Should you try the savings 'ladder' trend?
The strategy involves spreading savings across multiple fixed-term accounts
Savings rates are falling across the market and are likely to continue dropping for the foreseeable future.
One way to beat this downward spiral is to use a strategy called savings 'laddering'. It involves spreading your nest egg across multiple fixed-term accounts of different lengths to maximise your returns.
But is it worth trying? Here, Which? explains why now is a good time to give it a go and how to succeed with the strategy.
What's happening to savings rates?
Savings rates have been on their way down since the Bank of England cut the base rate in August 2024. It's fallen six times since then, dropping to 3.75% in December 2025. Although it's currently held at that level, experts predict it will be cut again next month.
Banks typically respond to a base rate cut by reducing the interest paid on savings accounts. Instant-access accounts are usually hit first, as their variable rates allow providers to adjust returns whenever they choose. Moneyfacts data shows that the average instant-access rate fell from 2.48% AER to 2.41% in the month to 1 February 2026.
Rates on fixed-term accounts are also falling fast as providers adjust their deals to reflect expectations of a continued downward trend. We've therefore seen the average one-year rate fall from 3.85% to 3.81% month on month, while the average rate for a bond lasting more than 12 months slipped from 3.8% to 3.79%.
This graph tracks instant-access and fixed-term rates since 2020:
NS&I and Nationwide announce instant-access cuts
National Savings & Investments (NS&I) is the latest big-name provider to slash interest on instant-access deals. From today (12 February 2026), the rates for Direct Saver and Income Bonds products have dropped from 3.3% AER to 3.05%.
Be aware that interest on Income Bonds is paid monthly into your nominated bank account rather than rolled back into the savings pot. You therefore won't benefit from compounding – the snowball effect of earning interest on interest.
The lower gross rate, which will also dip from 3.26% to 3.01%, is therefore a more accurate measure of the overall returns you stand to make.
NS&I's reductions follow Nationwide's announcement that, from 10 February 2026, interest rates across its range of variable-rate savings products, including instant-access and Isa accounts, were cut by up to 0.25 percentage points.
- Find out more: Best savings accounts
Can savings 'laddering' help beat falling rates?
Locking your money away for a year or more could protect your nest egg if savings rates continue to fall as expected. If you're nervous about losing temporary access to your cash, you may be tempted to go for a short-term bond. But opening an account lasting two to five years can shield your savings from further rate cuts for longer.
The savings ladder strategy involves spreading your money across several fixed-rate accounts that mature at different times. It means you won't lose access to your savings for too long, and your long-term funds won’t suffer when interest rates drop.
For example, a lump sum could be spread evenly across one, two, three, four or five-year fixed-term savings accounts. These pots don't have to be equal amounts, and you should split your money based on what you feel comfortable with. The important thing is to check the best rates on offer for different accounts.
- Find out more: What are the different types of savings accounts?
How does it work in practice?
Here's how to do it with a savings pot of £10,000:
- 2026: Place £2,000 each in one, two, three, four, and five-year fixed accounts.
- 2027: When the one-year account matures, place the £2,000, plus interest income, into a top-rate five-year bond.
- 2028: When your two-year bond matures, reinvest that money in the best five-year deal.
- 2029, 2030, and 2031: Continue the same process for three, four and five-year accounts. Eventually, you’d have several five-year fixed-term accounts on the go, with one maturing each year.
This table shows the best fixed deals, ordered by term:
| One-year fixed rate | DF Capital | 4.25% | £1,000 | Internet | On maturity |
| Two-year fixed rate | Sensible Savings | 4.2% | £5,000 | Internet, postal | On maturity (compounded annually) |
| Three-year fixed rate | Sensible Savings | 4.2% | £5,000 | Internet, postal | On maturity (compounded annually) |
| Four-year fixed rate | Cynergy Bank | 4.25% | £1,000 | Internet | Yearly |
| Five-year fixed rate | Tandem Bank | 4.33% | £1 | Mobile app | Yearly |
Table notes: rates sourced from Moneyfacts on 11 February 2026.
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Compare and chooseWhat are the drawbacks?
One downside of laddering is that when rates start ticking up again, you may find some pots underperform in comparison with future rates.
Another danger for savers with larger cash pots is that you could be hit with a bill from HMRC. That's because there's a limit to how much interest you can earn on your money before you face a tax bill. Basic-rate taxpayers can currently earn up to £1,000 in interest tax-free a year, higher-rate taxpayers £500, and additional-rate taxpayers get no allowance.
One way to avoid falling into this tax trap is to include a cash Isa as a rung on your savings ladder. You can currently hold up to £20,000 a year in an Isa tax-free, and that allowance can be split between multiple cash accounts or placed in other Isa products, such as stocks and shares.
Remember, new rules coming in force from April 2027 mean the amount you can hold in cash will fall to £12,000 for savers under 65. To use the full £20,000 Isa allowance, the remaining £8,000 would need to be invested in a stocks and shares Isa.
Finally, tying all your cash up in fixed bonds isn't advisable. You should always try to have some funds freely available for emergencies in an instant-access savings account.
Always check your cash is FSCS protected
The Financial Services Compensation Scheme (FSCS) protects up to £120,000 held in each UK-authorised provider in the event that the firm goes bust.
But watch out. The FSCS limit applies per banking group, not per brand. So banks that share a licence – such as Bank of Scotland, Halifax and Lloyds – count as a single provider. If the group failed, the £120,000 limit would apply across all balances combined.
You can check the Financial Conduct Authority (FCA) Financial Services Register to see which brands share a licence.
This matters if you hold large sums or save through apps that use partner banks behind the scenes. If an app places your money with a bank you already use, your combined balance could push you over the FSCS limit without you realising.
Our recent investigation explains how partner bank arrangements work and the pitfalls to watch out for.
