As banks jostle for the top-rate position, there’s a new three-way tie for instant-access savings accounts that sees the popular Marcus by Goldman Sachs account slip to third place.
This is great news for savers, who can now enjoy more choice and higher rates – but some accounts come with tricky caveats.
Which? reveals the best options for your savings, and how to avoid getting stuck with an account that doesn’t suit your spending habits.
What are the best instant-access account rates?
The table below shows the top five nationwide instant-access savings accounts for interest rates. The links will take you through to Which? Money Compare.
|West Brom Building Society Direct Double Access||1.5%||£1,000 minimum initial deposit. Two withdrawals permitted per year.|
|Virgin Money Double Take E-Saver||1.5%||£1 minimum initial deposit. Two withdrawals per calendar year.|
|Marcus by Goldman Sachs online savings account||1.5%||£1 minimum initial deposit. AER drops to 1.35% after a year.|
|Post Office Online Saver||1.45%||£1 minimum initial deposit. AER drops to 0.25% after a year.|
|Kent Reliance easy-access account||1.4%||£1,000 minimum initial deposit.|
Source: Which? Money Compare. Correct 7 December 2019.
As the table shows, no account has topped 1.5% AER yet. But with the competition this close, it can’t be too long until one puts its head over the parapet.
For now, our table is sorted in order of rates combined with the accounts’ various caveats.
Editor’s note: Kent Reliance cut its instant access savings rate on 7 December from 1.5% to 1.4%, it’s two-year fixed rate bond from 2.24% to 2%, and its one-year fixed rate bond from 2.01% to 1.7%. This article has been updated to reflect this change.
West Brom’s Direct Double Access account only pays 1.5% if you make just two withdrawals a year – you can take out money more often than this, but doing so will cause the interest rate to plummet to 0.25% for the rest of the account year.
Virgin Money’s Double Take account also only permits two withdrawals a year, but it’s even more restrictive. You’re not permitted any more than two withdrawals, and closing the account counts as a withdrawal.
So, if you’ve already made two withdrawals, you’ll have to wait until the following year to close the account.
If you know you’ll want to take money out several times during a year, it’s best to avoid accounts with restricted access.
Beware of bonus periods
Next in the table is Marcus by Goldman Sachs – the account which, until recently, had enjoyed the top spot since its launch in September. With Marcus you’re free to make as many withdrawals as you like, but the 1.5% AER will drop to 1.35% after the first 12 months.
The Post Office account works in a similar way, but the rate drop is much more dramatic. If you stick with the account for any longer than a year, you’ll find yourself on a paltry 0.25% AER.
With both of these accounts, you’ll have to make sure you move on to a more competitive rate after a year – so consider whether it’s likely you’ll remember, or have the energy, to do so.
- Find out more: how to find the best savings account
Should I get an instant-access account?
While it’s true that the rates on instant-access savings accounts are on the up, they still can’t beat the current rate of inflation, which is 2.4%.
If your savings aren’t growing by a rate equal to or more than inflation, your money will be losing value in real terms.
Fixed-term bonds offer the highest rates, but involve locking your money away.
Right now, the minimum term to beat inflation is three years. So only take this option if you’re sure you won’t need to spend the money before then.
Making a withdrawal before the term is up will either come with a hefty interest penalty, or simply won’t be allowed.
Currently, the highest rate on offer is 2.7%, which you can get with Atom Bank, Bank of London & The Middle East, and Ikano Bank’s five-year fixed-rate accounts.
They each have different minimum initial deposits. Atom Bank’s account can be opened with just £50, but you’ll need £1,000 for Ikano Bank and £10,000 for Bank of London & The Middle East.
You could also consider saving into a cash Isa.
These accounts are particularly useful if you have a large savings pot, as the interest earned will be tax-free.
Interest earned in a savings account will be taxed if it exceeds the personal savings allowance – which varies depending on how much you earn.
Cash Isa rates have been lagging behind savings accounts for some time now, and unfortunately no accounts can beat inflation at the moment. The highest rate on offer is 2.26% AER with Charter Saving Bank’s five-year fixed-rate cash Isa.
- Find out more: how to find the best cash Isa
Saving with Which? Recommended Providers
Which? Recommended Providers are companies that have been rated highly in our unique customer survey and have products that meet the high standards of our researchers.
The latest results have recently been released, and the highest-rated providers include Kent Reliance – perhaps unsurprising given the competitive rates it offers across its savings products.
All accounts require £1,000 minimum initial deposit.
You can compare hundreds of savings accounts for rates as well as customer scores with Which? Money Compare.
Please note that the information in the table(s) above is for information purposes only and does not constitute advice. Please refer to the particular terms and conditions of the savings account provider before committing to any financial products.
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.