
|
3.35% fixed |
Deposit £1,000+ |
|
|
3.35% fixed |
Deposit £5,000-£50,000 |
There's not much between these accounts.
These are all one-year accounts. My view is that none of the rates for fixes of two or more years are currently high enough to justify tying up your savings, because inflation may make their rates seem pretty weak in a few years. I think it's better to stay flexible and wait for better products, or protect your savings with inflation-linked accounts. (See below.)
Term cash ISAs
Here are more one-year fixes, but tax-free:
|
Account |
Interest rate |
Comments |
|
3.31% fixed |
Deposit £1,000+ |
|
|
3.3% fixed |
Deposit £1+. |
|
|
3% fixed |
Deposit £1+. |
|
|
2.8% |
Deposit £500+. No additional deposits after account opening |
Again, I've missed off quite a few ISAs with attractive rates because I spotted some unpleasant small print, such as being sent your money returned as a cheque if you don't renew with a second bond a year later – which would mean forever losing this year's cash ISA allowance.
For more on cash ISAs, have a read of The best cash ISAs for the new tax year.
Inflation-linked savings
Last, but not least, here are the accounts that guarantee to pay you more than inflation. What more can you ask for from your savings?
|
Account |
Interest rate |
Comments |
|
Inflation plus 0.39% AER per year for five years |
Deposit £2,500+ |
|
|
Yorkshire/Barnsley/Chelsea Building Societies' Protected Capital Account cash ISAs |
Inflation plus 0.29% AER per year for five years |
Deposit £3,000+ Additional one-off 0.5% bonus if you transfer quickly |
The above are the only savings products on the market that truly guarantee you'll match or beat inflation after taxes, based on the most comprehensive measure of rising prices: the Retail Prices Index. Birmingham Midshires, the Post Office and Derbyshire Building Society have similar products, but they might not beat inflation after taxes.
Inflation is the enemy when it comes to your savings because it attacks real returns, and reduces the purchasing power of your cash.
The accounts in this table are not easy access; your money is tied in for the duration of the deal, so these are again for long-term savings, not emergency savings or money you need to spend soon.
Kent Reliance looks best. The literature sells it to you as inflation plus a bonus of 2%, but that's 2% gross over five years. In real annual terms that bonus 2% works out at 0.39% AER.
Another savings account might beat inflation from May. Read about it in This tax-free account beats inflation.
Other accounts
One type of account not mentioned here that currently has good deals is the regular saver account. This is for people who are looking to set aside money from their income each month. At present the best deals are being offered by some banks, such as first direct, to existing customers only. A rare reward for loyalty.
More: Compare savings through lovemoney.com | This tax-free account beats inflation | 253% jump in easy-access savings rates