January is traditionally the time that people get their savings in shape. But are more people choosing fixed-rate or instant-access accounts, and are they opting for Isas?
We analysed the most clicked-on products on impartial comparison site Which? Money Compare in January 2016, and found that once again, one-year fixed-rate bonds were the most popular. Ordinary instant-access savings accounts took second place.
If you’re looking for the best account in which to grow your money in 2016, you can search through thousands of savings and Isa products using Which? Money Compare.
Fixed-rate accounts more popular than instant-access
One-year fixed-rate bonds took the top spot in our analysis, having become the firm favourite of savers looking to earn a decent rate over the short term. This might be partly due to predictions that the Bank of England will increase the base rate sometime over the next year.
Although fixing for a longer period – say three to five years – will earn you more interest, fixed-rate accounts can quickly become less competitive if market rates rise during that time.
Which? Money Compare table: compare fixed-rate savings accounts to find the best option for you
Traditional savings accounts more popular than Isas
This tax year, anyone aged 16 or over is allowed to save up to £15,240 tax-free in an Isa, and this generous allowance usually makes Isas the first port of call for savers. However, the introduction of the new personal savings allowance (from 6 April 2016) may have something to do with the overwhelming popularity of ordinary savings accounts.
From 6 April 2016, all basic-rate taxpayers will be able earn up to £1,000 in interest from their savings without paying tax, falling to £500 for higher-rate taxpayers.
Based on an interest rate of 1.5%, most people would be able to save £66,600 before owing tax, while higher-rate taxpayers could save just under £33,300.
Help to buy Isas also proving popular
Since they first became available on 1 December, at least 140,000 people have opened a Help to Buy Isa, which is designed to help first-time buyers get onto the property ladder.
You can deposit up to £200 a month in a Help To Buy Isa (plus an additional initial deposit of £1,000), with the government topping up these savings by 25% up to a maximum of £3,000.
Your Help To Buy Isa savings can be used to buy a home worth up to £250,000, or £450,000 in London. And if you’re buying with someone else, you can open separate accounts and jointly earn a bonus of up to £6,000.
It’s worth noting that you can’t contribute to a cash Isa in the same tax year as a Help to Buy Isa. Therefore, if you want to open a Help to Buy Isa in the 2015/2016 tax year, make sure you don’t add any money to a cash Isa in this tax year.
The Halifax Help to Buy Isa is the best deal announced so far, paying 4% AER.
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Which? Limited is an Introducer Appointed Representative of Which? Financial Services Limited, which is authorised and regulated by the Financial Conduct Authority (FRN 527029). Which? Mortgage Advisers and Which? Money Compare are trading names of Which? Financial Services Limited.