Interest rates look as though they might not fall again anytime soon due to the Middle East conflict having pushed up fuel prices, with savings returns ticking up recently.
Not all banks and building societies offer competitive savings rates, however, so it’s important to shop around for the best possible returns.
Here’s what you need to know to make sure your savings are working as hard as they possibly can for you.
Why choosing the right account matters
More than one in 10 of us (15%) don’t have a savings account at all, according to money.co.uk, and while many people may feel more comfortable having their money readily available in a current account, these accounts rarely pay the best returns.
It’s especially important when inflation is high, as rising prices eat into the purchasing power of your cash. Inflation held steady at 2.8% in the year to May 2026, so something that cost £10 last year will now cost £10.28.
Inflation is still lower than the Bank of England’s 3.75% base rate, so it’s possible to find savings accounts that pay interest that’s equivalent to or beats inflation.
Kevin Brown, savings expert at Scottish Friendly, said: “Hopefully easing pressures in the Middle East should dampen inflation concerns and give policymakers more time to assess whether this is a short-term shock. That points to a hold, while an unchanged reading makes it harder to argue for an immediate rate rise.
“For households, this is encouraging, but inflation doesn’t need to be rising for the cost-of-living squeeze to remain painful. The practical response for many will be to review savings rates, energy tariffs, mortgage costs and everyday spending, while considering whether longer-term money could work harder through investing.”
What savings options are there?
There are lots of types of savings accounts, all of which serve different purposes. Some of the most popular types of savings accounts include:
- Easy access savings accounts – These are savings accounts which allow you to make withdrawals instantly or easily without penalty
- Fixed-rate bonds – These accounts offer a fixed rate of interest over a set period of time, and you cannot usually make withdrawals during the fixed term
- Notice accounts – Notice accounts require you to give notice to make withdrawals. If you don’t, you’ll usually have to forgo some interest as a penalty
- Regular savings accounts – These accounts allow you to put away a small amount of money on a regular basis, typically ranging from £10-300 a month. The highest-interest paying regular savings accounts are generally linked to current accounts, so you must have a current account first before you’re eligible to open a regular saver account
- Cash ISAs – A tax-efficient way to save money, where you can save up to £20,000 a year (falling to £12,000 for under 65s from April 2027) and not pay any income tax on the interest you earn.
You can read more about how these accounts work in our guide What are the different types of savings accounts?
How many savings accounts should I have?
The number of savings accounts that you want will really depend on what your savings goals are and your personal situation. There’s no perfect combination of accounts, but many people will have a mixture of different types of savings accounts to suit different needs.
For example, if you have a long-term goal of buying a new home, but also want to save for things like holidays, or one-off purchases, then a combination of a fixed-term account, and something with easier access might be a good combination.
The types of accounts we’ve listed above aren’t exhaustive, and there are lots of other types of savings accounts. If you aren’t sure where to start, an internet search of types of savings accounts that are good for your specific financial goals could be a good place to start.
Bear in mind that if something goes wrong with your savings provider and they run into financial difficulties, the Financial Services Compensation Scheme (FSCS) will only compensate you with a maximum payout of £120,000 per financial institution. That means if you have more than £120,000 in savings with one financial institution, then it’s worth moving any fund above this amount to a different bank. Find out more in our guide Are my savings safe?
What are the best savings accounts?
Interest rates are changing all the time, but at the time of writing, some of the highest savings rates include:
Top 5 Easy Access Accounts
Fixed-rate bonds
Top 5 Fixed Rate Accounts
Easy Access Cash ISAs
Top 5 Easy Access ISAs
1 Year Fixed Rate Cash ISAs
Top 5 1-Year Fixed Rate ISAs
5 Year Fixed Rate Cash ISAs
Top 5 5-Year Fixed Rate ISAs
Regular savings accounts
Top 5 Regular Savings Accounts
Alex Beavis, Interim Director of Banking at LHV Bank, said: ” Loyalty counts for little in savings. Banks profit from inaction, and savers who leave money in mediocre accounts get substandard returns, made worse by inflation eroding what they have.
“Being an active saver is the answer. Active savers don’t lock their money away for a ‘rainy day’. They check, they switch, and they keep doing it which turns savings into real growth. Savers should also be able to trust their banks to offer simple, clear accounts that pay strong rates for the long term, not headline rates that fade to nothing within months.”
That means wherever you decide to keep your cash, don’t delay and check how much interest you’re earning on your savings now. If your returns are nowhere near close to those shown above, it’s time to vote with your feet and move elsewhere.
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