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The best savings rates on cash have recovered from dreadful to tolerable in recent years, though generic accounts continue to sport rates as low as 1% AER.
(An AER of 1% is equivalent to £1 per year for every £100 saved. Don’t spend it all at once!)
Higher rates will have been welcomed by many Monevator readers. The low-interest era was especially tough on cautious savers who kept a lot of their wealth in a cash savings account – although clearly higher rates have had impacts elsewhere, too, from the bond market to mortgages.
Today the situation for savers is more nuanced. While accounts paying pitiful rates still abound, the market is much more competitive.
Indeed, account switchers – and of course enthusiasts like myself, who keep a keen eye on interest rates – can out-earn more complacent savers five times over.
Moreover, anyone with a large pot of cash to stash has had something of an unexpected reprieve in recent months. Albeit for unfortunate reasons.
Isn’t it Iranic?
The Bank of England’s Bank Rate had fallen steadily since late 2024.
But with the war in Iran, Bank Rate steadied at 3.75% and further rate cuts are at the least postponed. Interest rates could even rise.
This leaves our savings at the mercy of geopolitics. But whether this leads to more competition in the savings market or to banks nervously edging their rates downwards is hard to call.
Best savings accounts
Perhaps, then, you’re left wondering where you should stash your cash today – or you’d just like a lower-hassle solution to this issue of fluctuating rates?
Let’s look at the different types of accounts available, which ones pay the highest rates of interest, and consider some tricks to make things simpler.
Easy access savings
- Highest easy access rate if you open a current account: LHV @ 4.25% AER. Open its app-based current account and then open a savings account
- Highest easy access rate including a temporary bonus: Tembo Money Homesaver @ 4.75% AER, including a 1.75% bonus for 12 months
- Highest straightforward easy access rate: Charter Savings Bank Easy Access (Issue 73) @ 4.01% AER, open from £1
Easy access is the most popular type of savings account. Such accounts give you instant access to your cash, which means you can add or withdraw money as often as you like. But they also pay far higher interest rates than a typical current account.
Easy access is the best type of account to go for if you know you’ll need access to your cash within a year or so. They’re also the best option if you just don’t want to lock away your cash for some reason.
However there are generally higher-paying options than easy access. So if you apply a mindset of “I must have all my savings available when I want them”, it will cost you.
It’s generally better to divvy up your savings. If you want, say, £20,000 for emergencies and £15,000 is stored for a house move in two years’ time, then you don’t need all £35,000 in an easy-access account.
Note that interest rates on easy access accounts are usually variable, meaning they can change in future. However some do pay a temporary fixed bonus.
Not so easy…
Picking the ‘best’ easy access account is tricky. That’s because there are many accounts out there, all pitched slightly differently.
What’s more, the highest rates are usually only available with strings attached.
LHV is a strong contender at 4.25% AER, but having to open a current account is extra hassle.
The Charter Savings Bank offers a much simpler product at 4.01%. For every £10,000 saved, the difference with LVH’s best offering would only be £24 per year, pre-tax.
Charter Savings Bank tends to release a new issue every time the interest rate wobbles. (If you’ve wondered how it had reached 73 separate issues of the same account, that’s why!) You can get a competitive rate to start with, but your earnings might not increase if rates increase. You’re free to move to the latest issue though, with some minor hassle.
Tembo is an intriguing option. You might want to leave after 12 months when its 1.75% bonus expires, but getting 4.75% AER for a year is decent by today’s standards.
Tembo is actually advertising a 5.75% AER, since it’ll boost your rate by 1% if you use its mortgage service. The service comes with its own fees though, and you could be worse-off than if you’d used a fee-free mortgage broker.
Regular savings
- Highest regular saver rate if you open an app-based current account: Zopa @ 7.1% AER, open Zopa’s ‘Biscuit’ account and then open a regular saver
- Highest regular saver rate if you open a traditional current account: First Direct or Co-operative @ 7% AER
- Highest regular saver rate open to all: Monmouthshire Building Society @ 6% AER, open via its app
Regular savings accounts enable you to put money into them on a monthly basis. Usually their headline rates beat easy access deals, but there are limits as to how much you can save each month. These limits are often quite stingy!
Some regular savers only allow you to hold them for a year. Others restrict your ability to withdraw cash. And the highest-paying accounts are often tied to you also running an associated current account.
Personally, I wouldn’t open a regular savings account on its own unless it was trivially easy – for instance, if it could be opened via the app of a current account I’m already using.
If you need to find the best home for £20,000, then putting £250 away each month doesn’t achieve much. However I’ve previously written a guide explaining how to build a ladder and stash thousands into regular savers if you want to maximise your savings interest.
