Act now to secure top savings rates!
Savings rates are nudging down following this month’s interest rate cut, but the good news is there are plenty of accounts paying competitive returns for savers prepared to seek them out.
The top easy access savings accounts pay well in excess of 4% annua interest. according to Moneyfactscompare.co.uk, with some savings providers bucking the trend of falling rates by upping the interest they pay.
For example, West Brom’s Four Access Saver account, which can be opened with as little as £1, now pays 4.65%, up from 4.40%. This account is a good option for savers who want access their money but who won’t need to make regular withdrawals as it only allows you to take money out of your account up to four times a year. If you exceed this number of withdrawals, the rate falls to 2.15% AER.
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Remember that if you’re a basic rate taxpayer, you have a Personal Savings Allowance that means you can earn up to £1,000 in interest a year on your savings without having to pay tax. If you’re a higher rate taxpayer, this allowance reduces to £500, and if you’re an additional rate taxpayer, you don’t get a Personal Savings Allowance at all. If you don’t have an allowance, or think you’re likely to exceed yours, it’s worth sheltering as much of your savings as you can in tax efficient individual savings accounts (ISAs), as all your returns will be tax-free.
Under current ISA rules, you can shelter up to £20,000 this tax year in ISAs, either in cash, stocks and shares, or peer-to-peer lending through an innovative finance ISA. Alternatively, you can split your allowance between the various different types of ISA, or you can pay into more than one of the same type of ISA if you want to.
Savings app Moneybox currently offers the highest easy access cash ISA rate at an impressive 5.71% on a balance of £500, although this rate includes a 1.51% bonus for the first three months, after which the rate falls to 4.20%.
Savers who are concerned about rates falling in future may want to consider a fixed rate ISA, which provides peace of mind that returns will remain the same throughout the account term. Currently, Santander, Kent Reliance, State Bank of Indi, Secure Trust and Vida Savings all pay a market-leading 4.25% on their one-year fixed rate ISAs. Each of these accounts requires an minimum deposit of £1,000, with the exception of Santander and Vida Savings which can be opened with £500 and £100 respectively.
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A spokesman for Moneyfactscompare.co.uk said: “With rates expected to continue on this downwards trajectory, savers wanting to secure a competitive, tax-free return on their money shouldn’t delay. There are still many competitive, inflation-beating accounts available, but there’s no guarantee how long the top accounts will remain on the market before providers make cuts or withdraw products.”
If you’re not sure how much interest you’re currently earning on your savings, then it’s vital you check as soon as possible, and move your money to an alternative account if you can do better elsewhere.
Sarah Coles, head of personal finance at Hargreaves Lansdown said: “More than a quarter of savers are completely in the dark about the interest they’re getting on their savings. Given how rates have been falling, and how much further they’re expected to go, they could end up paying a horrible price for it.”