The best savings accounts to profit from rising interest rates
Rising interest rates are good news for savers, who until recently earned next to nothing on money sitting in their bank accounts.
The Bank of England today raised rates to 4pc, and this latest increase means savings accounts are now paying out interest in excess of 4pc a year, guaranteeing returns only provided by the stock market in recent memory.
But with inflation still in double digits, it is vital you find the very best deal to protect your cash.
The Telegraph has compiled the best rates available on the market right now for Isas, bonds, savings and current accounts.
What is the difference between an Isa, bond, savings and a current account?
A current account is a transactional account that typically pays no interest but gives you a lot of flexibility in how often you access your money. With a savings account the bank pays you interest for keeping your money and therefore imposes some restrictions on how many withdrawals you can make.
A fixed-rate bond is a savings account with a fixed term, usually between one and five years. Until the duration of the bond is up, you cannot withdraw your funds, but in exchange for the commitment you will typically benefit from a higher rate.
The difference between an Isa and other savings accounts is there is no tax charged on the interest. Everyone can save up to £20,000 a year tax-free in an Isa.
How to choose the right account for you
The first thing to consider is whether you might need access to the funds in an emergency. A current account or an easy access savings account will give you this flexibility.
However, you will get a higher rate if you are willing to lock away your funds for a set period (for example, in a bond). Generally, the longer the period, the higher the rate.
The other thing to consider is whether you are at risk of exceeding your personal savings allowance. This is £1,000 for a basic-rate taxpayer and £500 for a higher-rate taxpayer. If you earn more than this in interest outside of an Isa, then you will have to pay income tax.
Use our calculator to work out whether you could breach your allowance and if you should get an Isa.
The best Isa rates for 2023
Easy access: Virgin Money Easy Access Exclusive Issue 2 – 3.00pc
You can withdraw money without penalty. It is a flexible Isa, which means if you replace money you withdraw within the same tax year and the replacement will not count towards your annual Isa subscription limit. This account is open to customers with a current account from Virgin Money, Clydesdale Bank or Yorkshire Bank (apart from the Essential Current Account or any account opened with Northern Rock).
One-year fixed rate: Barclays 1 Year Flexible Cash ISA Issue 36 – 4.00pc
You need a minimum of £1 to open this account. You can make withdrawals subject to a deduction of 90 days’ interest. This Isa is also flexible but the rate is fixed. If you are not already a Barclays customer, you’ll need to make an appointment in a branch to open the account. Up to three penalty-free withdrawals can be made within the term, with each withdrawal limited to a maximum of 10pc of the account balance.
Two-year fixed rate: Virgin Money 2 Year Fixed Rate Cash E-ISA Issue 550 – 4.11pc
The minimum deposit is £1. You can make withdrawals subject to a deduction of 90 days’ interest.
Five-year fixed rate: Close Brothers Savings 5 Year Fixed Rate Cash ISA – 4.20pc
You need a minimum of £10,000 to open an account. You can make withdrawals subject to deduction of 365 days’ interest.
The best bond rates for 2023
One-year fixed rate: Smart Save 1 Year Fixed Rate Saver – 4.16pc
You can save between £10,000 and £85,000.
Two-year fixed rate: Atom Bank 2 Year Fixed Saver – 4.45pc
You can save between £50 and £100,000.
Five-year fixed rate: Isbank (via the Raisin platform) – 4.50pc
You can save between £1,000 and £85,000.
The best savings account rates for 2023
Easy-access savings account: Shawbrook Bank Easy Access Issue 32 – 2.92pc
You can save between £1,000 and £85,000.
Regular savings account: First Direct Regular Saver Account – 7.00pc
You have to make a minimum deposit of £25 a month for one year. However, the maximum amount you can save each month is just £300.
Notice savings account: Hinckley & Rugby Building Society Rainy Day 120 Day Notice Issue 2 – 3.60pc
You can deposit between £2,500 and £300,000. You must give 120 days’ notice before making a withdrawal.
The best current account rates for 2023
Nationwide FlexDirect Current Account – 5pc (up to £1,500)
You must pay in £1,000 a month to earn interest.