Optimized Savings Strategy: Latest Interest Rates for Maximizing Your Money's Growth
Rewritten Article:
As the next Bank of England base rate decision approaches on Thursday, there's a strong likelihood of a cut from the Monetary Policy Committee, according to savings expert Anna Bowes from The Private Office. Let's delve into the current landscape of top savings accounts to see how they've fared recently.
Easy-Peasy Savings
More than £900 billion is parked in easy access savings accounts, Bank of England data reveals. A significant chunk of it might be earninga pittance, especially if it's stashed away with high street banks. An even more astounding £301 billion sits in current accounts, earning zero interest.
Stay Informed with Our AppThere are plenty of competitive rates out there, surpassing inflation and even beating the base rate of 4.5%. However, it's essential to scrutinize beyond headline rates as many top accounts come with restricted access or limited bonus rates.
The Cream of the Crop
At the start of April, the top rate available was 4.75%, with an average of 4.67% across the top five accounts. Last week, financial app Chip launched the Chip Easy Access Saver, which currently leads the pack, offering 4.76% AER.
However, this account permits only three penalty-free withdrawals a year, and the rate drops to 2.1% for the rest of the year. Additionally, it includes a 12-month bonus rate of 1.20%. There are numerous straightforward accounts too, such as the latest Charter Savings Banks Easy Access Account (Issue 58), paying 4.59% AER, with no bonus or restricted access.
Easy as Pie Easy Access ISAs
In the realm of easy access best buy tables, two accounts boast rates above 5% AER. This means the top ISA rates are higher than their non-ISA counterparts, making it even more advantageous to utilize your cash ISA allowance, which remains at £20,000 this tax year, despite rumors of a review.
These stellar accounts are accessible via financial app companies Plum and MoneyBox, paying 5.06% and 5.05% respectively. Since they aren't banks in their own right, your money is deposited with their partners CitiBank (in Plum's case) and a mix of Santander and HSBC if you choose MoneyBox. Your funds remain protected by the Financial Services Compensation Scheme until you reach the £85,000 limit with these banks.
If you'd rather avoid financial apps, Vida Savings offers a Defined Access ISA Issue 1 with a rate of 4.63% AER. This account can be opened online with a minimum of £100, but, as the name suggests, itimposes limitations on the amount of penalty-free withdrawals per year. Alternatively,Charter Savings Bank’s Easy Access Cash ISA Issue 57 pays 4.59% and allows multiple withdrawals without penalty.
Bonding with Fixed-Rate Bonds
Although some of the best buy fixed-term bond rates have dipped slightly in the past month, there are still numerous accounts offering inflation-busting rates. Since the base rate is predicted to fall next month, now may be an opportune moment to fix your rates.
For instance, at the beginning of April, you could have fixed for one year at 4.70%, compared to the current 4.65% AER. That's still higher than inflation (2.6%) even after tax deduction. The top rates for longer fixes have decreased only slightly. You can still secure rates of 4.53% for two years, 4.55% for three years, and 4.56% for five years.
Fixed-Rate ISAs
The declines have been more pronounced for fixed-rate ISAs. Nevertheless, you can still find accounts paying more than 4.20%. Two-year and five-year terms are both paying 4.30%, while the top one-year cash ISA offers 4.26%, and the top three-year ISA pays 4.20%.
Although the top ISA rates seem lower than bond rates, taxpayers who have not reached their personal savings allowance should consider ISAs. For non-taxpayers, however, the choice may not be the most beneficial.
Example
- If you were to deduct the basic rate tax (20%) from the LHV Bank one-year bond (4.65%), the net rate becomes 3.72%. On a balance of £20,000, you would take home £744 from the bond. Alternatively, you would take home £852 from the top one-year tax-free ISA.
- The Bank of England data shows that more than £900 billion is currently in easy access savings accounts, with a significant portion earning very little, especially if deposited in high street banks.
- Recently, the top rate available in easy access accounts was 4.75%, with an average of 4.67% across the top five accounts. However, these accounts may have restricted access or limited bonus rates.
- In the easy access best buy tables, financial app companies Plum and MoneyBox offer rates above 5% AER, making it beneficial to utilize the cash ISA allowance.
- Despite the declines in fixed-rate ISAs, two-year and five-year terms are still paying more than 4.20%. While the top ISA rates seem lower than bond rates for taxpayers, non-taxpayers might find other options to be more advantageous.
- As the next Bank of England base rate decision approaches, it's essential for investors to scrutinize finance options beyond headline rates, as many top accounts come with restricted access or limited bonus rates, even in banking and insurance industries like personal finance and banking and insurance.
