The new banks paying the best savings interest rates

With inflation climbing to 1.2% in November it's vital you chase the top rates on savings accounts to ensure the value of your cash isn't eroded.

However, those looking for a better deal should stay away from high street banks and try a challenger bank instead, according to new research.

MoneySuperMarket has looked at the best deals going on a range of savings products, and the figures reveal that challenger banks offer significantly better rates.

Where can I get the best deal?

The market leaders at the moment are Atom Bank and IKANO which both sit at 1.40% for a one-year fix.

As for three-year fixes it's best to go with Hanley Economic Building Society which offers a rate of 1.65% with IKANO Bank following closely behind at 1.63%.

Santander leads the way for the high street banks but even then it only offers a paltry 0.7% for a one year bond and 1% for a three year fixed deal.

For those willing to lock their money away for a little longer, IKANO has the best five-year savings rate at 2.05%, followed by the relatively new Masthaven at 2.01%.

RCI and Tesco Bank have the best rates on easy access savings accounts at 1%.

I'm a tad unsure about going with a challenger bank

Don't worry – in most instances challengers have safeguards in place for your money, just the same as high street names.

Some are covered by the Financial Services Compensation Scheme which secures up to £75,000 (rising to £85,000 in January 2017) should the bank go bust.

Foreign Banks like RCI and IKANO are covered for the same amount by the equivalent schemes in France and Sweden – you would just need to be routed through the overseas scheme.

Kevin Mountford, banking expert at MoneySuperMarket, said: "You shouldn't shy away from lesser known brands, as they are still secure and trustworthy, especially as it seems the traditional banks aren't interested in giving savers better rates at the moment."

Another option

Of course, you could use a current account to stash your savings.

You could go for the Nationwide FlexDirect Account which will give you 5% interest on balances of up to £2,000 for the first 12 months.

The TSB Classic Plus Account gives you the same 5% interest on balances up to £2,000, but this rate falls to 3% in January 2017.

For larger balances there's the Santander 123 Current Account, which pays 1.5% on deposits up to £20,000.

Compare high-interest current accounts