MPs this week had a go at bank bosses about their stingy savings rates, particularly on instant access accounts, saying that they seemed to be “taking advantage” of loyal customers. But you don’t have to put up with rubbish rates, as there are savings accounts out there paying up to 7% interest.
The official Bank of England base rate is now 4%, yet the returns offered by some widely held accounts are lagging way behind. The Barclays Everyday Saver easy access account offers only 0.55% interest and Santander Everyday Saver pays 0.6%, while the Lloyds Bank Easy Saver is offering only 0.65% unless you have got £25,000-plus stashed away.
Last month, MPs on the Commons Treasury committee grilled bosses of the four largest UK banks (Barclays, HSBC, Lloyds and NatWest), and this week they wrote to them to ask why, when interest rates have risen so many times, they were all offering easy access savings accounts paying less than 1% interest.
Harriett Baldwin MP, the chair of the committee, said: “The most powerful tool consumers have is to take their money elsewhere. But the banks also have a responsibility here. They need to step up and offer our constituents reasonable savings rates.”
If your money is earning a pittance, now is the time to switch to a better-paying account.
Regular savings accounts
These offer some of the best interest rates. Typically, you put aside some money each month for a limited period of time. You usually have to have a current account with the bank offering the product.
First Direct’s Regular Saver pays an eye-catching 7% interest, fixed for 12 months. It lets you save between £25 and £300 a month – so up to £3,600 a year – and you can change the amount of your standing order at any time. However, you can only withdraw your money after a year (you can access your cash before then but you will have to close the account).
Another decent-paying account is NatWest’s Digital Regular Saver, which pays 6.17% and lets you deposit between £1 and £150 a month by standing order. That rate only applies to the first £5,000 in the account.
Then there’s Lloyds Bank’s Club Lloyds Monthly Saver, which pays 6.25% fixed for 12 months and allows you to save between £25 and £400 every month.
HSBC’s Regular Saver pays 5% fixed for 12 months and lets you pay in between £25 and £250 a month – so a maximum of £3,000.
To be eligible for these products, you must hold one of the relevant bank’s current accounts.
Nationwide has an account called Start to Save Issue 2 that pays 5% for 24 months. With this, if you put away money regularly, it will enter you into its £250 prize draw. You have to increase your balance by at least £25 (but no more than £50) in each of the six months leading up to a prize draw to be in with a chance of winning. The most recent prize draw, held last month, resulted in 917 members winning £250. The next two prize draws are in August 2023 and February 2024.
Fixed-rate savings bonds
Many of the highest rates are offered by these. You typically have to tie up your money for a year or more, and they provide a clear, guaranteed return for savers in these challenging times. However, with some financial experts anticipating at least one more interest rate rise still to come, some may feel they don’t want to tie up their cash in a fixed-rate bond.
If you would prefer a short term, Atom bank has a six-month fixed-rate bond paying 3.75% and a nine-month one paying the same rate.
The top-paying one-year fixed-rate bonds are offering more than 4%. For example, Tandem Bank is paying 4.25%, and Atom bank is offering 4.3%.
Instant or easy access accounts
During the current cost of living crisis, many savers will be keen to keep their cash close to hand, where they can get at it easily. The good news is that many easy access account variable rates have got a lot better.
Zopa has the app-only Smart Saver account paying 3.07% where you can get started from £1 and can access your money at any time. Meanwhile, Sainsbury’s Bank has the Defined Access Saver, which lets you earn 3.05% on balances of £1,000-plus (it is 1.05% on £1-£999), although the rate drops sharply if more than three withdrawals are made in a 12-month period.
Cash Isas
The highest-paying easy access cash Isas are paying about 3% – check Moneyfacts for the latest rates.
Shawbrook Bank has the Easy Access cash Isa paying 3.01% (the minimum balance is £1,000). Meanwhile, Coventry building society offers the Limited Access Isa, which pays 3% (the minimum balance is £1), although you can only take money out up to six times a year without having to pay a charge.
NS&I, which is backed by the Treasury, has the Direct Isa. It pays 2.15%, there are no restrictions on taking your money out and the minimum to pay in is £1.
* All rates correct at the time of writing.
