Savers are being urged to cash in on high interest rates sooner rather than later following the Bank of England's decision to cut the Base Rate for the first time in more than four years.
While savers aren't able to cash in on the peak interest rates seen last summer, some savings accounts are still paying rates of up to eight percent and a significant number of people are missing out.
According to research by Shawbrook Bank, almost a quarter of savers (24 percent) are earning two percent interest or less on savings despite the current average easy access rate standing higher than this.
Adam Thrower, head of savings at Shawbrook said: "If you don’t know what you’re earning on your savings, it’s likely you aren’t earning much and therefore you could be losing out on hundreds of pounds. Move your money now before it’s too late."
The warning aligns with the message of this year's Savings Week UK, running from September 9 to 16, which is encouraging people to save their money more effectively.
There are a range of different accounts suitable for a variety of needs - from easy access accounts to fixed term savers - and some are still offering particularly attractive rates. Here are the top accounts on offer this week, at the time of writing.
Top easy access savings accounts
Easy access accounts are typically more flexible, as these allow savers to make payments and withdrawals with minimal restrictions and with small opening deposit requirements. Given the current high-living-cost environment, a survey from Hodge found more than half of respondents have had to dip into their savings for everyday expenses.
Still topping the leaderboard of easy access savings accounts offering the highest interest rate is Ulster Bank's Loyalty Saver with an Annual Equivalent Rate (AER) of 5.2 percent on deposits of over £5,000. Those with deposits lower than £5,000 will be paid a lower AER of 2.25 percent. Interest is paid annually and on account closure, and withdrawals are permitted at any time up to the daily limits.
Oxbury Bank's Easy Access Account (Special Edition One) falls just behind with an AER of 4.87 percent. The account can be launched with a larger minimum investment of £25,000 and interest is paid monthly. Up to £500,000 can be invested overall and there are no restrictions on withdrawals.
For those with smaller amounts to invest, the online bank cahoot's Simple Saver places next with an AER of 4.85 percent on up to £500,001. Savers need a minimum deposit of £1 to get started, there are no restrictions on withdrawals, and interest is paid on the anniversary of opening.
Top fixed rate savings accounts
Fixed-rate savers can be beneficial during the current period of falling rates, as these enable people to lock in an interest rate for a set length of time. However, they typically impose stricter withdrawal limits on customers, meaning savers should be comfortable investing money without needing to access it during the account term.
Topping the table for one-year fixes is the Union Bank of India's Union Premier Bond with an AER of 5.05 percent. Savers need a minimum deposit of £5,000 to launch the account and interest is paid on maturity. Up to £340,000 can be invested and withdrawals cannot be made until the term ends.
The Union Bank of India also takes the top spot for two-year fixes with an AER of 4.75 percent. A minimum deposit of £1,000 is required to open the account, interest is paid on the anniversary, and withdrawals are not permitted until the account matures. Up to £1million can be invested overall.
Hampshire Trust Bank tops the list for three-year fixes with an AER of 4.51 percent. The account can be opened with a minimum deposit of £1 and up to £250,000 can be invested overall. Interest is paid on the anniversary of opening and withdrawals are not permitted until the term ends.
For longer-term savers, UBL UK tops the list for four-year savers with an AER of 4.26 percent. A minimum deposit of £2,000 is required to open the account and interest is paid on maturity. Up to £85,000 can be invested and withdrawals are not permitted until the term ends.
Birmingham Bank offers the top rate for five-year fixes with an AER of 4.35 percent. The account can be launched with a minimum deposit of £5,000 and up to £250,000 can be invested. Interest is paid on the anniversary of opening and withdrawals are not permitted until the account matures.
The top one-year fixed bond rate fell more than other terms month-on-month and average rates dropped across the board in August, new Moneyfactscompare research shows. The average one-year fixed bond at 4.43 percent gross is now 0.63 percent higher than the top five-year fixed bond at 3.8 percent.
Rachel Springall, finance expert at Moneyfactscompare.co.uk, commented: “Fixed bond rates took a turn for the worse during August and the pool of bonds paying five percent or more continues to dwindle. It is entirely plausible that providers may drop rates further in the weeks ahead, but the challenger banks are holding firm in the top rate tables.
“It has now been a month since the Bank of England base rate cut, which was the first drop in over four years. Any cuts to base rate can typically impact variable savings rates, but providers will also review rates on accounts that guarantee returns. Unsurprisingly then, fixed bond rates from one-year, up to and including five-year terms, have dropped month-on-month. It is also worth noting that time is a key factor in the flow of cuts within the savings market, and each institution will no doubt be monitoring its peers’ moves in the coming weeks. Those savers who are prepared to lock their cash away for a guaranteed return may be wise to act with pace to secure a five percent bond.”
