Low saving rates mean you’re losing out in real terms against the inflation rate. So what can you do? Here are my top places to put your cash to make as much as 3%.
(This article is updated at the start and the middle of each month after inflation rate announcements and any significant account changes. New videos are at the start of the month.)
You want to make sure you’re getting the best rate on your savings – not just to earn the biggest possible return but also to ensure you earn more than inflation.
The latest inflation rate (for July 2021) was 0.2%. This low rate means more savings accounts beat it now than in recent months, but the vast majority of accounts are well below this.
We’re a long way now from when we could get 5%, with rates slowly dropping over the last few years. And follow following the base interest rate has been cut to an all-time low of 0.1%. those cuts have happened even faster.
We’ve seen a run of drops across leading savings accounts. In May Nationwide reduced the rate on its FlexDirect from 5% to 2%, while TSB’s Classic Plus account was cut from 3% to 1.5%.
Meanwhile the market-leading easy-access savings accounts such as the one from Marcus were cut twice in three weeks to just 1.05% before it was closed to new customers. A new account paying 1.2% from Skipton appeared in mid-September but closed after just a handful of days.
And now, NS&I has dramatically cut rates The NS&I Income Bond, for example, is falling from 1.16% to 0.01% on November 24th. Then TSB followed by announcing the Classic Plus account will follow suit and drop rates to 0% in December. Both huge cuts and a big disappointment for savers.
Fortunately, there are places where you can beat the current rate. Here are my picks of inflation-beating instant-access accounts for your cash savings.
Here’s my monthly video round-up from mid-September 2021.
Earn 3% interest
Natwest (Regular saver) – 3%
This account launched in late September and offers a massive rate but with a few restrictions. The biggest is you can only save £50 every month. Not far behind is that interest will only be paid on the first £1,000 saved.
It’s only open to Natwest customers. Here’s my review of the account and more information on how it works.
Earn 2.75% interest
These accounts are all Regular Savings.
Regular or monthly savers work differently to normal saving accounts. For a start, there’s a limit to how much you can save each month, and the interest is calculated on the balance each month. After 12 months the interest is paid and your saver closed. But you can then open up another and begin again.
These are ideal if you only have a certain amount of money to put aside each month, or to move money every month from a lower-paying easy access account. Here’s my full guide to how they work.
You can only open these top accounts if you have or open a current account with these banks – but that’s no reason to put you off.
First Direct (Regular Saver) – 2.75%
This is my top pick as it allows monthly deposits of up to £300. Pay in the full amount over a year and you’ll make £53.40 in interest. However right now newbies can’t open up the required current account to get this.
HSBC (Regular Saver) – 2.75%
The monthly maximum with HSBC is a slightly lower £250 a month, meaning you can put aside £3,000 over a year and earn up to £44.50 in interest.
Marks & Spencer Bank (Monthly Saver) – 2.75%
This is the third regular savings account. You’ll be able to save a maximum of £250 a month.
Earn 2% interest
All of these accounts can be opened by anyone, you don’t need to be an existing customer. Two options are a current account so you can save more upfront at this rate, the other is another regular saver at a lower rate.
Nationwide FlexDirect (current account)
This is the highest paying account, and you can access your money at any time. However the amount of money you can save in it is limited.
You can get 2% for one year on a balance up to £1,500 with the FlexDirect account. You do need to pay in £1,000 a month to get this rate.
After the first year it will drop to 0.25%, but you can always switch away when that happens (and hopefully get a nice cash bonus for doing so).
You’re able to get the 2% on both a solo account and a joint account, so it’s worth opening a joint account too if you’re in a relationship (though watch this video first).
Virgin Money (current account)
This relatively new account from Virgin Money will pay 2.02% on up to £1,000. So though it’s a fraction better than Nationwide, I’ve put it second as you can save less there.
Earn 1.55% interest
Coventry Building Society (Regular Saver) – 1.55%
This is another regular saver, this time from Coventry Building Society. The rate is variable so it can change at any time. In fact it’s recently dropped from 1.85% to 1.55% for new accounts (and it was 2.5% only a few months back). You can however pay in a much larger £500 a month.
Earn 1.5% interest
If you’ve maxed out the above accounts then these are your next best options.
Lloyds Bank (Monthly Saver) – 1.5%
Sadly this account has dropped from 2.5% to 1.5%. You must have a Club Lloyds bank account (which comes with a free magazine subscription) to open this monthly saver. You can pay in a max of £400 a month and get interest to your account after a year.
If you have a standard Lloyds account the monthly saver rate is a lower 1% and there’s a limit of £250 a month.
Earn 1.2% interest
Halifax Reward (current account) – 1.2% (equivalent)
The Halifax Reward account changed in June. Existing customers need to opt-in, but if you do it’s possible to get £5 a month as a “reward”. There are two ways to get this.
One is spending £500 on your debit card (though other cashback credit cards can beat this), or you can get if there is £5,000 in your account every day of the month.
If you do this every day of the year, you’ll get £60, which though it’s not interest, is the equivalent of 1.2%.
However, have less in the account for just one day of a month and you get nothing. And £5k is a lot of money for most people, especially as you can get better rates at Nationwide and TSB first.
So it’s better to use the debit card option and see it as cashback rather than a savings option.
Here’s my rundown of how this Rewards account will work.
Earn 1.18% Interest or less
The above accounts all have caps on how much you can save. You’d need £4,500 to max out the Nationwide, TSB and Virgin accounts. Then it’s a case of pushing the money into the higher paying regular savers.
But what should you do with any additional money? You can still beat most standard savings or current accounts where you’re likely to get less than the base rate of 0.1%.
You can also fix your savings for a year or longer and get a slightly better rate in return. However, you need to be sure you won’t need access to that cash over that time. The longer you fix, the greater the risk you’ll lose out if rates were to rise. But at the same time, they’re protected if rates were to continue to fall.
Atom (Fixed savings account) – 1.18%
The best accounts are dropping or closing daily (even hourly) at the moment. This account from Atom Bank is one of the top fixed accounts, and allows a minimum deposit of £50.
Kent Reliance (Fixed savings account) – 1.17%
This account is with the Kent Reliance building society and it fixed for one month. Early withdrawals are subject to 180 days penalty on interest. It allows a minimum deposit of £1,000.
Coventry Building Society 1.1% (Two withdrawals a year)
This account from Coventry BS will let you take money out twice a year – so it’s only for those who don’t think that’ll be a problem. The rate is variable, so it could change at any time (in fact it dropped from 1.2% to 1.1% days after adding it here). And since the Regular Saver from Coventry has been cut twice in the last few months I wouldn’t be surprised if the same happens.
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