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Savers looking for an inflation-busting rate, without locking their money away for years, may be attracted to a 12-month fixed-term - especially as rates become increasingly competitive.
While the average rates for one-year savings and cash Isa accounts are currently just 1.41% and 1.32% respectively - the lowest they've been all year - providers have been vying to hit the top of the tables.
In the last two weeks alone, both Cynergy Bank and Paragon Bank launched market-leading 1-year cash Isas. Meanwhile, SmartSave launched a competitive one-year savings account paying 2.01% on 24 June, just to drop the rate two weeks later.
As competition rages on, now could be the perfect time to find a great deal. Which? reveals where to find the best savings rates for one-year fixes, plus other alternatives to grow your cash.
According to Moneyfacts data, there are currently 115 one-year fixed-term savings accounts on the market, and 59 one-year fixed-term cash Isas.
The table below shows the five top-rate one-year fixed-term savings accounts.
Account | AER | Minimum initial deposit |
Bank of London & The Middle East one-year premier deposit account | 2.2% (EPR*) | £1,000 |
Al Rayan Bank 12-month fixed-term deposit | 2.17% (EPR*) | £1,000 |
Metro Bank one-year fixed-term savings account | 2% | £500 |
Gatehouse Bank one-year fixed-term deposit | 2% (EPR*) | £1,000 |
Smart Save one-year fixed-rate saver | 1.95% | £10,000 |
*Expected Profit Rate. Source: Which? Money Compare. Correct 12 July 2019.
SmartSave, a small digital bank based in Wrexham, launched its one-year savings account on 24 June offering 2.01% AER - the third-highest rate in our table. However, just two weeks later on 8 July, the rate was reduced to 1.95% AER.
The cash Isa accounts from Cynergy Bank and Paragon Bank (in the table below) both increased their rates on 4 July, which saw them catapult to the top spots, but how long they'll stay there remains to be seen.
The table below shows the five top-rate one-year fixed-term cash Isa accounts.
Account | AER | Minimum initial deposit |
Cynergy Bank one-year fixed-rate cash Isa | 1.61% | £500 |
Paragon Bank one-year fixed-rate cash Isa | 1.6% | £500 |
Al Rayan Bank 12-month fixed-term deposit cash Isa | 1.6% (EPR*) | £1,000 |
Shawbrook Bank one-year fixed-rate cash Isa | 1.58% | £1,000 |
Charter Savings Bank one-year fixed-rate cash Isa | 1.57% | £5,000 |
*Expected Profit Rate. Source: Which? Money Compare. Correct 12 July 2019.
When it comes to choosing a new home for your savings, remember that it's not just about the interest rate. Here are a few things you should consider before making a decision:
While the top-rate cash Isa accounts can all be beaten by their savings equivalents, they have the added benefit of being tax-free.
Interest you make from cash in a savings account is taxable, though whether you'll actually pay any tax may depend on your tax band.
Thanks to the personal savings allowance, basic-rate taxpayers can earn up to £1,000 savings interest in a tax year without paying any tax, while higher-rate taxpayers can earn up to £500. But those who pay additional-rate tax don't receive any allowance.
So, if you have a large savings pot, you're an additional-rate taxpayer, or you want to prevent paying tax in the future, the tax-free Isa wrapper may be worth accepting a slightly lower interest rate.
There are alternative ways to earn high interest without locking your money up at all, but you might have to work harder to earn it and you won't be able to deposit as much. Here are a few ways to find a higher AER than any one-year fixes can offer.
If you're set on making the most of your savings, a regular savings account can be a great idea, particularly if you have a smaller savings pot, or need the flexibility to access your money.
These accounts, however, have limits on how much you can deposit each month. Given you can only deposit a few hundred pounds at a time, you'll only earn the full 5% annual interest on a small amount of your savings.
The top regular savings accounts are:
Alternatively, there are a number of high interest current accounts out there, offering up to 5% AER. But, as with regular savings accounts, there are often a number of caveats you'll need to watch out for, including a minimum monthly deposit and direct debits.
While Lloyds Bank and Bank of Scotland are set to cut the rates on their current accounts, there are still plenty of other options to get a good deal. We reveal where to find them in our recent news story.