Top picks – October’s best savings accounts to get the most out of your cash
It’s not easy to make your money pay. Interest rates are currently rock bottom and many of the best payers involve sacrifices that are enough to make anyone think twice.
Gone are the days where accounts paid generous rates of more than 5% – right now, cash ISAs alone are averaging at 0.74%, according to Savings Champion – that’s £7.40 for every £1,000 you save.
Thankfully, when it comes to savings, there are options, and many of them.
There’s investments, easy access, fixed rates, ISAs and that’s before you factor in specialist accounts for buying a house, retiring or building a nest egg for a young child.
How to choose a savings account
Different accounts cater for different needs, and high interest in the current climate is likely to come with a catch, so here are some handy tips and questions to bear in mind to get started.
1. What exactly are you saving for?
This is crucial. While in theory, they’re all savings accounts , some are designed to help you reach a specific aim, such as buying your first home.
If you’re hoping to get on the ladder, there are two types of ISAs to get you on track.
Help to buy ISAs allow you to save £200 a month and earn a 25% Government bonus a year, to the maximum of £3,000.
When you start your pot, you can make an initial deposit of £1,200, which you can then build on each month (up to £200).
The good news is if you’re buying with someone else who’s also a first-time buyer, you can both open an account for double the rewards. Bear in mind that the minimum boost is £400 though so, you’ll need to have saved at least £1,600 to claim the extra cash.
This scheme is open until 30 November 2019. After that date they won’t be available to new savers anymore – but those already on it will be able to continue until 30 November 2029. The deadline to claim your bonus is 1 December 2030.
Lifetime ISA’s are also tax-free, offering under-40s the chance to get their hands on as much as £32,000 absolutely free from the Government.
Savers between 18 and 40 can pay in up to £4,000 a year which will then be topped up by 25% at the end of the tax year. This can then go towards buying your first home or your retirement.
If you’re saving for a child, however, a junior ISA may be the best way forward. You can pay in up to £4,260 a year tax-free and teach your child the basics of saving and money as you go along.
Get a better bank account
2. Will you need to access your money?
If you know for a fact that you’ll need access to your money, avoid fixed rate bonds as these come locked for at least six months – and breaking free will cost you.
Easy access, or ‘instant’ access may be a smarter move as you have peace of mind that if you ever need it back, ie for a sudden car repair, you can withdraw it.
If you know for a fact that you won’t need your money, consider a fixed rate bond. These pay well but mean locking your money away for a contracted term. If you have a smaller amount to save and can promise to make regular, small deposits, which you won’t need to withdraw, consider a regular savings account instead.
Some current accounts also pay good money – and you have access to it 24/7.
Nationwide’s FlexDirect account pays 5% on balances up to £2,500 for the first 12 months, with a max return of £125. The rate will drop to 1% after that.
Tesco Bank’s current account pays 3% on balances up to £3,000 – a rate that’s guaranteed until 1 April 2019.
3. Consider switching rewards
If you don’t have much to save and can’t find a way around it, you may be able to get an instant bonus instead by switching your bank account instead.
To get this perk, you’ll have to switch using the Current Account Switch Service and transfer your wages and direct debits over, too.
Doing so could unlock a quick win and give you access to better savings rates later down the line, because you’re an ‘existing customer’. See our guide on bank accounts you can get paid to join to find out more.
On that note, if you switch to a bank account for the introductory rate, remember to switch again once it ends.
4. Is your money safe?
If you’ve large amounts to stash away, remember, you’re only protected to the value of £85,000 a year PER banking group.
These are rules set up by the Financial Services Compensation Scheme (FSCS) to safeguard your savings if the worst happens.
It means your money is safe but only per company. For example, First Direct is owned HSBC, so only £85,000 is protected by the compensation agreement.
In short, don’t put all of your eggs in one basket. Find out which banks are owned by whom in our guide.
You may also want to consider NS&I – the government owned savings scheme – which offers 100% protection on every penny you save.
How to make more of your money
5. The majority of us are NOT limited to ISAs
Saving your money in an ISA is tax-free but new rules mean you can now save your money ANYWHERE tax free, providing you’re not earning more than £1,000 in interest (or £500 if you’re a higher rate tax payer). This is in line with new rules introduced in April 2016.
This means that instead of following just ISAs, you can now follow the best rates across the whole market.
