Looking for the best return on your cash, but don't want too much risk?
Sadly, savings interest rates still remain low, thanks mainly to a combination of a low Bank of England base rate and the last of the cheap money available to banks and building societies via the Funding for Lending scheme.
While the Funding for Lending scheme money might be winding down, the Bank of England has indicated that interest rates are likely to stay low for some time. In addition, when they do rise, they are likely to rise slowly. So, if you prefer to have your savings in cash, now might be the time to look at getting a better rate by locking your money away for the short term.
If you're aged 65 or over, don't forget the new market-leading 65+ Guaranteed Growth Bonds from NS&I, although they're only around until this Friday.
It's also well worth looking beyond high street savings accounts to the likes of current accounts and peer-to-peer websites.
Let's look at all of these and more to see what rates are on offer.
Instant access savings accounts
The top rate of interest on an easy access account is currently 1.50% from Kent Reliance Building Society although you'll need to open it in a branch. Next best is Virgin Money's Defined Access e-Saver, but that limits you to three withdrawals a year.
By giving up access to your cash for 120 days, you can earn a rate of 1.95% from Charter Savings Bank. The account can be opened with £1,000.
If you don't want to lock your money away for that long, you can get 1.55% with the 60-Day Notice Account, also from Charter Savings Bank, with a minimum deposit of £1,000.
If you haven't used your annual tax-free Cash ISA allowance (now £15,240), this arguably should be the first place you turn, unless you're a non-taxpayer. Disappointingly, short-term ISA rates have been falling in the past couple of months and some top ISAs have been closed but there is a new player causing a stir in the shape of the international arm of India's Punjab National Bank.
Its Variable Rate Cash ISA pays a top easy access rate of 2%, and you only need a pound to open an account. Its fixed rate ISAs are also market leading, although you need at least £1,000 to open these.
Its two-year fixed-rate Cash ISA pays 2.15% and you can get a top rate of 2.3% over three years.
Alternatively State Bank of India is offering 2.3% on its 1,000 Day (about two years and 270 days depending on leap year) ISA but you will need a deposit of £5,000 to get started.
The best rate over four years is 2.5% from Punjab. And the bank wins yet again for the five-year Cash ISA with a stonking 2.7% return.
Fixed rate savings accounts
The top one-year bonds come from FirstSave and Al Rayan Bank, paying 2% over 12 months on balances over £1,000.
Al Rayan Bank is best over two years, paying 2.30% on balances from £1,000.
Paragon Bank offers the top rate on a three-year bond of 2.50%, with a minimum deposit of £1,000.
Vanquis Bank offers the top rate over four years paying 2.61% on deposits from £1,000.
Over five years you can get 3% from Paragon Bank so long as you have £1,000. Secure Trust Bank is best over seven years paying 3.11% followed closely by FirstSave which offers a return of 3.10% over the same period, both with a minimum deposit of £1,000.
There are a couple of other longer-term options if you have at least £10,000 to spare. Agribank, which provides finance to farmers, is now offering a five-year bond paying 3.3% and a three-year bond paying 2.7%. These are market-leading rates, however your money is not protected by the UK Financial Services Compensation Scheme. Instead it's covered by the Maltese equivalent, up to a maximum of €100,000 (£73,985 at time of publication).
If you're aged 65 or over you'll be eligible for the NS&I 65+ Guaranteed Growth Bonds. There's a one-year fixed rate that pays 2.8% and a three-year fixed rate paying 4%. Both deals are market leading and allow you to save from £500 up to £10,000. However, remember they close on 15th May so you don't have long to grab one.
Current accounts continue to trump all the top savings accounts at the moment, for smaller balances anyway.
TSB's Classic Plus account pays 5% permanently on balances of up to £2,000, providing you credit the account with £500 a month.
Nationwide's FlexDirect account pays 5% interest on balances up to £2,500 for the first 12 months. The only condition is you need to pay in at least £1,000 a month.
Lloyds Bank is offering the Club Lloyds account, which pays 4% on balances between £4,000 and £5,000, providing you credit the account with £1,500 a month and set up two direct debits from it.
If you don't want to move your money around, Santander's 123 account pays 1% on balances over £1,000, 2% on balances over £2,000 and 3% on balances from £3,000 to £20,000. You need to pay in £500 a month, and set up at least two direct debits. There's also a £2 a month fee on the account but you can earn cashback on some of your direct debits for household bills.
Tesco Bank's current account also pays 3%, but only up to £3,000. You need to pay in at least £750 a month or you'll face a £5 monthly fee.
And Bank of Scotland's Classic Account with Vantage pays 3% on balances of between £3,000 and £5,000 so long as you pay in £1,000 a month. You can have up to three accounts too.
Peer-to-peer websites allow you to lend money to other people and potentially earn a greater reward for your risk.
However, your interest isn't tax free and your money isn't protected by the Financial Services Compensation Scheme, which is where the risk comes in.
