There’s no escaping the fact that financial times are tough, but savers may be able to make their money work much harder by taking advantage of competitive savings rates.
Savings rates have jumped in recent months, thanks to a series of increases in the Bank of England base rate in a bid to curb inflation.
Average rates on several different types of savings accounts hit their highest levels in 15 years last October, including one-year fixed rate bonds, easy access accounts and notice accounts.
However, with the base rate having stabilised (for now at least), it may not be too long before the rates on short-term products begin to ease. Read more in our article Highest savings rates in decades may disappear as inflation falls.
Make sure you don’t miss out on competitive rates while they last. Here, we run through 10 of the best places to save your cash right now.
1. Easy access cash ISAs
Individual Savings Accounts (ISAs) are a great way to save while ensuring that any returns you make are free from tax.
Essentially, an ISA acts as a tax-efficient wrapper for your money, meaning that any interest you earn won’t be subject to income tax. An easy access option means that your cash won’t be locked away for years and you usually won’t be penalised if you need to withdraw your money at short notice. There may still sometimes be withdrawal limits, however, such as having a set number of withdrawals allowed per year. Exceeding this limit may result in penalties, such as interest deductions, so always check the terms set by your provider carefully.
ISA rules changed in April 2024, so you can open more than one of the same type of ISA each tax year. Remember , however, that you can only deposit a certain amount across all of your ISAs each tax year, known as your ISA allowance. In the 2024/25 tax year, this is £20,000. You can learn more about the ins and outs of ISAs in our article Everything you need to know about ISAs.
At the time of writing, the best easy access cash ISA rate is 5.17% from Plum, followed by a 5.16% from Moneybox. Our article Best cash ISA rates – which cash ISAs pay the most interest?, which is updated weekly, contains more information and detailed breakdowns of current best buy accounts under the “Variable rate cash ISAs” heading.
2. Notice cash ISAs
Notice cash ISAs are different from easy access ISAs in that you usually can’t withdraw your money whenever you like. Instead, as the name suggests, you have to give notice that you want to take your money out and wait for the set notice period to elapse before you can withdraw it.
The length of the notice period depends on the account, so it can be anywhere from 30 days to several months. However, notice ISAs do tend to offer slightly better rates than easy access accounts, so they can be a worthwhile option if you don’t expect to need your money at short notice, plus you’ll still benefit from the tax advantages of the ISA structure.
At the time of writing, the best offering is from the West Brom, a 5.10% ISA with a 60-day notice period. The next best option from the Furness Building Society is 5.01% with a 90-day notice period.
3. Fixed rate cash ISAs
Another ISA option you may want to consider is a fixed rate cash ISA. Here, you lock away your money for a set length of time – generally a year, two years, three years or five – in exchange for even higher rates than easy access or notice ISAs tend to offer. Bear in mind that if you want to withdraw your money from a fixed rate ISA before the fixed period has ended, you’ll usually lose out on two or three months of interest and the account may be closed, so only put away an amount you are confident you can afford to do without for a while.
Bear in mind too that with most of these products, you have to pay in all the money in the first 30 days – you can’t top it up and, as we mentioned earlier, you can’t open another cash ISA until the next tax year. So, if you only have a small amount to start saving with, consider opting for a type of account that you can contribute to as and when you want to.
At the moment, the best one-year fixed rate ISA is from Shawbrook Bank, paying 4.76%. The best two-year offering is 4.62% from OakNorth, the best three-year fixed rate ISA is 4.39%, also from OakNorth and the best five-year offering is from from UBL, at 4.16%. The rates on shorter terms are higher than those on longer ones at the moment because interest rates are currently high, but are not expected to remain at this level for years into the future. So, snapping up a one-year account now means that you can benefit from the highest rates on the shortest possible term.
Our article Best cash ISA rates – which cash ISAs pay the most interest? contains more information on the best fixed rate cash ISAs available at the moment.
4. Premium Bonds
Premium Bonds are a special kind of government-backed bond offered by National Savings and Investments (NS&I). You don’t earn interest on your Premium Bond investment, which can be any amount between £25 and £50,000. Rather, you are entered into a monthly prize draw, where you can win tax-free cash prizes every month ranging in value from £25 to £100,000. There are also two £1m jackpots up for grabs each month.
Rather than an interest rate, Premium Bonds use a prize fund rate, which is supposed to represent the ‘average’ payout a person with typical luck could expect over a year. At the moment, this is 4.40%. However, this is far from a guaranteed rate, and the reality is you could very well go a whole year (or more) and win nothing at all.
Read more about how Premium Bonds work to decide whether you might prefer them to a traditional savings account in our article Are Premium Bonds better than savings accounts?
5. Easy access savings accounts
An easy access savings account is similar to an easy access ISA – you may not get the very best rates on the savings market, but you do get increased access to your account (again subject to certain limits set by the provider so read the small print carefully), which can make them an appealing option if want to be able to access your cash at short notice.
