Some savings accounts pay an interest rate directly linked to the bank base rate. But is there any point with a tracker savings account when base rate is at its record low?
You might be wondering what on Earth the point is of a savings account which tracks the base rate, given base rate is at its lowest level in the Bank of England's 300-year history.
However, some tracker savings accounts are paying pretty good rates over and above the base rate. And they come with the added bonus that if the Bank of England increases the interest rate at which high-street banks can borrow from it, you'll benefit from more interest yourself with none of the usual dawdling from the banks, and without the need to shop around again.
But how much do base-rate tracker savings accounts pay and how do they compare to other accounts?
I've been digging around for the best tracker accounts I can find. Here are the top five, but please leave a comment below for other readers if you think I've missed a good one:
Top five base-rate tracker savings accounts
|
Name |
Interest |
Period |
Withdrawals |
Conditions |
|
Cambridge BS Three Year Base Rate Tracker Bond |
3.5% (base rate plus 3%) |
Three years |
No early withdrawals |
Minimum £500. Access in branch or by post |
|
Kent Reliance BS Two Year Tracker Bond* |
3.5% (base rate plus 3%) |
Two years |
No early withdrawals |
Minimum £1,000. Online, in branch or by post |
|
Kent Reliance BS One Year Tracker Bond* |
3% (base rate plus 2.5%) |
One year |
No early withdrawals |
Minimum £1,000. Online, in branch or by post |
|
Lloyds TSB Tracker Bond** |
3% (base rate plus 2.5%) |
18 months |
No early withdrawals |
Minimum £2,000. Access at branch or by telephone |
|
Hinckley & Rugby BS Tracker Savings Bond |
2.75% (base rate plus 2.25%) |
One year |
Seven-day notice account |
Minimum £2,500. Access in branch or by post |
*Also available as Cash ISAs.
**You have to open another Lloyds savings account simultaneously, if you don't already have one.
The interest rates above vary from 2.75% to 3.5%.
There's something for everyone here, with trackers lasting from one to three years and one of them with access in just seven days, which is close to easy access.
Like other savings accounts, they also vary in terms of access and withdrawal conditions.
Now let's compare those trackers with the closest equivalent, non-tracking savings accounts:
Best similar, non-tracking savings accounts
|
Tracker account |
Interest |
Best comparable account |
Interest |
Period |
|
Cambridge BS Three Year Base Rate Tracker Bond |
3.5% (base rate plus 3%) |
AA Three Year Fixed Rate Savings Account |
4.00% |
Three years |
|
Kent Reliance BS Two Year Tracker Bond |
3.50% |
IBB 24 Month Fixed Term Deposit Account |
3.75%* |
Two years |
|
Kent Reliance BS One Year Tracker Bond |
3% (base rate plus 2.5%) |
FirstSave One Year Fixed Rate Account |
3.45% |
One year |
|
Lloyds TSB Tracker Bond |
3% (base rate plus 2.5%) |
Barnsley BS 18 Month Fixed Rate Account |
3.25% |
18 months |
|
Hinckley & Rugby BS Tracker Savings Bond |
2.75% (base rate plus 2.25%) |
3.06% |
Hinckley BS is 7-day notice; Derbyshire BS is easy-access |
*This account is Sharia-compliant, which means the interest rate can't be guaranteed, but you'd normally still expect to receive this.
[SPOTLIGHT]As you can see, the base-rate trackers come pretty close to their closest equivalent, non-tracking fixed-rate or easy-access accounts, paying just 0.25 to 0.5 percentage points less before tax.
I think the base-rate trackers are certainly something to consider if you want peace of mind for one year or more years, both in terms of getting a competitive rate today and protecting yourself from rises tomorrow, without having to shop around in between.
Having a good account only takes the edge off
Bear in mind that while these accounts might keep you competitive, none of them at today's rates will completely protect taxpayers from inflation. In other words, your savings are still losing value, but much more slowly than someone who doesn't shop around.
You'll need to look to top Cash ISAs to beat inflation, or you could hold out for inflation-beating savings accounts, which become available from time to time, but sell out quickly.
You could also consider lending your money to other individuals through peer-to-peer lenders like Zopa and Ratesetter. These reward you even more, but come with a little bit more risk.
More on savings accounts: