Make the most of your savings

With interest rates likely to fall further next month, Amelia Murray looks at how savers can make the most of lean times

If you are a loyal, longstanding saver with a bank or building society, chances are you are earning a poor rate on your cash. You may even get absolutely nothing. You need to take action. The Financial Conduct Authority, the City watchdog, has named and shamed 32 of the lowest-paying savings institutions in its latest “Sunlight Remedy” report.

More savers than ever are earning nothing or next to nothing – and that is before any cuts to the Bank of England’s Bank Rate, now expected to occur in early August.

The worst offenders, according to the FCA, include some of Britain’s most prominent savings providers, such as the Post Office, HSBC and its offshoot First Direct.

The picture is clouded by the fact that some accounts are no longer “open”, or marketed to new savers, in which case there is less readily obtainable information about rates paid.

These are more likely to be used by savers who trust their banks, and thus leave cash unchecked for many years.

The FCA’s research sought to see through some of the providers’ common tricks, which involve cutting rates where conditions are not met or where tiered interest rates are applied. The rates shown in the table, right, are thus the lowest that any saver in that account could receive. In most cases, even where higher rates apply to some savers, they remain poor deals.

Do you save into one of these accounts? If so, don’t lose out for your loyalty. Follow the advice below, switch your money and earn double the rate or more.

High interest current accounts

Five years ago few current accounts paid attractive interest. Nowadays it’s different: some current accounts pay far more than top savings deals. The catch is that customers must usually fulfil a number of criteria. Nationwide’s FlexDirect and TSB’s Classic Plus both pay the top 5pc rate on balances up to £2,500 and £2,000 respectively. Nationwide customers must pay in at least £1,000 each month and after 12 months the rate drops to 1pc. You could earn £125 in the first year if the account is credited with £2,500 on opening. Classic Plus holders must deposit £500 a month, register for online banking and go paperless. They can also earn up to £5 a month cashback. Potential earnings in a year are £160. Those with a number of direct debits and larger balances should consider a Santander 123 current account. It pays up to 3pc on savings between £3,000 and £20,000. It also offers 1pc cashback on water and council tax bills, 2pc on gas and electricity bills and 3pc on phone and broadband bills. Customers must pay in £500 per month and set up

Paying in: savers with long-standing accounts may get next to nothing in interest. Below left: Anish Hemachandran who uses a range of accounts to raise returns

at least two direct debits. A £5 monthly fee applies. Those who hold £20,000 in the account could earn £540 a year, less the fee (but before cashback).Fixed-rate bondsCharter Savings Bank offers the top one-year and 18-month bonds, paying 1.79pc and 1.85pc respectively. It also has a two-year bond which offers 1.91pc. Customers could earn a higher rate of 2pc with Al Rayan Bank, but this is an “estimated profit rate”, as always quoted by Shariah-compliant banks, which is not guaranteed.Regular saversFirst Direct and M&S Bank both have regular savings accounts that pay 6pc for the first year. Sounds amazing? Yes, but there are strict limits.First Direct customers can pay in up to only £300 each month and with M&S the limit is £250.Nationwide’s regular saver pays 5pc but allows customers to pay in up to £500 each month for 12 months.‘How I beat the savings drought’In a bid to beat tumbling interest rates Anish Hemachandran has a carefully structured range of accounts. He spreads his savings between highinterest current accounts, a reward account, a regular saver, a Help to Buy Isa and a general savings account.Mr Hemachandran, 28, a medical device engineer from Aylesbury, keeps £2,500 in Nationwide’s FlexDirect account and £2,000 in TSB’s Classic Plus account, which both pay 5pc. Those are the maximum balances on which those rates apply.He keeps a smaller sum of £50 in a Halifax Reward account which gives customers £5 each month they pay in £750. Mr Hemachandran’s £30,000 salary is paid into this account which he then splits across the rest to meet the various accounts’ criteria.Mr Hemachandran keeps £2,000 in a Nationwide regular saver, which pays 5pc, and £5,000 in a savings account with Halifax.Overall, he thinks he earns between £50 and £55 per month in interest.Two banks pay 6pc for the first year. Sounds amazing? Yes, but there are strict limits