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One in eight savings accounts now pay 0.1% or less – here’s how to find the best rate

Six of the biggest banks are paying loyal customers just 0.01% on their savings

One in eight savings accounts now pay 0.1% or less – here’s how to find the best rate

Securing the best savings rate is no easy feat at the moment, as Which? research finds that one in eight instant-access, fixed-term savings accounts and cash Isas pay 0.1% or less, with many only offering 0.01% AER.

Of the 864 accounts on the market, excluding notice and regular savers, we found 110 paying 0.1% AER or less, according to data from Moneyfacts. And many of the lowest rates are being offered by the biggest high street banks.

Looking at the 10 biggest providers, six – including Bank of Scotland, Halifax, Nationwide, NatWest, RBS and Santander – are paying savers the worst rate on the market of just 0.01% AER on some of their instant-access accounts.

Here, we reveal which providers are paying the worst savings rates and where you can find a more competitive return on your savings.


How many savings accounts pay just 0.01%?

Using data from Moneyfacts, we found 24 cash Isa and savings accounts currently paying just 0.01% AER, and a further 29 that pay less than 0.1% AER.

Most were instant-access accounts, but we did find a three-month fixed-term saver from Atom Bank that only offered 0.1%. And to earn 0.1% AER from Danske Bank you’d have to lock up at least £5,000 for a month.

If you stuck with a 0.01% rate account over the course of a year, you’d earn just 10p on £1,000 saved.

Going for an account that pays 0.1% – of which we found 54 – would earn you £1.

Rates this low leave your savings with no hope of being able to keep up with inflation, meaning that your cash will not be able to keep up with price rises, effectively eroding its value.

Where can you find the best savings accounts?

The table below shows the top rates for fixed-term and instant-access savings accounts, in order of term. Where available, the links will take you through to Which? Money Compare for more information.

Account type Account AER Terms
Five-year fixed-term savings account RCI Bank Five-Year Fixed Term 1.9% £1,000 minimum initial deposit.
Four-year fixed-term savings account RCI Bank Four-Year Fixed Term 1.8% £1,000 minimum initial deposit.
Three-year fixed-term savings account Bank of London & The Middle East Three-Year Premier Deposit Account 1.75% (EPR*) £1,000 minimum initial deposit.
Two-year fixed-term savings account Bank of London & The Middle East Two-Year Premier Deposit Account 1.75% (EPR*) £1,000 minimum initial deposit.
One-year fixed-term savings account Bank of London & The Middle East One-Year Premier Deposit Account 1.6% (EPR*) £1,000 minimum initial deposit.
Instant-access savings account Marcus by Goldman Sachs Online Savings Account 1.2% £1 minimum initial deposit.

*Expected Profit Rate. Source: Moneyfacts. Correct on 5 May 2020; rates are subject to change.

As the table shows, opting for one of the top rates on the market will see you earn at least 120 times the amount of interest as the lowest rates.

However, the top rates here are restrictive; if you have less than £1,000 to save, you may have to settle for a lower rate.

It’s worth noting that the accounts from the Bank of London & The Middle East are sharia-compliant products. This means they offer an expected profit rate (EPR), rather than an annual equivalent rate (AER).

This means the rate is not guaranteed, however, at the time of writing we haven’t heard of an instance where an Islamic bank hasn’t delivered its EPR in the UK.

Top cash Isas

The top rates for fixed-term and instant-access cash Isas are in the table below. Again, where available, the links will take you through to Which? Money Compare.

Account type Account AER Terms
Five-year fixed-term cash Isa Punjab National Bank Five-Year Fixed Rate Cash Isa 1.4% £1,000 minimum initial deposit.
Four-year fixed-term cash Isa Punjab National Bank Four-Year Fixed Rate Cash Isa 1.35% £1,000 minimum initial deposit.
Three-year fixed-term cash Isa Metro Bank Three-Year Fixed Rate Cash Isa 1.3% £1 minimum initial deposit.
Two-year fixed-term cash Isa Al Rayan Bank 24-Month Fixed Term Deposit Cash Isa 1.4% (EPR*) £1,000 minimum initial deposit.
One-year fixed-term cash Isa Ford Money Fixed Cash Isa One-Year 1.25% £500 minimum initial deposit.
Instant-access cash Isa Al Rayan Bank Instant-Access Cash Isa 1.1% (EPR*) £50 minimum initial deposit.

*Expected Profit Rate. Source: Moneyfacts. Correct on 5 May 2020; rates are subject to change.

Rates for cash Isas are all lower than their savings account equivalents, but the top accounts are more accessible to those with smaller savings pots, with half requiring less than £1,000 as a minimum initial deposit.

Like the Bank of London & The Middle East, Al Rayan Bank also offers an expected profit rate (EPR).

Of course, interest rates aren’t the only things you need to consider.

Isas have the advantage of being tax-free; this means any interest you earn won’t need to be declared on a tax return.

Interest earned from normal savings accounts, however, may be taxable if it exceeds your personal savings allowance.

In the 2020-21 tax year, basic-rate taxpayers can earn up to £1,000 before having to pay tax on savings interest, whereas higher-rate taxpayers can only earn up to £500, and additional-rate taxpayers don’t receive this allowance at all.

Why are savings rates falling?

Savings and cash Isa rates have been on the downturn for some time now.

Looking at long-term fixed-rate savings accounts alone (with terms of more than 18 months), according to data from Moneyfacts, average rates peaked at 1.87% in April 2019.

Just over a year later, in May 2020, the average rate has dropped to 1.18% – but the fall has been at a much faster pace in the past couple of months.

This has been brought on by the Bank of England’s decision to cut the base rate to a historic low of 0.1%, to ease the economic effects of the coronavirus outbreak.

The base rate dictates the interest that banks have to pay to take out loans. When the base rate is high, banks will seek to attract savers’ deposits as a means to cover their debts without taking out a loan. But now that loans are so cheap, they don’t need your savings.

In the year up to the base rate drop on 19 March, long-term average rates were falling at an average of 0.04% per month.

However, since March 2020, rates have already fallen by 0.19% – more than twice as fast as before the base rate cut.

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