Martin Lewis
saving less than roughly £4,000.
Top pick is FirstDirect.com, which gives switchers £100, plus has a linked savings account paying 6%, which you can put £300 a month in. The Marks and Spencer bank account (bank. marksandspencer.com) has a very similar set up.
Alternatively, the Halifax.co.uk Reward account gives £100 then pays £5 each month no matter how much or little you’ve got, unless you go overdrawn when it’s wiped.
This alone beats the best interest after tax for those saving less than £1,500 in the top high-interest bank savings – plus the free cash.
4 EARN 2.3% AND PROTECT SAVINGS FROM TAx
Cash ISAs are just savings accounts where you don’t pay tax on the interest. Every £100 earned in normal savings nets a basic-rate taxpayer £80, higher-rate payers get £60. In a cash ISA you get the whole £100. You can save up to £15,240 a year and once in, it’s tax-free year after year.
The top-paying easy-access cash ISA, where you can take your cash out whenever you want, is the Nsandi.com Direct ISA paying 1.5%. If you are planning to put cash away, a good alternative is Coventrybuildingsociety.co.uk with a five year fix at 2.3%. Unlike normal fixed savings, you can access your cash early by closing the account. You will lose 120 days’ interest, but even so that means keep the cash in for a year and you’d effectively earn 1.54%.
5 IF YOU PUT CASH ASIDE EVERY MONTH, EARN OVER 3%
Regular savings accounts often pay high interest on a small amount for a short time. The top regular savers are linked to current accounts (listed in point three). Yet some decent deals are open to all, including Leeds BS 3.05% AER variable on £50 to £250 a month for a year.
6 MIx AND MATCH TO MAx IMISE EVERY PENNY
There’s no one best savings account. It depends on how much you’re saving, how often, if you need access to it and more.
Combining accounts often wins.
The goal is for every penny to flow where it earns most, such as putting a lump sum in a fixed-rate ISA and money you put aside each month in a top regular saver.
7 LOCK YOUR CASH AWAY TO BOOST RATES AND EARN UP TO 2.5%
Fixed-rate savings have two advantages: rates are usually higher and are guaranteed. Yet in return you forgo access to the cash for that time.
Over one year, Utbank.co.uk (min £500) is the winner at 1.9% AER, and for three years it’s ubluk.com (min £2,000) at 2.45% AER. But remember today’s interest rates are low – if rates do rise, you can’t ditch and switch.
8 CHECK YOUR RATES BEFORE POOH-POOHING 1.5% EASY-ACCESS
While Bmsavings.co.uk’s 1.5% easyaccount account sounds awful (minimum £1,000), compared to what many accounts now pay, it’s quite decent.
9 FOR HIGHER-RATE TAx PAYERS, DON’T FORGET PREMIUM BONDS
Premium Bonds are savings accounts where the interest earned is tax-free and based on a monthly prize draw. The current published ‘prize rate’ is 1.35%. This describes the mean average, indicating that for every £100 paid into bonds, on average £1.35 a year is paid out.
In practice, this is impossible, as the smallest prize is £25. In fact if 20 people each had £100 in, for one to win £25-plus, the remaining 19 would have to win nothing.
PremiumBondCalculator.com lets you plug in how many bonds you have, and predicts your likely winnings.
10 EARN LESS THAN £15,600? YOUR SAVINGS SHOULD BE TAx FREE
Next April the new personal savings allowance launch, allowing basic rate taxpayers to earn £1,000 a year interest tax-free (£500 for higher rate taxpayers). Yet this year a similar scheme started for those earning under £15,600.
Here you get your normal £10,600 personal allowance – under which all income is tax free. Plus you can earn up to £5,000 a year from savings interest tax-free.
Speak to your bank to ensure you’re not paying more tax than you need.