Take the sting out of ING's latest rate drop: maximise your interest by moving your cash to one of these best-buy savings accounts.
According to, well, practically anyone you speak to, interest rates will go up this month. Inflation (the Consumer Price Index) hit 3.1% in April, meaning that the Bank of England is extremely likely to try and dampen things by raising the Base Rate. What's more, some have predicted that there will be more rises to come.
Now I know this is depressing news for anyone with a variable rate mortgage. But, on the bright side, it does mean the cash in our savings accounts will earn more interest. Yipee!
Unfortunately, the Dutch bank ING Direct seems to take a different view -- it has just informed its Websaver account holders that instead of an interest rate increase, their rate was decreased (from 1 May) from 5.65% AER to 5.5% AER!
To be honest, for me ING Direct has taken the biscuit for the final time. Despite the recent fiasco with its Direct Savings account rates (which at 4.75% AER currently lag 0.5% AER behind Base Rate), a number of loyal account holders gave the bank the benefit of the doubt and opened a Websaver account (paying 5.65% AER, 0.4% above Base Rate).
Now this account is by no means perfect (or indeed "catch-free") as you needed to have a Direct Savings account already set up to open one, and transfers can only go on between the two. But ING Direct had built up such a following that many of us were happy to abide by its rules.
However, following the news of ING's latest rate cut, I reckon even stalwart fans will start leaving in droves. We'll just have to see if it raises its rates again, should we see the predicted Base rate rise this month.
New Home for your Money
So where should former ING customers move their money to? Well, we've started a new tax year, meaning that we can each stash £3,000 away, free of tax in a cash ISA. (Check out Best Buy Cash ISAs 2007/8 to find out which we recommend.) But if you've used your ISA allowance already, or will need access to this cash again soon, I've ferreted out the best savings accounts of the moment.
Regular readers will note that although I generally detest the word bonus (as these tend to artificially buoy accounts into the best buys) I have included a few in this table. The reason for this is simple -- the bonuses for the accounts listed last for a whole year, after which point you should be reviewing your account anyway, and preparing to move your money to another top deal.
Best Buy Instant Access Savings Accounts
Provider | Account | Rate/AER | Min-Max investment | Rate guaranteed? | Bonuses/ Conditions |
|---|---|---|---|---|---|
Scarborough BS | Click & Save Issue 4 | 5.80% | £1k-£1m | Rate guaranteed to be 5.80% to 31.7.08, then equal to Base Rate to 31.7.09, then 0.45% below Base Rate. | Min. withdrawal £1k. Rate includes 1.00% bonus until 31.07.2008, then 0.45% bonus until 31.07.2009 |
Icesave (apply via the Fool) | Easy Access | 5.70% | £250-£1m | Rate guaranteed to be at least 0.25% above Base Rate to 1.10.09 then at least equal to Base Rate to 1.10.11. | |
Birmingham Midshires | BM Websaver | 5.70% | £10-£15k | Rate includes 0.75% bonus for 12 months, After 12 months account reverts to Internet Easy Access | All withdrawals via nominated account. 6 withdrawals pa then account reverts to Internet Easy Access on seventh withdrawal. |
Anglo Irish Bank | Easy Access Deposit | 5.65% | £500 - £1m | Rate guaranteed to be at least equal to Base Rate until 1.1.08. | |
ICICI (apply via the Fool) | HiSAVE | 5.65% | £1 - £5m | Rate will be at least 0.25% AER above Base Rate until 31.12.07. |
As you can see, the top paying account is from Scarborough BS, paying 5.8% AER until July next year. However, you can only make withdrawals of £1k+ (you also need £1k to open an account). The Icesave account offers a simple 5.7% AER with easy access to your cash (requiring £250 to open an account).
Accounts for Older People
Additionally, there are some great rates available to older readers. Northern Rock's Silver Savings Online account pays 5.82% AER on balances of £1-£2m. You need to be fifty or over to open one, and the rate is guaranteed to at least equal the Base Rate until 31.1.10.
The Coventry BS Sixty-Plus Saver Issue 2 account pays 6% AER, which it guarantees to be equal to Base Rate until 30.6.08 (and includes a 0.75% bonus for the first year your account is open). You can open the account with between £500 and £2k if you're aged over 60. You can then pay in a maximum of £2k per month, and can make just one withdrawal per month in branch (but as many as you like over the phone, Internet or ATM).
So the Coventry account is great if you have money to deposit each month, but those with a lump sum of more than £2k may prefer a more straightforward home for their money, such as Northern Rock's offering..
Multiple Accounts
And for any old ING Direct Savings account customers who pine for its ability to open multiple accounts with different names (such as holiday, car etc) check out the Sainsbury's Bank Internet Saver account. Not only does it have the same fantastic multiple account opening feature, it pays 5.5% AER -- a whopping 0.75% AER more than the ING account. But be warned, its software could do with being made a bit more user friendly.
Families
And finally, families may like Coventry BS's Family 1st account. It's an account spilt into two parts. Part one is the Saver account, paying 5.75% AER on savings from £1-£500k (this rate is guaranteed to equal base rate for 18 months and includes a 0.5% AER bonus for 12 months). Part two is the Benefits account, into which you must arrange for your Child Benefit to be paid, which earns a whopping 7.25% AER.
This account, though slightly complicated, could make a useful savings vehicle, especially if you're stashing your children's Child Benefit away for them anyway, due to the competitive rate. However, you must arrange for the government to pay the Child Benefit in directly; you can't simply transfer over the money.
So don't let ING, or anyone else, take advantage of you. Keep an eye on the interest rate of your savings account and should it drop, be ruthless and shift your cash to a high paying savings account today.