How To Keep Your Savings In A High Interest Home

What happens to your savings once your great fixed rate has disappeared? Find out here.

So, you've managed to bag yourself a (relatively) high interest rate on your savings. Even better it's fixed for the next year, which means you don't need to worry about falling returns for a while. Good for you!

But what happens to that great rate once the term is up?

Take my recently matured fixed rate regular savings account, for example. As a customer of Lloyds TSB, I earned a fantastic rate of 8% AER on my monthly savings throughout the whole of 2008. But as soon as 2009 arrived, my savings rolled over into a new account which pays a less than spectacular 2%. Of course, I won't put up with that!

So I think if you've just signed up for a new regular savings account or a fixed rate bond, you need to keep your eye on the ball, just as you would if your special rate mortgage deal was about to finish.

Regular savers accounts

You can still find a regular saver with pretty attractive rates. For instance, the Barclays Monthly Savings account pays 6% AER, which is reasonably generous in today's market. You can earn that rate on savings between £20 and £250 a month for a year.

But you'll almost certainly need to move your savings at the end of the term. This is because your cash will automatically be moved into one of Barclays' instant access accounts. Now it's true, we don't know what rates these accounts will be paying this time next year, but we can use the current range of instant access accounts to give us a rough idea.

Unfortunately, Barclays' easy access range isn't much to write home about right now. For one thing, there are only two accounts available (excluding cash ISAs) - the e-savings account and the Active Savings account. With e-savings, you would earn just 0.42% AER and, worse still, a tiny rate of 0.20% AER on Active Savings.

There's a chance Barclays' instant access products may improve by the time new Monthly Savings accounts are rolled over, but I wouldn't bank on it.

The current market-leader for monthly savings is HSBC which offers super high fixed rates of 8% or 10% on its Regular Saver accounts. Unfortunately, these accounts are only available to existing HSBC customers. But non-HSBC customers might not feel quite so aggrieved when they hear that after a year, account holders' cash will automatically be switched into the Flexible Saver account where it will earn a pathetic 0.10% AER (based on current rates).

That said HSBC normally offer a new Regular Saver every year, but since the maximum deposit is only £250 a month - assuming the rules stay the same - it could take some time to transfer old savings into a new high-interest home.

Fixed rate bonds

When it comes to fixed rate bonds it's a slightly different story. Bond savings aren't normally switched automatically into a new low interest account on maturity. Instead, they tend to be linked from the outset to an account nominated by you. That means at the end of the term, cash will be transferred out of the bond and into the linked account.

The most competitive one-year fixed rate bond - the ICICI Bank UK HiSave Fixed Rate Account - currently pays 4.3% AER. It must be linked to your current account, where the proceeds of the bond will be moved to on maturity. So, unless you happen to earn a decent in-credit rate on your current account, you'll need to move your old bond cash somewhere new to keep on earning a competitive return.

You do have the option of renewing your bond with ICICI Bank where you'll earn the same fixed rates as the latest issue. If you did that today, you would get the following rates:

So, when your top fixed rate disappears, find a new high interest home for your savings as soon as you can. Otherwise the great return you earned so far could be wiped out. You can compare all sorts of savings accounts here.

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