Want to find a savings account that will remain competitive over the long term? Here are the accounts that have provided the most consistent returns over the past three years.
With the base rate now at 2%, it's more important than ever to find the best returns for your savings. Rates are predicted to fall further still, so unless you've been smart enough to fix your savings in a bond, you could switch accounts only to find that your new rate is also no longer competitive.
ING Direct is one of the worst offenders when it comes to keeping pace with the base rate. When it launched in 2003, ING took the savings market by storm, and its no-frills, high rate instant access account quickly attracted more than a million customers.
However, savers pulled over £5.4bn from accounts in 2007 when it failed to keep up with a string of interest rate rises. The bank has since seen a resurgence in savings, with enticing rates of 6% and its takeover of failed Icelandic Bank Kaupthing Edge both helping to boost its savings balances.
But after two dramatic base rate cuts, ING has reverted to its old ways, slashing its standard rate from 4.25% in October to just 2.75% in November.
The bank is still offering a decent return of 5% on its savings account. However, this includes a 12 month bonus of 2.17%, and unsurprisingly, is for brand new customers only.
The hare and the tortoise
So, if you're tired of always chasing the best rates, you could always opt for a consistent savings account instead.
I have always been a big fan of consistency, and while many accounts race to the top of the best buy tables with substantial introductory bonuses, these savings tortoises come up trumps over the long term, providing the best overall returns.
So, here are the online accounts which have yielded the best returns over the past three years on savings of £1,000:
| Provider and Account | Interest Rate (AER) | Minimum Deposit | Total Interest earned on £1,000 over 36 months |
|---|---|---|---|
| Sainsbury's Finance Internet Saver | 2.25% | £1 | £169.91 |
| Nationwide BS e-Savings | 3.05% | £1 | £161.34 |
| Coventry BS Netsave Instant III | 2.65% | £1 | £152.83 |
| Norwich and Peterborough BS NetmasterGold Save II | 1.5% | £1 | £152.57 |
| Halifax Web Saver | 2.1% | £1 | £149.61 |
Source: Moneyfacts
On first glance, you could be forgiven for thinking the table isn't that exciting. After all, Sainsbury's rate of 2.25% is hardly the most competitive rate around, and there are lots of better deals to be found elsewhere.
However, the account has topped the consistency tables alongside Nationwide's e-Savings for much of 2008, and while other accounts lure you in with juicy bonuses only to fall behind six to 12 months later, Sainsbury's has always offered steady returns, enabling it to remain competitive long after these introductory rates expire.
If you prefer not to bank online, the Beverley BS Postal Account is the most consistent non-internet account over the past three years, and is currently paying 3.75% AER on balances from £5,000.
Not quite that much to save? For balances from £1, the telephone-based Call Save account from Teachers BS currently pays 3.35% AER, and is the second most consistent non-internet account.
Wrap up your savings in an ISA
During times like these, it's more important than ever to make full use of your annual Cash ISA allowance of £3,600. Rachel Robson recently looked at the best ISAs in terms of rates, but what if it's consistency you're after?
Here are the best performing ISAs over three years based on interest earned on £3,000:
| Provider and Account | Interest Rate (AER) | Minimum Deposit | Total Interest earned on £3,000 over 36 months | Allows Transfers In? |
|---|---|---|---|---|
| Kent Reliance BS Direct Variable Cash ISA | 4.01% | £1 | £528.31 | Yes |
| Yorkshire BS e-ISA | 3.95% | £10 | £516.12 | Yes |
| Tipton and Coseley BS | 3.55% | £3,600 | £513.56 | No |
| Earl Shilton BS 90 Day Cash ISA | 3.8% | £10 | £510.28 | Yes |
| Monmouthshire BS Cash ISA 2 | 3.55% | £10 | £504.56 | Yes |
Source: Moneyfacts
Building societies lead the way when it comes to consistent cash ISAs, with Kent Reliance's Direct Variable cash ISA holding the top spot. This simple account pays a competitive 4.01% on balances from £1 and also allows transfers in from other providers.
At the end of the day, consistent savings accounts aren't for everyone. After all, if you're disciplined enough to switch when your account is no longer competitive, there is no reason why you shouldn't always opt for the top paying accounts.
In addition, past performance doesn't guarantee consistent returns in the future, although in my opinion, measuring returns over three years provides a pretty good indication.
At the end of the day, if don't have time, or, let's face it, are too lazy to keep switching your savings, consistent savings accounts provide a good starting point, and although you won't necessarily get the best returns all the time, your account should remain competitive over the long term.
More: The Last Of The Good Savings Rates / Why Premium Bonds Don't Make Good Savings