Best savings accounts

With many types of saving account available, we look at what each one entails and which option could be the best for you.

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Looking for the best savings account available? The reality is that “best” will depend on your saving habits, how frequently you want to access the account and other factors. We’ve listed the main types of savings accounts and the pros and cons. You’ll find step-by-step advice on how to choose the best savings account with our “top pick” recommendation (find out how we choose our top picks).

Easy-access savings accounts

As the name implies, these are savings accounts where you can still easily access your money. So you have the freedom to make numerous deposits, but also the ability to withdraw funds instantly without giving any notice. The flip-side is that in exchange for that flexibility, the interest rates are among the least competitive for savings accounts. This type of account can usually be opened quickly online, with a small initial deposit (sometimes as low as £1). You can then save as little or as much as you want in the account (although if your interest income on large deposits goes over your personal savings allowance, there could be tax to pay).

Pros

  • Usually able to open these accounts quickly online
  • Ability to save small or large amounts
  • Instantly withdraw funds if you need to

Cons

  • Interest rates are on the lower side
  • Interest income is not tax-free (if you go over the personal savings allowance)

Notice savings accounts

With this option, you can usually still make deposits when you like, but you will have to give notice if you want to take money out of the account. This notice period could range anywhere from one month up to four months or more, depending on which provider you sign up with. If you don’t give the required notice, there are penalties – often in the form of reduced interest payments. The interest rates on notice savings accounts tend to be better than easy-access savings accounts, with longer notice periods attracting higher rates. You usually need to have a higher minimum deposit to open a notice savings account, and you’ll also need to maintain a certain balance in the account.

Pros

  • Interest rates more competitive than easy-access savings accounts
  • Good option if you know you don’t need immediate access to your money

Cons

  • Less flexibility – you have to give notice of withdrawals
  • If you don’t give enough notice, there are penalties attached
  • Often require a higher starting deposit and need to maintain a certain balance

Regular savings account

With these savings accounts, you pay in a regular amount every month for a set period of time. Both the amount and time period will vary depending on which provider you go with, but there are options out there where you can choose to save relatively small amounts. The downside is you can’t withdraw the funds during this set period, and if you miss a payment or take the money out, there will be penalties. The upside is that this type of account attracts higher interest rates than both easy-access and notice savings account.

Pros

  • Interest rates are usually better than easy-access and notice savings accounts
  • The obligation to pay in every month will help build up savings

Cons

  • Can’t skip a month’s payments without penalties
  • Commitment to keep money tied in for a set period

Individual savings accounts (ISAs)

Individual savings accounts, or ISAs as they are more commonly known, come with a tax-free wrapper. So you can save money in them and not pay any tax on the interest. You can only open one new ISA per tax year and there is a yearly limit to the amount you can save in them (currently £20,000 for the 2020/21 tax year). The other conditions attached to ISAs are set by different providers, so some of them have easy-access elements, while others require you to tie the money in for a fixed term, with no withdrawals allowed. The least flexible options tend to have higher interest rates.

Pros

  • Good range of interest rates available
  • Form of tax-free savings
  • Easy-access and fixed-term options

Cons

  • Limited to yearly ISA allowance (currently £20,000)
  • Fixed-term ISAs best suited to long-term savers

Fixed-rate bonds

Fixed-rate bonds involve depositing a single amount of money for an agreed period of time, at a set interest rate. So the money is tied in for a fixed term, which can range for one to five years. You won’t be able to add money to the savings pot during this time or withdraw it. The interest rate you get is fixed, which provides certainty on your level of return (although it’s not so great if interest rates go up elsewhere in the meantime). The longer you lock your money in, the higher the interest rate tends to be. There is usually a high minimum deposit required, so it could be a good option if you have a lump sum available, that you know you won’t need to get your hands on again in the immediate future.

Pros

  • Good option for investing a lump sum in the long term
  • Certainty on interest rate over the fixed term

Cons

  • Not suitable if you think you may need to access your savings before the fixed term ends
  • Risk that interest rates in the wider market go up after your savings are locked in

How to choose the best savings account

What turns out to be the “best” savings account for you will depend on your individual needs, so here are some pointers to consider before you choose one:

  • Access. Do you need to have instant access to your savings or are you happy to leave them untouched in an account for a long period of time? This will influence whether you go for an easy-access, notice or fixed-term account.
  • Interest rate. Obviously an important factor if you’re looking for a return on your savings. Check out which provider is offering the best rates – but remember the type of account you choose (e.g. easy access vs fixed term) will also have a bearing on how competitive the rate is.
  • Bonuses. Some accounts will have introductory offers when opening a new account, or bonuses for leaving your money in the account for an extended period of time. You might want to keep an eye on when the bonus offer ends so you can switch to a better account.
  • Deposits. Do you want to save small amounts regularly or deposit just a single lump sum? This will influence the type of account that is most suited to you.
  • Minimum balance. There could be a minimum balance required to open and then maintain an account, which you are not allowed to fall below. Make sure you’re confident you can meet this savings threshold.

We show offers we can track - that's not every product on the market...yet. Unless we've said otherwise, products are in no particular order. The terms "best", "top", "cheap" (and variations of these) aren't ratings, though we always explain what's great about a product when we highlight it. This is subject to our terms of use. When you make major financial decisions, consider getting independent financial advice. Always consider your own circumstances when you compare products so you get what's right for you.

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