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There are hundreds of different savings accounts on the market – all with varying terms, conditions and interest rates – so it’s not surprising savers can feel overwhelmed.
Our guide helps navigate the world of saving accounts so each saver can find the best home for their hard-earned cash. We’ve also included a few example accounts offering competitive rates right now.
What’s the right kind of savings account?
The type of account that’s right for your savings will depend on how often you’ll want to access your money and how you want to manage the account.
As well as focusing on the interest rate – which will ensure your money is working as hard as possible – you’ll want to pick an account that offers the appropriate level of access to your money.
Rachel Springall, savings expert at Moneyfacts, says: “Everyone will have different reasons as to why they want to build a savings pot. Some may need quick access to some cash to fall back on, some may want to kick start their savings habit for a specific goal, others may just want to invest a lump sum and take their interest as disposable income. Picking the right kind of savings account to suit these different needs is vital.”
Always pick a savings account from a Financial Conduct Authority-regulated financial services company. That way your money is protected up to £85,000 per person per financial institution in the event the company goes bust, under the Financial Services Compensation Scheme (FSCS).
Some of the newer savings providers on the market may operate under familiar brands, but many are paying top interest rates to attract new business. Your money is safe with any regulated savings provider (up to FSCS limits) so it can make sense to take advantage of the deals offered by new players.
What are the different types of savings account?
When it comes to savings accounts there is a broad range of choice. Here’s our round-up of the most popular options for savers:
Easy access
Easy access, or instant access, accounts usually allow you to withdraw (and deposit) your savings at any time without penalty or loss of interest.
They are the most straightforward type of account and can usually be opened with as little as £1 or £10. These accounts can typically be managed online, often via an app, and some accounts offer phone and branch access.
Interest rates vary considerably between providers and will usually be lower than fixed rate savings, so seek out top paying accounts and review your rate regularly as rates are variable and your provider can cut them at any time.
Some accounts may pay a short term bonus, for six months or a year for example, before the rate drops. But with no penalties to switch to a different account at any time you can always move your money after the rate is reduced.
Oxbury Easy Access Account Limited Edition 1
Interest (gross variable)
5.02%
Min opening balance
£20,000
Opened/ Managed
Online, app/Online, app
Interest (gross variable)
5.02%
Min opening balance
£20,000
Opened/ Managed
Online, app/Online, app
This easy access account from Oxbury can be opened and managed either online, or through the bank’s dedicated app. Savers can access their cash any time, without notice or penalty, and there’s no limit on the number of deposits and withdrawals that can be made.
However, it comes with a steep minimum opening balance of £20,000, so might be the best option for savers who are just getting started.
Account holders can deposit up to £500,000 – though only the first £85,000 is covered by the Financial Services Compensation Scheme (FSCS) in the event the provider fails.
Interest on the account is calculated daily and paid monthly.
- Competitive AER
- Unlimited withdrawals
- Open online
- High minimum opening balance
Notice accounts
With a notice account the savings account provider requires that you ‘give notice’ before withdrawing your money. The notice period varies depending on the account, but can be anything from 30 days to 180 days.
Some notice accounts pay a higher variable interest rate compared to easy access accounts, but this is not always the case. Some of the highest paying notice accounts may only be managed by post or phone. Compare deals before signing up and make sure you can manage your cash in the way you want.
Regular saver
These accounts suit savers who don’t have a lump sum to deposit but who want to save regularly over a shorter period of time and take advantage of high interest rates.
With a regular saver account you’ll pay a fixed amount into the account every month, you can usually choose to save between £25 and £300 – and you’ll earn interest over a fixed term, typically 12 months. Interest is paid out on maturity (at 12 months).
The downside is some accounts will restrict withdrawals so they will only suit you if you can commit to save for the full 12 months. The interest rate is also only usually available for one year – and then you’ll have to move your savings to another account.
The larger bank brands tend to offer the best regular saver rates. Accounts can typically be operated online and by mobile phone – and some can be managed in-branch.
Nationwide Flex Regular Saver
Interest rate (AER)
6.50%
Minimum/maximum monthly deposit
£0 - £200
Current account required?
Yes
Interest rate (AER)
6.50%
Minimum/maximum monthly deposit
£0 - £200
Current account required?
Yes
Nationwide’s Flex Regular Saver account pays a market-leading 6.50% AER (fixed for 12 months) when you deposit up to £200 per month.
Although you can skip monthly payments, you won’t be able to carry the unused subscriptions forward into subsequent months.
Unlike some regular savers, the account allows three penalty-free withdrawals throughout the 12 month term. From the fourth withdrawal, however, the interest rate drops to 2.15% AER for the remainder of the term.
Interest on the account is calculated daily, and paid at the end of the 12 month term.
To be eligible, you must hold a Nationwide current account, but since the bank is currently offering £200 to switch, it could be worth opening one.
- Leading AER
- Make up to 3 withdrawals per year
- Option to skip monthly payments
- Must have a Nationwide current account to qualify
- Low monthly deposit limit
- Interest rate drops from fourth withdrawal
Fixed rate bonds
Fixed rate bonds pay a fixed rate of interest for a set time period, usually one, two, three or five years. You choose how long you want to lock your money away to earn the rate – usually you cannot withdraw any funds during the fixed rate term.
This type of savings account suits savers with a lump sum of money. Some bonds come with a minimum deposit of £100 whereas others are £1,000 or even £5,000 minimum, for example.
As interest rates have risen over the past 12 months, fixed rate bond rates have looked increasingly attractive. The general rule is the longer you can lock your money away the higher the interest rate you can get on the bond. However, with current long-term interest rate projections suggesting rates are due to fall over the next three to five years – locking your cash away for longer isn’t necessarily translating into significantly higher rates.
