Swedish bank offers best four-year fixed rate – at just 2.25pc

Ikano Bank, which was launched by the founders of Ikea, is offering two new fixed-rate savings accounts, both of which pay among the top rates currently available to savers. The first is a four-year fixedrate account paying 2.25pc, and the second is a five-year fixed option that pays 2.45pc.

If £5,000 were deposited into the five-year account, and the interest allowed to compound rather than being paid out, the balance would be £5,643 at maturity in 2021.

There are no Ikano branches in Britain, so prospective customers need to apply and manage their accounts online, although there is a UK-based call centre.

Savers can choose between annual and monthly interest payments, and there is no bonus period.

If Ikano were to go bust, any compensation would have to be sought from the Swedish authorities, and the amount of cover varies depending on the strength of the euro against the pound.

Based on Thursday’s exchange rate, the amount protected by the Swedish scheme is about £77,000. In Britain up to £75,000 is protected by the FSCS. The last conventional five-year bond to pay 3pc or more vanished earlier this year.

The best rate currently available, admittedly for a lengthy seven-year term, is 2.75pc from First Save.

Compared with other standard fixed-rate accounts, Ikano’s five-year offering is beaten only by Union Bank of India at 2.5pc – and the Union Bank account comes with FSCS protection.

At 2.25pc, the four-year option is ahead of the nearest competitors, Vanquis Bank at 2.05pc and Tesco Bank at 2pc.

Over five years there are slightly higher rates available if you are comfortable with the “expected profit rates” offered by Islamic banks. Bank of London & the Middle East, for example, offers an expected rate of 2.75pc for five years.