Want to know the best savings accounts and where you’ll get the best return? Choose the right bank and you can get as much as 5% interest.
Because I have nothing better to do, I regularly visit forums about finances and one question that often pops up is where is the best place to keep your savings? The common reply seems to be an ISA or Premium Bonds but that is generally not the case.
Years ago, an ISA used to be the best option. They used to offer very attractive interest rates and had the added bonus of being tax free. But over the last 5 years, interest rates have dropped sharply. According to this article from Moneywise, average easy access ISA rates have fallen from 2.56% in January 2012 to just 0.82% at the beginning of 2017. On top of this, the government introduced a personal saving allowance, meaning that 95% of adults would no longer need to pay tax on their savings.
Premium Bonds pay out at a rate of 1.15% (from May 2017) and that is with average luck. With poor luck, you could end up with nothing!
The best alternatives?
Strangely, current accounts are offering the best interest rates at the moment.
Tesco – 3% on balances up to £3000
Santander – 1.5% up to £20000 (monthly fee applies)
There are also some short term accounts available
Other points to consider. You’re not always limited to just one account per bank. Tesco will allow you two and the Bank of Scotland three.
Although Nationwide accounts are limited to 12 months, you can open another account 12 months after your 5% rate has finished and then start all over again.
Some of these accounts offer added benefits such as cashback on direct debits or for using cashless payment.
To qualify for some of these benefits there may be certain conditions attached, so always check before signing up.