Notice savings
- Highest notice savings rate (180 days): The Stafford Building Society @ 4.26% AER
- Highest notice savings rate (90 days): OakNorth @ 4.15% AER, rate includes a 1% bonus for new customers only
Notice savings accounts are just like easy access accounts, but with an added rule that you must give your provider notice before making a withdrawal. In this way they can beat easy access rates without requiring you to lock away your cash for an excessively long period.
Generally, the longer the notice period, the higher the rate. It does depend on long-term projections in the money markets though.
Personally, I don’t use notice accounts, as I can usually beat their rates with easy access and regular saver alternatives. I’m more than happy to pop a few doors down the (figurative) high street if someone will pay me a fraction more interest. As customers go, I’m as disloyal as they come.
However the big advantage of notice accounts is they can be set-and-forget.
If you know you won’t get around to changing your bank when the market moves, then notice accounts can at least deliver a slightly higher rate than the easy access alternatives.
Again though, if you’re ready to look for the best deals, notice accounts aren’t likely to deliver.
Remember too that they’re variable accounts, so they’re not guaranteed to stay at high rates. When the Bank of England Bank Rate drops, most providers will soon issue their own rate cuts.
Fixed savings
- Highest fixed savings rate (one year): Close Brothers @ 4.65% AER, minimum £10,000 deposit
- Highest fixed savings rate (5 years): Close Brothers @ 4.67% AER, minimum £10,000 deposit
- Highest fixed savings rate (5 years, low minimum): ThisBank @ 4.57% AER, minimum £100 deposit
To secure the highest currently prevailing interest rates, fixed savings accounts are usually the way to go.
With these accounts you must lock away cash for a set period of time. In return, you typically earn a higher interest rate than most easy access alternatives – at the time you put your money away.
Fixed rates can vary significantly depending on long-term interest rate predictions. Right now, there’s little difference between a one-year and a five-year term. But things can change quickly.
Although I think fixed savings accounts have a place, I tend to steer clear. That’s because if I can manage without access to the cash for five years, then I can invest it in potentially more lucrative assets like shares.
However some people do like to keep several years of cash at the ready. And if you most value certainty then you will find it here.
With fixed rates it’s important to appreciate the ‘interest rate risk’ of opting for an account with a long fixed period: if rates rise in future, you won’t be able to benefit until your current term expires.
Reducing the hassle
Some of you will be reading this and thinking it sounds like a nightmare. Opening new accounts with different banks, posting copies of your ID, and remembering yet another app login.
All for only marginally higher rates here and there!
This is where intermediary platforms can provide an interesting alternative.
Hargreaves Lansdown is one such option. Alternatives include Prosper and Flagstone. I don’t have experience of the latter, but I have investments with the UK’s investment behemoth. Hence it was no extra hassle for me to open Hargreaves’ Active Savings Account product.
With Active Savings I can open, for instance, a Close Brothers one-year fixed account at 4.47% AER with just the push of a button.
Admittedly, that rate is 0.18% less than going to Close Brothers direct. But if the hassle factor has you languishing on a lowly rate at your bank, then an intermediary is a better alternative.
In this example, with £10,000 of savings I would earn £18 less (pre-tax) per year with Active Savings versus going direct. No big deal.
But if my money was sitting in a Barclays Everyday Saver paying just 1% AER, and I was planning to move it into a Barclays’ one-year fixed rate account at 3.7% AER – just because I wanted to avoid the hassle of switching provider – then you can see why an intermediary can be a more profitable option.
These services probably won’t get you the best rate. But they can get you a better than average one, and with only a few clicks.
Is a savings account a good idea with high inflation?
After the enormous price rises of recent years, the latest Government inflation figures tell us that Consumer Price Index inflation is running at 3%.
This is the first and biggest problem with cash. Even if you bagged some of the highest rates we’ve listed above, you’d be lucky to see more than a 1% return in real terms. 1
So compared to other asset classes, you probably won’t win with cash in the long run.
However even the most aggressive investors should usually have some of their wealth in cash, whether for diversification or for maintaining an emergency fund. And it’s clearly worth getting the best rate you can on your money, for whatever level of hassle you can deal with.
The second problem with cash is taxes.
If you’re a higher-rate taxpayer, then only the first £500 of savings interest is tax-free. For everything above that, the 4% headline rate gets you just 2.4% after HMRC has had its cut.
Tax-free gilts may well be a better alternative for large sums of money, especially for higher earners.
How much of your portfolio do you currently keep in cash? Have you had any experience with savings intermediaries? We’d love to hear in the comments below. Note that we’ve updated this article with current rates and products, but kept the old comments for interest. Check the dates to be sure.
- That is, after inflation.[↩]
