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Do your emergency savings need a rate boost?

Find out whether your rainy day fund could be earning higher interest

Variable saving rates are starting to swing upwards once again – but is your emergency cash growing like it should be?

Following the Bank of England’s decision to raise the base rate from 0.25% to 0.5% on 2 November 2017, providers were slow to pass on the benefit to savers.

But the tide seems to be turning. As variable rates begin to creep up, Which? takes a look at the best accounts for stashing your rainy day cash.


Variable savings rates increasing

Most of us will keep our extra cash in a place that allows us relatively easy access in case of an emergency – but how often do you review the rates this pot is getting?

Which? analysis of Moneyfacts data shows that there has been a rise in the average rate across a number of savings products since the base rate decision last month – including  instant access, instant access Isas, notice accounts, notice Isas and regular savers.

2 Nov 2017 Today
Easy access 0.38% 0.46%
Easy access Isa 0.62% 0.71%
Notice 0.64% 0.70%
Notice Isa 0.81% 0.90%
Regular savings* 2.01% 2.09%

*Includes both variable and fixed rates

To benefit, check what rate your emergency savings fund is earning and see if the following deals can beat it.

The best easy access savings accounts

If you need to dip into your rainy day funds at a moment’s notice, an easy access account is the best place to put them.

Just watch out for accounts that limit withdrawals or are inflated by a temporary bonus.

The Natwest Savings Builder account, for example, offers a 1.5% gross AER on savings below £5,000 – but you need to save at least £100 a month, or earn just 0.1%.

The highest-paying account that is truly easy-access – meaning it has no restrictions on withdrawals or minimum monthly deposits – is the RCI Bank UK Freedom Savings Account, which offers a rate of 1.3% gross AER.

You can open an account online with a minimum deposit of £100 and save up to £1m.

UK savings with RCI are protected under the European Economic Area (EEA) passport scheme, rather than with the UK Financial Services Compensation Scheme. So if RCI were to go bust, savers would get access to the French deposit protection scheme which protects the first €100,000 (£85,000) of savings per person.

The best easy access cash Isas

If you haven’t used up your 2017/18 allowance, you might want to keep some of your rainy day money in a cash Isa – the rates on these accounts are also rising.

The best on offer right now is the Bath Building Society Cash Isa, which pays 1.3% gross AER on deposits from £1.

The best notice accounts

If you are prepared to give some warning before you withdraw cash, you can also get a decent rate from a notice account.

The Aldermore 30-Day Notice Account Issue 7 pays 1.05% gross AER on balances from £1,000 and you can save up to £1m.

The best notice Isas

The top rate for a notice Isa comes also comes from Aldermore.

The 30-Day Notice Cash Isa Issue 7 pays 1.05% gross AER on balances from £1,000 – so long as you are happy to give 30 days’ notice to get at your savings.

The best regular savings accounts

If you’re still building up your rainy day savings pot, you could consider a regular savings account.

These deals allow you to save a set amount each month. Just bear in mind you’ll get a smaller return, as you are drip-feeding money into the account rather than depositing a lump sum.

The best deals come from First Direct, Nationwide, M&S Bank, Santander and HSBC which all offer 5% gross AER. But they all require you to have a current account with the same lender and, apart from Nationwide, all limit access to your cash.

If these accounts aren’t an option, the best deal open to all that doesn’t limit withdrawals is the First Trust Bank Regular Saver. It allows you to save between £10 and £500 a month for up to 12 months at a rate of 2.5% gross AER.

Consider current accounts that pay interest

A current account that pays in-credit interest is another decent home for your rainy day savings fund.

Rates haven’t changed in this market since the base rate, but returns are still competitive.

You can earn a market leading 5% on balances up to £2,500 with the Nationwide Flex Direct account for 12 months.

Or for larger balances you can earn 1.5% with the Santander 123 Current Account on up to £20,000 indefinitely.

But when using a current account as a savings account, make sure you meet all the criteria to qualify for interest. This might mean funding the account with a minimum amount and setting up a few Direct Debits to satisfy the requirements.

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.

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