Lending Works is currently guaranteeing a rate of 6% over five years and 4.8% over three years.
RateSetter's five-year income account says it is paying an average rate of 6.4% over five years. While Zopa is averaging 5% over five years or 4% over three years.
If you don't want to lock your money up for as long, all of these companies offer shorter lending periods, albeit with lower interest rates.
You could also look at the likes of Funding Circle, which only lends to businesses, and Landbay, which lends money to buy-to-let property landlords. There's also Wellesley & Co., which is currently promising a 7% return on a five-year bond to fund the expansion of its business, with interest paid twice a year. It's also offering 6.5% over four years and 6% over three years.
Accounts paying the most interest
Below is a table showing summarising where to earn the most interest on your cash. It's ordered by net returns.
|Account||Type||Gross interest rate||Net interest rate for basic rate taxpayer||Minimum deposit|
|RateSetter's Five-Year Income*||Five-year peer-to-peer savings||6.4%||5.12%||£10|
|Lending Works Five Year*||Five-year peer-to-peer savings||6%||4.80%||£10|
|Zopa Five Year*||Five-year peer-to-peer savings||5%||4%||£10|
|Nationwide FlexDirect account||Current account||5%||4%||£1 (max: £2,500)|
|TSB Classic Plus||Current account||5%||4%||£1 (max: £2,000)|
|Lending Works Three Year*||Three-year peer-to-peer savings||4.8%||3.84%||£10|
|Zopa Three Year*||Three-year peer-to-peer savings||4%||3.20%||£10|
|Lloyds Bank Club Lloyds||Current account||4%||3.20%||£4,000 (max: £5,000)|
|NS&I 65+ Guaranteed Growth Bond**||Three-year fixed rate bond||4%||3.20%||£500 (max: £10,000)|
|Agribank***||Five-year fixed rate bond||3.30%||2.64%||£10,000|
|Secure Trust Bank||Seven-year fixed rate bond||3.11%||2.49%||£1,000|
|Paragon Bank||Five-year fixed rate bond||3%||2.40%||£1,000|
|Santander 123 account||Current account||3%||2.40%||£3,000 (max: £20,000)|
|Tesco Bank Current Account||Current account||3%||2.40%||£1 (max: £3,000)|
|Bank of Scotland Classic Account with Vantage||Current account||3%||2.40%||£3,000 (max: £5,000)|
|NS&I 65+ Guaranteed Growth Bond**||One-year fixed rate bond||2.80%||2.24%||£500 (max: £10,000)|
|Agribank***||Three-year fixed rate bond||2.70%||2.16%||£10,000|
|Punjab National Bank International Limited Five year fixed rate Cash ISA||Five-year fixed rate Cash ISA||2.70%||2.70%||£1,000|
|Vanquis Bank||Four-year fixed rate bond||2.61%||2.09%||£1,000|
|Paragon Bank||Three-year fixed rate bond||2.50%||2%||£1,000|
|Punjab National Bank International Limited Four year fixed rate Cash ISA||Four-year Cash ISA||2.50%||2.50%||£1,000|
|Al Rayan Bank****||Two-year fixed rate bond||2.30%||1.84%||£250|
|Punjab National Bank International Limited Three year fixed rate Cash ISA||Three-year fixed-rate Cash ISA||2.30%||2.30%||£1,000|
|Punjab National Bank International Limited Two year Fixed Rate Cash ISA||Two-year fixed rate Cash ISA||2.15%||2.15%||£1,000|
|Al Rayan Bank****||18-month fixed rate bond||2.00%||1.60%||£1,000|
|Punjab National Bank International Limited Variable Rate Cash ISA||Easy access Cash ISA||2.00%||2.00%||£1|
|Charter Savings Bank||120-Day Notice Account||1.95%||1.56%||£1,000|
|FirstSave 1 Year Fixed Rate Bond||One year fixed rate bond||1.90%||1.52%||£1,000|
|Al Rayan Bank****||120-day notice Cash ISA||1.80%||1.80%||£250|
|Charter Savings Bank||One-year fixed rate bond||1.75%||1.40%||£1,000|
|Charter Savings Bank||60-Day Notice Account||1.55%||1.24%||£1,000|
|Kent Reliance||Easy access savings account||1.50%||1.20%||£1,000|
*Not protected by Financial Services Compensation Scheme
**Only available to over 65s
***Protected by Malta Depositor Compensation Scheme to maximum of €100,000, not by UK Financial Services Compensation Scheme
****Anticipated profit rate
The account you go for will probably be determined by the amount you have to save, your attitude to risk and whether you want instant access to your money.
What's clear though is that if you want a better return on your money in the longer term, with a bit more risk in some cases, you're better off looking beyond traditional savings accounts right now.
Unfortunately, if you just want somewhere to put some money away in case of a rainy day, you're not going to be able to beat inflation unless you go for peer-to-peer savings. If you don't fancy that, you should still shop around for the best rate you can get.
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