If you have small amounts to save, or want to start saving, shop around and follow the highest rates.
However, if you have a large amount and are on track to exceed the £1,000 (or £500) tax-free limit, you should still consider an ISA.
That’s because ISAs don’t count towards your personal allowance, they’re in addition to it.
In short, it means you can save £20,000 in a stocks and shares or cash ISA tax free AND earn £1k interest in another account on top.
Savings best buys – The top payers this week
5 best easy access accounts right now
Marcus Online Savings Account: 1.5%, minimum £1 at opening, no notice period, unlimited withdrawals, no penalties, online and by phone only.
Sainsbury’s Bank Defined Access Saver Issue 7: 1.4%, minimum £1,000 at opening, no notice period, unlimited withdrawals, no penalties, online and by phone only.
Paragon Limited Edition (Issue 7): 1.37%, minimum £1 at opening, no notice period, unlimited withdrawals, no penalties, online only.
RCI Bank Freedom Savings account: 1.37%, minimum £100 at opening, no notice period, unlimited withdrawals, no penalties, online only.
AA Member Saver Issue 8: 1.36%, minimum £100 at opening, no notice period, unlimited withdrawals, no penalties, online and by phone only.
You can view more easy access accounts at MoneySupermarket or see our full guide on easy access accounts online.
Best easy access ISAs
Leeds Building Society: 1.38%, minimum £1,000 at opening, no notice period, unlimited withdrawals, no penalties, online only.
Paragon Bank: 1.137%, minimum £1 at opening, no notice period, unlimited withdrawals, no penalties, online only.
Virgin Money: 1.38%, minimum £1 at opening, no notice period, unlimited withdrawals, no penalties, online only.
Best 1, 2, 3 and 5 year fixed rate ISAs
1 year: Paragon Bank, 1.5%: Minimum initial payment of £500 required. Available online only.
2 year: Aldermore Bank, 1.8%: Minimum initial payment of £1,000 required. Available online only.
3 year: Aldermore Bank, 1.9%: Minimum initial payment of £1,000 required. Available online only.
5 year: Skipton Building Society, 2.01%: Minimum initial payment of £500 required. Available online only.
See more top paying accounts right now, here or view our full guide on ISAs explained.
Best junior cash ISA rates
Coventry building society: 3.6% variable, until the age of 18, £1 minimum, available in branch and by post only.
Danske bank: 3.45% variable, until the age of 18, £25 minimum, available in branch and by phone only.
Darlington building society: 3.25% variable, until the age of 18, £1 minimum, available in branch and by post only.
TSB bank: 3.25% variable, until the age of 18, £1 minimum, available in branch only.
Tesco bank: 3.15% variable, until the age of 18, £1 minimum, available online and by phone only.
For child trust funds, more ISA tips and other ways to save for your child, see our full guide, here.
Best fixed rate bonds
We’ve outlined the top payer for each time frame below, for many more options, see our guide on the best fixed rate bonds instead. To find out more about any of the products below and to unlock the exclusive deals, click here.
6 MONTHS: Masthaven Bank: 1.6% interest, min £500, max £250,000, six months, available online only.
ONE YEAR: Sainsbury’s Bank: 1.45% interest, min £5,000, max £1 million, one year, available online and by phone only.
Excl offer: TWO YEARS: Union Bank of India UK: 2.27% interest, min £5,000, max £340,000, two years, available online only.
THREE YEARS: Masthaven Bank: 2.36% interest, min £500, max £250,000, three years, available online only.
FOUR YEARS: Union Bank of India UK: 2.3% interest, min £5,000, max £340,000, four years, available online only.
FIVE YEARS: Paragon Bank: 2.66% interest, min £1,000, max £100,000, five years, available online only.
Best regular savings accounts
Existing customers only, First Direct Regular Saver: 5% interest, open with £25-£300, one year, available online and over the phone only.
Existing customers only, M&S Regular Saver: 5% interest, open with £25, one year, available by phone, post or in branch.
Open to all: Saffron Building Society (kids only): 4% interest, open with £10-£200, one year, available in branch and by post only.
Open to all: Santander Regular Saver: 3% interest, open with £1-£200, one year, available by post or in branch.
View more best buys at MoneySupermarket or find out more on regular savings accounts, here.
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