Inflation has crept back up again - but the good news is, the top-paying savings rates are still above 4%. So where exactly should you be putting your money?
Inflation was this week confirmed to have unexpectedly risen to 4% in the 12 months to December - up from 3.9% in November.
Economists had been expecting a marginal drop to 3.8% and it means more question marks are now raised over how soon the Bank of England will start to cut interest rates. Savings rates have made a big comeback over the last year, following fourteen consecutive interest rate rises in a row by the Bank of England.
And the good news is, the top-paying savings rates are still above 4%, the current level of inflation. When choosing a savings account, you should first make sure you are covered by the Financial Service Compensation Scheme (FSCS) which protects up to £85,000 of your money if a provider goes bust.
Savers with a fair chunk of money to put away should also keep in mind you can only earn a certain amount in interest each year before you start paying tax. The personal savings allowance is £1,000 for basic-rate taxpayers and £500 for higher-rate taxpayers, while additional rate taxpayers don't get an allowance at all.
Additionally, you can put away £20,000 each year into an ISA account and any interest earned here is always tax-free. Here are the top rates at the time of writing, although do keep in mind that can change on a daily basis.
Top-paying easy-access savings accounts
Easy-access savings accounts are ideal if you may need to access your savings, as you make withdrawals whenever you want - although some providers do limit how many withdrawals you can make in a set period of time.
Ulster Bank - 5.2%
Charter Savings Bank - 5.13%
Cahoot - 5.12%
If you're a Santander Edge current account holder, you can beat the above rates by opening its linked Edge Saver account, which pays 7% but only on up to £4,000. This rate includes a 2.5% bonus for 12 months.
Skipton Building Society also offers 5.5% interest on up to £3,000 in savings if you had a mortgage or savings account with at least £1 in since January 11, 2024. This rate includes a 1.70% bonus for 12 months.
Top-paying regular savings accounts
With a regular savings accounts, you're normally required to deposit a small amount - in return, the rates are better. However, you'll need to read the terms and conditions carefully.
For example, some won't allow withdrawals, while others may limit how many withdrawals you can make, or they cap how much you can save. Some need you to have a current account or another product with the provider already. In most cases, the rates are fixed for 12 months - although some are variable.
- Nationwide - 8% variable for one year
- Skipton Building Society - 7% fixed for one year
- First Direct - 7% fixed for one year
- Lloyds Bank - 6.25% fixed for one year
- NatWest/RBS - 6.17% variable on up to £5,000
- TSB - 6% fixed for one year
- Bank of Scotland - 5.5% fixed for one year
- Halifax - 5.5% fixed for one year
- Lloyds Bank - 5.25% fixed for one year
- HSBC - 5% fixed for one year
- Santander - 5% fixed for one year
Top-paying notice savings accounts
Like the name suggests, these accounts require you to give notice when you want to withdraw your money. The top-paying notice accounts right now are:
United Trust Bank - 5.4% (100 day notice)
Monument Bank - 5.25% (60 day notice)
Shawbrook Bank - 5.23% (45 day notice)
Top-paying fixed-rate savings accounts
Fixed-rate accounts don't normally allow you to withdraw your money until the end of the term - so these aren't ideal for households who may need to access their cash.
SmartSave - 5.16% (one year fixed)
Close Brothers - 4.95% (two year fixed)
Bank of Ceylon UK via Raisin - 4.95% (two year fixed)
Close Brothers - 4.6% (three year fixed)
Newbury Building Society - 4.6% (three year fixed)
SmartSave - 4.36% (five year fixed)
Top-paying ISA accounts
ISA stands for Individual Savings Account. Each year, you can deposit £20,000 into an ISA and you don't pay tax on the interest. The rates on these savings products have been improving in recent years, although you can still get better rates elsewhere.
The top-paying easy-access ISAs right now are:
Moneybox - 5.09%
Zopa - 5.08%
Charter Savings Bank - 5.07%
The top-paying fixed-rate ISAs right now are:
Shawbrook Bank - 5.01% (one year fixed)
Close Brothers - 4.75% (two year fixed)
Close Brothers - 4.5% (three year fixed)
UBL UK - 4.26% (five year fixed)
If you have a Virgin Money current account, you can access a one-year fixed ISA with a rate of 5.25%.
