Get your savings sorted, says Martin Lewis
Millions across the nation are earning insulting interest on their savings and it's set to worsen. Everyone should be checking now how much they’re earning, and according to our Money Saving Expert Martin Lewis, if it’s under 1.35% you need to DITCH NOW – some could even get up to 50%, he’s here to show us how…
Why are so many people earning such low rates?
It's looking like another dire year for savers. Rates have plummeted over the last six months and things don’t look set to improve. Yet also many people leave their savings with their own bank, or just sitting in old accounts; if that’s you, you’ll earn nowt. The average savings interest is just a paltry 0.4%.
To get a half-decent return you need to become an active, disloyal, aggressive saver, shifting from best rate to best rate. So CHECK WHAT YOUR SAVINGS PAY. Owt earning less than the top 1.35% easy-access rate needs moving. Don't dally - every day is lost interest.
For the very latest info see Martin’s full ‘Best Buy Top Savings’ guide.
Why do you say less than 1.35% - why’s that the key rate?
If you want an easy-access account where you can put money in and withdraw when you like, then Marcus and Saga (min age 50) are the top payers at 1.35%. Both are variable, so keep an eye on the rate and if it drops, ditch and switch. As these are easy to open, with very little limits, there’s simply no excuse for earning less – though you should ask can I earn more?
By the way it’s worth noting I’ll only mention accounts with the full UK up to £85,000 per person per financial institution savings safety protection. Though, both Marcus and Saga are provided by Goldman Sachs Bank, so they share their savings safety protection.
How do people earn more?
There are lots of ways, which are either limited in amount or more restrictive terms. There’s nothing stopping you using a combination of all of them. So, try and keep as much cash as you can wherever it earns the most interest.
If you’re prepared to lock cash away in a fixed account, you can earn more. The top one-year fix is 1.65% with app based bank Atom Bank and PCF Bank is also 1.65% - as they’re both a fix the rate is locked in.
Currently the top notice account from MoneyBox also pays 1.65% - here you can withdraw money but need to give 95 days’ notice. However, the rate is variable, so it’s not guaranteed.
For two-year fixed Atom Bank (min £50) and UBL (min £2,000) both pay 1.8%. Some longer fixes pay more, though be mindful that if interest rates rise, you’re locked in and can’t switch to a better deal.
You haven’t mentioned cash ISAs - aren’t they any good?
A cash ISA is just a tax-free savings account. Yet these days all basic 20% rate taxpayers have a personal savings allowance meaning you can earn £1,000 interest a year anywhere without it being taxed (higher 40% rate taxpayers can earn £500/year and top 45% taxpayers don’t get one).As most don’t pay tax on savings interest and cash ISA rates are lower than normal savings, only those with large savings or very high earnings should be looking at cash ISAs. The top easy access cash ISA is with Cynergy Bank at 1.31%, the top 1 year fix is also Cynergy Bank at 1.4%.
What about people who like to put money aside each month?
If you can put money aside each month, you can earn far higher rates of interest. Regular savings accounts are special accounts that let you put money in each month, and because the amounts are limited, they offer much higher rates of interest.
Coventry BS has a 2.5% regular savings account and Principality BS is 2%; you can put up to £500/mth in each. Or do both and that’s up to £1,000 a month (you are allowed to miss months).
Or current account customers of First Direct, HSBC and M&S Bank can get linked regular savers paying 2.75% that you can put up to £300 a month in.
Are there any other ways to boost your interest?
There are lots of niche options. Let me run through them quickly…
Pay off debts or mortgage first. If the interest rate on your debt is higher than on savings, then it’s often better to pay off your debt rather than save as you’ll be paying more on your debt than you’re earning on your savings.
Claiming universal credit or working tax credits - get a 50% Government bonus on your savings. The Help to Save scheme lets those on low incomes save up to £50 a month, with a 50% bonus of up to £1,200 paid after two and four years.
The account’s easy-access so you can make withdrawals whenever you want, but remember if you’ve very costly debts it’s best to try and clear these before saving.
High-interest current accounts. Nationwide FlexDirect pays 5% interest on the first £2,500 in it for the first year. So, if you move account that can be worthwhile for those with smaller savings.
Saving for your first home – the Lifetime ISA is a no-brainer. First-time buyers aged 18-39 saving in this special ISA get a 25% bonus added on what you’ve saved (max £4,000/year) to use towards your first home as long as it’s under £450,000. Moneybox mentioned earlier has the top rate at 1.4%.
Autosave apps. Apps like Chip, Tandem, Plum (which is investing not saving) and MoneyBox use clever tech and data to figure out what you can afford to save, then move money from your current account to your savings or investment accounts with them automatically. It’s a great way to get into the savings habit, though some of them don’t pay decent interest, in which case every few months move your money out to a normal savings account to ensure you earn.