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How to find the best savings account

By Chiara Cavaglieri

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How to find the best savings account

We round up the best savings rates on the market and explain how to pick the right account for you. 

How to beat inflation

Now that inflation has reached 2.3% - the highest level since September 2013 - it's much harder for savers to find an account that pays enough to protect their money from losing value in real terms.

In March, there were 163 savings rate rises, with some increasing by as much as 1.20%. But despite this boost, there are still very few accounts to choose from that pay enough to match or beat inflation.

Currently, not one of the 740 savings accounts on the market can beat or match inflation. 

No instant-access accounts - and no cash Isas at all - come close to inflation at its current rate. Here we round up the few savings deals that can keep pace with inflation, and list the best of the rest.

The Which? Money Compare savings and Isa tables let you search hundreds of savings accounts from providers large and small to find a great account based on quality of service as well as cost and benefits.

Fixed-rate bonds

Fixed-rate bonds - which require you to tie up your money for a set period - are the only type of account that has been able to keep up with climbing inflation in recent months. 

The five-year fixed-rate account offered by Ikano Bank and Paragon Bank pay 2.25% AER. It's worth noting that Ikano is not covered under the Financial Services Compensation Scheme, although up to £85,000 of your savings is protected by the Swedish equivalent.

The risk of tying your money up in a fixed-rate account is that rates may rise in the meantime and you'll miss out on better terms.

Regular savings accounts

Regular savings accounts are a good alternative. The best rates are high enough to outstrip inflation, but unlike fixed-rate bonds or instant-access accounts, you'll be much more restricted on the amounts you can pay in - maximum monthly deposits range from £250 to £500. What's more, the rates are only payable for a limited time - typically 12 months.

To access the best rates, you'll need to have a current account with the same provider - First Direct, HSBC, M&S Bank, Nationwide and Santander all have regular savings accounts that pay 5% AER for 12 months.

Current accounts

Despite a series of rate cuts on popular interest-paying current accounts, many still offer meaningful returns, albeit only on small balances. You'll also need to make sure you pay in the required minimum monthly amount to qualify for interest.

Nationwide's FlexDirect account pays 5% AER on balances up to £2,500 for the first 12 months, generating a maximum return of £125. The rate will drop to 1% after that.

Tesco Bank's Current and TSB's Classic Plus accounts pay 3% AER on balances up to £3,000 and £1,500 respectively. What's more, Tesco Bank guarantees to pay 3% AER until 1 April 2019.

Savings account deals

Instant-access savings accounts (unlimited withdrawals)

The best instant-access savings rate in our tables is 1.1% AER, offered by RCI Bank. This provider is not covered under the Financial Services Compensation Scheme, although up to €100,000 of your savings is protected by the French equivalent. 

Leeds Building Society and Bank of Cyprus UK offer the next best rates in our table, both paying 1.05% AER. 

One-year fixed-rate savings accounts 

If you’re willing to tie up your savings for a year, the best rate in our tables is 1.55% AER, offered by Charter Savings Bank.

Ikano Bank and Union Bank of India offer the next best rates in our table; at 1.5% AER. 

Two-year fixed-rate savings accounts 

OakNorth Bank offers the best two-year fixed-rate savings account in our table, paying 1.71% AER.  

Axis Bank UK and Paragon Bank offer the next best rates in our table, both at 1.7% AER. 

Three-year fixed-rate savings accounts 

The newly launched three-year Guaranteed Growth Bond from NS&I pays a market-leading 2.2%, but the maximum deposit allowed is just £3,000.

OakNorth Bank offers the next best rate in our table; 1.91% AER. 

Four-year fixed-rate savings accounts 

Ikano Bank and Paragon Bank offer the best rates in our four-year fixed-rate savings account table, both paying 2% AER. 

Ikano is not covered under the Financial Services Compensation Scheme, although up to £85,000 of your savings is protected by the Swedish equivalent. 

Vanquis Bank offers the next best rate in our table, at 1.95% AER.

Five-year fixed-rate savings accounts 

The best rate on a five-year savings account available in our tables is 2.25% AER, offered by Ikano Bank and Paragon Bank.

Ikano is not covered under the Financial Services Compensation Scheme, although up to £85,000 of your savings is protected by the Swedish equivalent. 

Atom Bank offers the next best rate in our table, at 2.15% AER. 

Choose the right type of savings account

We know that customer service is an important factor for many consumers when choosing a savings account. That's why the Which? Money Compare comparison tables include our unique customer satisfaction ratings alongside each account. 

It's worth bearing in mind that a fair proportion of the best rate savings accounts are internet-only. If you've got your heart set on a branch-based account, then you will probably have to settle for a slightly lower interest rate.

  • Last updated: 27 April 2017
  • Updated by: Jo Langenhan

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