The highest paying fixed rate bonds tend to be online-only. But many providers offer fixed rate savings by phone and post.
Habib Bank Zurich HBZ UK Fixed Rate eDeposit
AER (gross)*
5.18%
Minimum opening deposit
£5,000
Opened/ Managed
Online/Online
AER (gross)*
5.18%
Minimum opening deposit
£5,000
Opened/ Managed
Online/Online
This 12-month fixed rate bond from the UK arm of Habib Bank Zurich pays a competitive 5.18% AER (fixed) on balances between £5,000 and £1 million.
Note that only the first £85,000 is covered by the Financial Services Compensation Scheme (FSCS) however.
The bond can be opened and managed online, and savers have up to 30 days to transfer funds.
- Leading AER for 1-year bonds
- Open online
- High minimum opening deposit
Cash ISAs
Individual savings accounts or ISAs are a tax-free way to save. All interest paid on savings in a cash ISA is free from tax. You can get easy access, notice and also fixed rate cash Isas (these work in the same way as fixed rate bonds).
Cash ISA rates have become less competitive in recent years. Their value has also been lessened by the introduction of the Personal Savings Allowance (PSA) for savers.
The PSA means that basic rate taxpayers can earn up to £1,000 in savings interest every year before any tax is due or £500 for higher rate taxpayers. It means the majority of UK savers don’t need to use ISAs to shelter their savings interest from tax, so they can seek out the best paying of any savings account.
For some higher rate and additional rate taxpayers and those with significant sums on deposit cash ISAs are still important. Most financial services providers offer cash ISAs with a broad variety offered through a range of channels; online, via an app, by phone, post and branch.
There are many different types of ISAs including Lifetime cash ISAs and Junior cash ISAs and you can transfer money between ISA accounts subject to ISA rules and provided it is done in the correct way to preserve the tax-free status.
Chip Cash ISA
Interest (gross variable)
5.10%
Minimum opening balance
£1
Flexible cash withdrawal/replace
Yes
Interest (gross variable)
5.10%
Minimum opening balance
£1
Flexible cash withdrawal/replace
Yes
App-only provider, Chip, pays a competitive 5.10% AER (variable) on its easy access cash ISA. The account pays a tracker rate, which pays the Bank of England bank rate minus 0.6%.
It can be opened and managed exclusively through the Chip app, and the minimum opening balance is just £1.
Savers can access their cash any time, without notice or penalty, plus – as a flexible ISA – you can withdraw and replace cash without the replacement counting towards your annual ISA allowance.
It can also be linked to your current account via open banking, which allows you to switch on the automatic saving feature. This feature automatically works out how much you can afford to save, and transfers it into the ISA on your behalf.
Interest on the ISA is calculated daily and paid monthly.
Bear in mind this account can be opened and managed exclusively via the Zopa app, which may be a drawback for some savers.
- Competitive AER
- Open from £1
- Flexible
- Access cash any time
- App-only format may be drawback for some
National Savings and Investments (NS&I)
National Savings is the government-backed savings brand. It has a range of different savings offerings, including easy access, fixed rate and tax-efficient ISAs.
Many savers like NS&I products because, as it is a government-owned brand, savings are 100% safe, although usually the best NS&I rates can be beaten elsewhere in the market.
One of the most popular savings products NS&I offer is Premium Bonds. Premium Bonds are a type of savings but instead of being paid interest bond holders are entered into a monthly prize draw with the opportunity to win tax-free prizes of between £25 and £1 million. There are two £1 million prizes each month.
For each £1 you have saved in Premium Bonds you’ll get a unique number. So if you have £1,000 in premium bonds, for example, that would be 1000 different bond numbers representing 1000 chances to win each month.
You can save and withdraw money in Premium Bonds at any time without penalty, the minimum saving is £25 and the maximum is £50,000. You can save online, by phone or post. And you can save into the bonds on behalf of a child. But the odds of winning a prize are 24,000 to one and NS&I gives an equivalent interest rate that this translates to as an ‘annual fund prize rate’ (3.15% as of February 2023).
Help to Save scheme
The government’s Help to Save scheme, set to run until April 2025, is designed to encourage working people on tax credits to save.
Eligible savers can put money into a 100% safe government-backed account and the government pays a bonus on top – boosting the overall savings pot. For each £1 saved by workers the government pays 50p – up to a maximum bonus of £1,200 over four years.
You can save between £1 and a maximum of £50 per month, and you do not have to pay money into the account every month. Savings can be paid in by debit card, standing order or bank transfer. Someone saving the maximum £50 per month over four years would have a total of £3,600 at the end of the scheme – including the bonus.
Frequently Asked Questions (FAQs)
Which savings account is best?
The best savings accounts pay high interest rates and have few terms and conditions. But the right account for you will also be one that you can manage in the most convenient way for you – whether that’s on an app on your phone or if you want to visit a branch.
What types of savings accounts should I have?
The type of savings account you go for should reflect your financial needs and goals. You may have an easy access savings account to hold your emergency funds, but also a fixed rate bond – to take advantage of higher rates for long-term savings, for example.
Do I need to pay tax on my savings interest?
Since the Personal Savings Allowance (PSA) was introduced in 2016 basic rate taxpayers can earn up to £1,000 in savings interest each tax year without needing to pay tax. For higher rate taxpayers it is up to £500. You don’t need to declare this interest on a tax return. In addition, any savings interest earned in cash Isas is tax free.
For the latest savings news, see our savings news update.