Regular savings accounts
Regular savings accounts can be a good option for those looking to get into a savings habit, as these accounts typically offer higher interest rates and the terms generally encourage savers to pay money into the accounts monthly.
Principality Building Society places top with an AER of eight percent. The term of the account runs for six months and up to £200 can be invested per month. The account can be opened with a minimum deposit of £1 and interest is paid on maturity.
The online-based digital bank first direct is also offering a competitive AER of seven percent. The rate is fixed for 12 months and Britons can get started with just £25. Interest is calculated daily and paid on account maturity exactly one year after opening. Between £25 and £300 can be deposited per month in multiples of £5. Withdrawals are not permitted throughout the 12-month term. In this event, the account will have to close and interest will be paid up to the closure date at the Savings Account variable rate instead.
The Co-operative Bank is also offering a seven percent AER on its Regular Saver Issue One. Savers can deposit up to £250 a month and up to £3,000 can be invested in the account over the 12-month term. Interest is paid on maturity and withdrawals are permitted without penalty or notice.
HSBC joins the top three with its newly launched Regular Saver, offering an AER of seven percent. Savers can get started with £25 and up to £3,000 can be invested in the account overall. The account allows a maximum of £250 payments per month for 12 months, and interest is paid on maturity. Earlier access is permitted on closure only and will be subject to a lower interest rate paid.
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Top Cash ISAs
Cash ISAs are a popular savings option, as these accounts enable people's money to grow without having to pay tax on the interest above the Personal Savings Allowance (PSA). However, some ISAs can come with a few more restrictions, like penalty charges for early access or transfers.
For those who need instant access to their cash ISA, Trading 212 is now taking the top spot with its Cash ISA offering an AER of 5.2 percent. There are no withdrawal restrictions and interest is paid daily.
In the fixed rate sector, Punjab National Bank (International) Limited places top of the list for one-year fixes with an AER of 4.8 percent. A minimum deposit of £1,000 is required to get started, interest is applied on maturity, and early access is permitted on closure only, subject to a 30-day notice, and no interest will be paid.
Nottingham Building Society takes the top spot for two-year fixes with an AER of 4.56 percent. The account can be opened with £500 and interest is paid yearly. Earlier access is only permitted on transfers out and will be subject to 180 days' loss of interest.
For longer-term savers, United Trust Bank tops the board for four-year ISAs with an AER of 4.1 percent. The account can be opened with £5,000 and interest is paid on the anniversary. Early withdrawals will be subject to 365 days' loss of interest. However, interest can be withdrawn annually on the anniversary.
The State Bank of India offers the top rate for five-year fixed ISAs with an AER of 4.15 percent. The account can be opened with a minimum deposit of £5,000 and interest is applied on maturity. Earlier access is permitted on closure only with a 30-day notice. No interest is paid if the account is closed before the first anniversary, and there will be a one percent loss of interest if closed after the first anniversary.
What is an ISA?
ISA stands for Individual Savings Account.
The main difference between an ISA and other savings accounts is it offers tax-free interest payments.
The ISA allowance for the 2024/25 tax year is £20,000.
You can have a cash ISA - including a Help to Buy ISA - a stocks and shares ISA, an innovative finance ISA, a Lifetime ISA or a mixture of them all.
You must save or invest by April 5 - the end of the tax year.
Cash ISA popularity has significantly risen this tax year as savers proactively attempt to dodge increasing tax implications brought on by frozen allowances and higher interest rates. Paragon Bank recorded a notable 40 percent jump in new ISA applications during the first week of the new tax year.
Additionally, the average balance deposited in Paragon fixed-rate Cash ISAs during the week following April 6 was 45 percent higher than the average balance in the corresponding period in 2023.
Derek Sprawling, managing director at Paragon Bank Savings said: “The 2023/24 tax year was one of the strongest ISA seasons on record and the new tax year has carried on in a similar manner. We had our busiest ever day for applications on April 8 as savers looked to open their new ISA early in the new tax year to take full advantage of the tax-free wrapper.”
He added: “It is encouraging that nearly two-thirds of our active cash ISA savers fully utilised their £20,000 allowance last tax year, with a similar proportion looking to do the same this year. As ISAs celebrate the 25th anniversary of their launch, it’s positive to see that they are thriving.”
But while savers are encouraged to take steps to protect their savings earnings, last month's Bank of England Base Rate drop could spell slightly less positive news for future returns. Kevin Mountford, co-founder of Raisin UK, said: "The Bank of England has reduced interest rates by a quarter percentage point to five percent. This comes after rates were held at a 16-year high of 5.25 percent since August 2023.
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