Ordinary savings accounts don’t have the tax-free benefit that ISAs do, but they often come with slightly higher interest rates. So, the better option for your finances will depend on whether the returns you stand to make from the better rate are still higher after tax than a lower-rate (but tax-free) ISA offering.
Remember as well that if you are a basic rate taxpayer, you get up to £1,000 a year in savings income tax-free under the Personal Savings Allowance, or £500 for higher rate taxpayers. So provided you won’t exceed your PSA, an ordinary easy access account might prove a better option than an ISA.
The current top offering for an easy access account comes from Post Office Money at 5.06%. Read more about how these accounts work and the current best offerings in our article Best instant access savings accounts.
6. Fixed rate bonds
Like fixed rate ISAs, a fixed rate bond means locking your money away for a year or more in exchange for attractive rates, and like fixed rate ISAs, the best rates are currently available on the accounts with the shortest terms. There is often no way of accessing your money during the term, even if you are willing to pay a penalty.
The top rate on a one-year account comes from HTB at 5.18%, while the best two-year offering comes from Beehive Money at 5.07%. The top pick for four year fixed rate bonds is from Raisin at 4.50% and for five years it’s Secure Trust Bank with 4.55%. Read more about how fixed rate bonds work in our article Fixed rate savings bonds explained.
7. Current account
Current accounts are designed for managing your income and day-to-day spending rather than building up your savings, but there are a few providers offering attractive rates and incentives on their current accounts that can make them worth considering. Some also offer generous cash switching incentives if you move your account across to them. You may have to meet certain conditions, such as transferring a certain amount into the account or setting up a certain number of direct debits, in order to qualify for an interest rate or switching incentive, however.
At the moment, the best current account options for pure interest rates come from Nationwide (5.00%), Kroo (4.35%), Santander (3.50%) and Startling Bank (3.25%). For a more detailed breakdown of the best current accounts for different financial features or incentives for new customers, check out our article What are the best current accounts and switching incentives?
8. Regular savings accounts
Regular savings accounts tend to offer the best rates of all the accounts listed here – but the catch is that there is a maximum amount you can deposit each month, and the account will mature after 12 months, at which point your savings will usually be transferred to a much lower interest-paying standard savings account. This means there is always a ceiling on the amount you can earn with a regular savings account, but they can be a great way of saving if it’s easier for you to put away a bit each month rather than a lot all at once.
Bear in mind you’ll usually need to hold a current account with a bank or building society before they let you open a regular saver with them.
At the moment, the best rate for a regular savings account is from The Co-operative Bank and First Direct, both of which offer 7% and Nationwide offers 6.50%. The maximum you can pay into The Co-operative each month is £250, while First Direct allows you to pay in £300. This means you could stand to earn more with them if you can afford to put away the maximum amount each month. All accounts mentioned are only open to people who hold current accounts with the banks named.
You can learn more about regular savings accounts and the best offerings in our article What are the best regular savings accounts?
9. Notice accounts
Ordinary notice accounts are similar to notice cash ISAs, whereby you put your money away and must give notice if you want to make any withdrawals. They can therefore be a good option for longer-term savings, but not so much for building an emergency fund.
Again, the difference in choosing between one of these accounts and their ISA counterparts comes down to whether you stand to benefit more from potentially higher rates on the ordinary versions, or from the tax benefits of the ISA structure (again, remembering to factor in your Personal Savings Allowance, should you have one).
The best notice account at the moment is from Investec, offering 5.25% with a 90-day notice period. Read more in our article What are the best notice savings accounts?
10. Pension contributions
Another option if you have some excess cash to put away is to consider putting some of it into your pension rather than a savings account.
Topping up your pension can be a great move for your long-term finances. Firstly, since your pension is invested, the more you can afford to pay in, the greater any potential returns are likely to be, although there’s always the risk that you could get back less than you put in.
If you’re thinking about getting independent financial advice, financial services company Fidelius is offering Rest Less members a free initial consultation with an independent financial advisor to chat about your finances, where you are now, and where you want to go.
There’s no obligation, but if they feel you’d benefit from paid financial advice, they’ll go over how that works and the charges involved. Fidelius is rated 4.7/5 from over 1,000 reviews on VouchedFor, the review site for financial advisors.
Second, any contributions you make will be bolstered by pension tax relief, which is when the government adds what you would have paid in tax to your pension instead. If you are a basic rate taxpayer, you receive 20% pension tax relief, meaning that you would only have to contribute £80 to your pension to receive £100, with the government making up the rest. Higher rate taxpayers receive 40% pension tax relief, and additional rate taxpayers receive 45%, so in these brackets you would only need to pay £60 or £55 respectively to contribute £100 to your pension. Read more in our article How pension tax relief works.
Depending on your workplace pension plan, your employer may pay more into your pension if you do so as well.
Remember however, that you won’t be able to access your pension savings until age 55 at the earliest (rising to 57 in 2028) so you should only consider topping up your pension once you’ve already built up a readily accessible savings buffer.
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