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UK households are often looking for ways to make their money go further amid the cost of living crisis, and savings accounts could help you improve your finances this year.
The Bank of England‘s (BoE) decision to hold interest rates at 3.75% this month did not bring relief to mortgage holders, but was great news for savers as it influences the rates set by banks and building societies on their products.
Inflation remains above target, with the UK’s consumer prices index (CPI) rising for the first time in five months to 3.4% in December, from 3.2% in November. But the good news is that most offers stated here offer above inflation returns.
Experts urge savers to shop around for the best deals and review their accounts regularly, as many may still be sitting on products that fail to beat inflation.
Kate Steere, personal finance expert at Finder, said: “Savers are still being punished by December’s rate cut, so a decision to hold would come as a welcome relief. Finder tracked the rates of the main easy access accounts at 37 popular providers, and found that 81% of them have lowered rates or scheduled cuts since the last base rate decision.
“While I expect there to be two or three cuts later in the year, savings rates should start to stabilise for the moment if the base rate is held. In fact, some providers have bucked the trend and have actually increased their rates in the past month.
“With inflation ticking up unexpectedly last month, it’s more important than ever for savers to seek out a competitive rate to protect the value of their cash.”
Read more: Bank of England holds interest rates at 3.75%
Alice Haine, personal finance expert at Bestinvest, said: “Keeping interest rates on hold at 3.75% is generally positive news for savers as it means average savings rates may remain higher for longer. Savings rates have been drifting lower since peaking in the autumn of 2023.
“And while inflation rose more than expected in December, much of that increase was largely attributed to temporary factors, including high airfare prices over the festive season. Inflation is still expected to ease back, which is expected to pave the way for further interest rate cuts.
“With this in mind, savers should avoid sitting on the sidelines waiting for conditions to improve. Money languishing in an account paying a dismal rate should be moved swiftly to a more competitive option to ensure it works as hard as possible. Few things are more frustrating for savers than seeing inflation quietly erode the value of their cash.”
Karen Barrett, founder and chief executive of Unbiased, argues that while the breathing space is good news for savers, the constant speculation around rate decisions is becoming a distraction.
She explained: “Whether rates are held, cut, or raised, the foundations of a good financial plan don’t change. The more important question isn’t what the Bank did, but whether your plans still stack up for the next five, 10 or 20 years.
“It’s understandable to feel tempted to react to the latest news around mortgages, savings or investments. But knee-jerk decisions rarely work out well. A clear, long-term plan, supported by a qualified financial adviser, helps people cut through the noise and stay focused on what they can control.”
In her autumn budget in November, chancellor Rachel Reeves announced changes to the tax payable on savings income. From 2027-28, the basic rate on savings will be increased by two percentage points to 22%, the higher rate will be increased by two percentage points to 42% and the additional rate will be increased by two percentage points to 47%. This will take effect from 6 April 2027.
Until recently, savers could earn a market-leading 5% for three months, but the best offer is now 4.40% from OakNorth via the Prosper platform. Interest is paid at maturity, and a minimum investment of £10,000 is required to open the account.
Santander (BNC.L) via the same Prosper platform pays 4.3% on a three-month term. Interest is paid at maturity, and £10,000 is needed to open the account.
The DF Capital has a 4.23% deal for 12 months with which requires £1,000 to open and you can invest up to £250,000.
Online banks typically offer higher rates than traditional bricks-and-mortar branches, which translate into better returns, giving you a more efficient way to save and reach financial goals.
If you prefer to go with a familiar name, the high-street lenders have slightly lower offers, but are still above inflation.
Tesco (TSCO.L) Bank offers a one-year fixed-rate savings account that pays 4% annually, with the minimum balance required being £2,000. However, you can invest up to £5m.
NatWest (NWG.L) has a fixed-term savings account offering 3.3% for one year. The minimum deposit is just £1 and interest will be paid on the first business day of every month and on the maturity date.
Unlike easy-access products, where interest rates can vary, fixed-rate accounts earn a set rate of interest for the period you choose, whether that’s six months or several years. Those are the most common deals, but some offers go up to 10 years and over.
You must leave your initial deposit for a fixed period without making withdrawals. If you touch your money, you forfeit any interest.
Easy-access savings accounts let you withdraw your money without notice. With that ease of access come lower interest rates, but they are a good option for those who think they might need their money in a hurry.
Be aware that rates on these accounts are variable, which means they can go up or down. You will be notified of any change ahead of time.
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Chase (JPM) has a 4.5% offer for 12 months that you can access with £1.
Mansfield BS has a 4.25% offer which you can open from £1 and save up to £400,000. If you were to put £1,000 in this account, your balance after 12 months would be £1,042.50.
Manchester BS has a 4.15% deal which you can access with only £1 and invest up to £1,000,000. Interest is paid annually.
There are even higher-paying easy-access accounts, but they are not for new customers. Santander’s (BNC.L) Edge Saver, for instance, offers 6%, but is only available to current account holders.
Can’t decide on whether you want to put your money away and not touch it for a long time or keep it accessible at all times? Maybe you should consider a notice savings account.
Notice savings accounts require you to give notice to your savings provider before you can withdraw your funds.
These are ideal for those who know when they might need their cash but don’t want to face the temptation of dipping into it at any time.
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You need to give the bank or building society a set advance warning before you can withdraw your money. It’s usually between 30 and 120 days, though this can be longer.
OakNorth Bank via Prosper has a 4.5% deal that requires £10,000 to access. The notice period is 120 days and it is only available to new customers.
The same platform has a deal with GB Bank that offers 4.4% on a 35 day notice account.
GB Bank also offers a standalone 4.33% deal on a 120-day period notice, with the minimum deposit set at £10,000.
Interest rates with notice accounts are variable, which means they could go up or down over time.
For those looking to make the most of their cash savings, regular savings accounts can offer returns of up to 7.5%.
Most regular savings accounts require you to put money away each month with interest paid yearly. It is not uncommon for the offer to be available only to current customers.
Principality offers 7.5% in a six-month regular saver account. You open an account and pay in up to £200 each month. Interest is calculated on the money in the account each day and paid six months after opening.
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Zopa pays 7.1% on monthly deposits of up to £300. Account holders also receive 2% AER interest on all balances and 2% cashback on bill payments and there is no minimum monthly deposit.
The Co-op offers 7% on its regular savings account, allowing deposits of up to £250 a month.
First Direct pays the same 7% but you can save £300 every month.
Every deal mentioned here is covered by the Financial Services Compensation Scheme, so you are protected up to £120,000 or double that if it’s a joint account.
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