New top-rate one-year cash Isa launched: should you switch your savings?

Amid dwindling rates and Brexit uncertainty, savers may be put off locking their money away for a long time - but short-term savings are showing signs of life following the recent launch of a new market-leading account.

The new table-topping account is a one-year fixed-rate cash Isa paying 1.62% AER from Charter Savings Bank, which comes at a time when many top rates are being reduced and withdrawn by other providers.

While this could be a flicker of hope for savers who want a short-term home for their cash, how does this account compare with other one-year savings options?

What are the top rates for one-year savings accounts?

The table below shows the highest-rate one-year fixed-rate savings accounts currently available.

_{*Expected Profit Rate. Source: Which? Money Compare. Rates correct as of 6 September 2019, but are subject to change.}

One-year fixed-rate accounts can be good for savers who want the peace of mind of knowing they're not letting their cash languish in an account that's not paying anything, while also not locking up their money for a long period of time.

It's worth noting that three of these five accounts are from Islamic banks, and therefore feature an Expected Profit Rate (EPR), rather than traditional savings interest (AER).

There is, therefore, a small chance that the rate you receive will be different from the one advertised. However, this hasn't happened with any UK Islamic banks to our knowledge.

Currently, the difference between the top-rate one-year fix and the top five-year fix is just 0.65%. Considering the latter deal would involve giving up access to your cash for an extra four years, you wouldn't be gaining significantly more in the way of interest.

Table-topping accounts can be quite restrictive if you don't have a lot of money to save; none will accept less than £1,000 to open the account, and two require £5,000. There are accounts that will take deposits from £1, but they don't offer these higher rates.

• Find out more:how to find the best savings account

How do cash Isa accounts compare?

You can find the top one-year fixed-rate cash Isas in the table below.

_{*Expected Profit Rate. Source: Which? Money Compare. Rates correct as of 6 September 2019, but are subject to change.}

The aforementioned new account from Charter Savings Bank sits at the top of the table but, as with its savings account counterpart, you'll need to save at least £5,000 to be eligible.

There are more choices here for those with smaller savings pots, however - you only need £500 to open the above account from Cynergy Bank, and just £1 to get Metro Bank's account.

• Find out more:how to find the best cash Isa

Don't forget Isas' tax-free advantage

While cash Isa rates are all lower than those offered by the top one-year savings accounts, they may still be worth considering for their tax-free status.

That's despite the fact that many people holding savings accounts won't have to worry about being taxed on the interest their cash makes, due to the personal savings allowance.

This allows basic-rate taxpayers to earn up to £1,000 tax-free savings interest in each tax year, and higher-rate taxpayers to earn up to £500. Exceeding these levels would be no mean feat considering the rates that are on offer.

Additional-rate taxpayers don't get any personal savings allowance, however, and those who have a lot of money saved may earn a lot of interest, especially when factoring in the effect of compounding over time.

In these cases, it's still definitely worth considering an Isa.

• Find out more:cash Isa rules and allowances

Other one-year saving options

Regular saver accounts

If you don't have a lot of money to save, a regular savings account can be a good bet.

You'll need to save a certain amount each month, and depositing less than this or withdrawing any money could mean that you lose out on the interest you've earned, so read the terms and conditions carefully.

The top regular savings accounts are:

• First Direct regular saver account: this pays 5% AER, but you'll need to hold a First Direct current account to apply. You'll need to pay in between £25 and £300 each month for 12 months, and if you make any withdrawals during this time the interest rate will fall to just 0.15% AER.
• M&S Bank regular saver account: to get the 5% AER you must hold an M&S current account and deposit £25-£250 a month into the regular saver for 12 months. If you close the account before the year is up, you'll receive the Everyday Savings Account variable rate instead, which is currently 0.2% AER.
• HSBC regular saver account (preferential rate): only HSBC Premier or HSBC Advance account holders can apply for this one, which also pays 5% AER if you deposit £25-£250 a month for 12 months. If you close the account before the 12-month mark, the rate will be reduced to 0.2% AER.

High-interest current accounts

It's not just savings accounts that can pay you interest on your cash; some current accounts offer great rates, but - like regular savers - you'll often have to read the terms and conditions carefully to make sure you'll get them.

The current accounts paying the highest interest are:

• Nationwide FlexDirect current account: You'll get 5% AER on up to £2,500 for the first 12 months as long as you pay in at least £1,000 a month. After a year the rate will drop to 1% AER.
• TSB Classic Plus current account: This pays 3% AER on balances up to £1,500, as long as you pay in at least £500 a month and register for internet banking/paperless statements.
• Bank of Scotland Classic Vantage current account: To get 1.5% AER on balances up to £5,000, you'll need to pay in at least £1,000 a month, stay in credit and pay out at least two direct debits from the account. Note that things are set to change from 1 October, when you'll receive 1% AER on money under £3,999.99 and 2% AER from £4,000-£5,000.

_{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? Money Compare is a trading name of Which? Financial Services Limited.}