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Are the best savings accounts offered by banks you’ve never heard of?

Find out whether high street banks can measure up

Scrolling through the best-rate savings accounts on offer today, you’d be forgiven for looking at the providers up the top and thinking: ‘Who?’.

Several new savings providers have emerged in the past few years. Some, such as Metro Bank, could be spotted on your local high street while others are digital-only. There are imports from overseas, including Marcus by Goldman-Sachs, as well as hyper-local brands known mostly in their own region.

It may feel risky to hand your money to an unknown bank, but sticking to the big name brands could cost you, with our analysis showing the best interest rates are rarely paid by the 10 biggest providers.

So, who are the banks behind the table-topping rates? And which ones are offering better deals than their high-street rivals?


Do any big high street banks pay the best savings rates?

To see how savings rates compare, we’ve pitched ‘new’ smaller banks up against the biggest 10 high street stalwarts.

We’ve identified the biggest banks to be: Barclays, Santander, Lloyds, Halifax, Royal Bank of Scotland, NatWest, HSBC, TSB, Nationwide and Bank of Scotland.

The accounts we’ve selected are those that don’t require savers to hold another account with the provider. All banks featured are protected by the Financial Services Compensation Scheme (FSCS), which protects deposits of up to £85,000 per provider.

High-interest instant-access savings accounts

The table below shows the three top-rate instant-access savings accounts.

Account AER Terms
Kent Reliance online only easy access account 1.5% £1,000 minimum initial deposit
Marcus by Goldman Sachs online savings account 1.5% £1 minimum initial deposit. AER drops to 1.35% after 12 months
Yorkshire Building Society online single access saver 1.46% £100 minimum initial deposit. One withdrawal permitted per account year

Source: Which? Money Compare. Correct 17 April 2019.

Who are these providers?

  • Yorkshire Building Society: you might well have heard of it, as it’s the third-largest building society in the UK and has 143 branches.
  • Kent Reliance: it’s been around for 150 years, but branches are (unsurprisingly) mainly in Kent, so those living elsewhere might not be familiar with the brand.
  • Marcus by Goldman Sachs: this savings account is the only product from the famous US investment company to have travelled across the pond so far and, after launching in September 2018, more than 100,000 people had signed up within the first two months.

How do the big banks compare?

The highest rate of interest from one of the big 10 was Nationwide’s limited access saver, paying 0.75% AER – half the rate offered by Kent Reliance and Marcus. You can open the account with £1, but if you make any more than five withdrawals a year, the AER drops to 0.1%.

Elsewhere, the other highest rates come from the TSB eSaver, which pays just 0.55% AER, and the TSB Easy Saver, with an AER of 0.5% that drops to 0.3% after 12 months.

The best one-year fixed-rate savings accounts

The table below shows the three top-rate one-year fixed-rate savings accounts.

Account AER Terms
Bank of London & The Middle East one-year premier deposit account 2.2% (EPR*) £1,000 minimum initial deposit
Al Rayan Bank 12-month fixed-term deposit 2.17% (EPR*) £1,000 minimum initial deposit
My Community Bank 12 months fixed term deposits 2.05% £1,000 minimum initial deposit

*Expected Profit Rate. Source: Which? Money Compare. Correct 17 April 2019.

Who are these providers?

  • Bank of London & The Middle East: the largest Islamic bank in Europe, BLME is UK-based, and was founded in 2006. In addition to savings, it offers wealth management services, and commercial finance products.
  • Al Rayan Bank: another Islamic bank, it’s been around since 2004, and has five UK branches. More than 85,000 people are signed up to its savings, finance and current account services.
  • My Community Bank: it’s an online credit union, once known as Brent Shrine Credit Union. You must follow one of the occupations or trade associations listed on its website to apply.

How do the big banks compare?

HSBC’s one-year fixed-rate saver rewards a £2,000 minimum initial deposit with 1.6% AER – easily the best offering from the big banks, but still 0.8% less than the top rate available.

Below this, accounts from Nationwide, Barclays, NatWest and Royal Bank of Scotland all pay 0.8% AER – Nationwide asks for at least £1 to be saved, whereas the others all require at least £500. Go with one of these, and you’re missing out on a potential 1.4% savings growth from the top-rate account.

Top five-year fixed-rate accounts

See the table for the highest-rate accounts with a five-year fixed-rate term.

Account AER Terms
Gatehouse Bank five-year fixed-term deposit 2.75% (EPR*) £1,000 minimum initial deposit
Bank of London & The Middle East five-year premier deposit account 2.7% (EPR*) £1,000 minimum initial deposit
Paragon five-year fixed-rate account 2.5% £1,000 minimum initial deposit

*Expected Profit Rate. Source: Which? Money Compare. Correct 17 April 2019.

Who are these providers?

  • Gatehouse Bank: an Islamic bank founded in 2007 and based in London. As well as savings, it also provides home finance and buy-to-let products.
  • Paragon Bank: it’s been around since 1985 and is one of the UK’s largest mortgage and personal loan providers, but only forayed into savings in 2014.

You can find out more about Bank of London & The Middle East above.

How do the big banks compare?

The only big high street bank that offers a five-year fixed-term savings account is the Nationwide five-year fixed-rate bond. It pays 1.6%, and requires a minimum initial deposit of £1.

While the minimum deposit is more attainable for those with smaller savings pots, you’d be losing out on 1.15% AER in comparison to the top rate, which is potentially a large sum over a five-year period.

Whichever provider you choose, it’s important to shop around, and to consider all the terms and conditions. You can search hundreds of savings accounts with Which? Money Compare.

What is an ‘expected profit rate’?

Rather than paying a rate of interest (AER), Islamic banks pay an Expected Profit Rate (EPR) – that is, the bank indicates the profit it plans to share with its account holders.

There is a small chance that the rate you receive will be different to the one advertised, but this rarely occurs. If it does, you’ll usually be notified in advance and have the option to withdraw your funds penalty-free. Savings accounts from Islamic banks are open to all savers.

How to check whether a bank is safe

You may feel understandably wary when entrusting your savings to an unfamiliar company, but there should be safeguards in place to protect your cash – even if the bank goes bust.

Before going ahead and making a transfer, there are a few things you should check:

1. Is it FCA-registered?

A firm must have FCA banking authorisation in order to hold your savings. In some instances, a new start-up company may offer certain savings products but arrange for the money to be held in a separate bank while it waits for FCA approval. Either way, you should make sure that whatever account your money is being held in has FCA backing – otherwise, your funds could be at risk.

2. Is it protected by the FSCS (or non-UK equivalent)?

Those who save with authorised UK banks are protected by the FSCS, where up to £85,000 will be refunded to you within a couple of days of a bank going bust. Non-UK banks may not be covered, but EU countries often have their own equivalent scheme – and most cover a similar amount of money.

Check which scheme the provider is registered with before you transfer any of your cash.

3. Which institution owns it?

The FSCS covers banking institutions – not individual banks. For this reason, you should check who owns your bank, especially if you hold multiple accounts.

For instance, following a merger, Halifax, Bank of Scotland and Lloyds Bank are now all held within the same banking institution. So, if you have £85,000 saved in, say, a Halifax account, and another £50,000 saved with Lloyds Bank, that means £50,000 of your savings won’t be covered under the FSCS.

Find out more: FSCS: are my savings safe?

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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