Updated: Tue, 15 Jan 2013 01:00:00 GMT | By lovemoney.com

Pick your next ISA or savings account in five minutes

Follow this guide and you'll have your next savings account sorted within a matter of minutes.


Pick your next ISA or savings account in five minutes

Pick your next ISA or savings account in five minutes

One thing that puts people off from using savings accounts, or switching to better ones, is the time it takes to research them.

But, using the information below, most people should be able to quickly pick out the best account for them that's currently available.

Generally, I haven't included savings accounts that are exclusive to existing customers or other groups, or accounts with onerous small print, such as limited withdrawals.

Emergency and short-term savings

Everyone should save thousands of pounds in accounts where they can deposit money as often as they want, and withdraw it quickly when there's an emergency, unforeseen expense, or a big item to pay, such as a holiday or Christmas.

The appropriate account for you is called an easy access savings account.

As with most savings accounts, your savings bank will normally deduct 20% of your savings interest in tax, and you'll pay more through your tax return if you're a higher-rate payer. You could save in your spouse's name if he or she pays a lower-rate of tax. If you don't pay tax, ask your bank not to deduct it.

Account

Interest rate (after basic tax)

Guarantees (after basic tax)

Minimum balance

Post Office Instant Saver

2.1% variable (1.7%)

Guaranteed to pay 2% (1.6%) or above for a year

£500

ING Direct Savings Account

2% variable (1.6%)

Guaranteed to pay 1.48% (1.2%) or above for a year

£1

Triodos Bank Online Saver Plus

2% variable (1.6%)

Guaranteed to pay 1% (0.8%) or above for a year

£1

I have included online accounts only.

All of these accounts allow unlimited withdrawals, except Triodos Bank, which allows just three penalty-free withdrawals. Triodos Bank is included because it's a sustainable bank. It also boasts about its safe lending practices – meaning your savings should be safe from bank failure.

Notice the minimum balances. Don't open an account if you expect the balance to drop below the minimum inside one year.

Tax-free emergency and short-term savings

For every type of savings account, including easy access, there's a tax-free equivalent. These are called Cash ISAs. By saving in a Cash ISA, you normally get a better deal than with ordinary savings accounts.

You can currently save £5,640 into a Cash ISA each financial year (which starts on 6th April and ends 5th April the following year). You can open one new Cash ISA a year, and some providers let you move existing cash ISA savings into your new ISA (called allowing “transfers in”). This is useful to ensure you keep getting a good interest rate.

You might not be able to use a Cash ISA if you already invest a lot in share ISAs. Here are the top easy access Cash ISAs I can find:

Account

Interest rate

Guarantees

Minimum balance

Transfers in?

Ulster Bank Cash ISA Plus

2.5% variable

Guaranteed to pay 1.5% or above for a year

£1

Yes, from other providers

ING Direct Cash ISA

2.25% fixed for one year

N/A

£1

Yes, for existing customers only

I have included online accounts only. No other easy access Cash ISAs stand out on both interest rate and small print.

The fixed rate for ING makes it the most attractive. ING Direct's Cash ISA is, unusually, available for transfers in from existing customers only. However, new customers can still put in £5,640.

Some of you may be wondering why Selftrade's Cash ISA is not at the top of this table. That's because you can't apply for it at the time of writing. Selftrade's press office has also informed me that it's currently available to existing customers only.

Inflation-beating savings accounts

Unfortunately, no providers are currently offering accounts that promise to beat inflation after tax. These are the cream of savings accounts, since most people, in the long run, don't get paid enough savings interest to make up for rising prices.

Long-term savings accounts

Some of you have more savings than you're likely to need for emergencies or for big expenses inside a year. You might consider a second savings account for your excess cash.

You might want a better interest rate or you have a specific goal you're saving for over the next 12 to 60 months. Consider a fixed rate of interest to help you with that quest, using a fixed-rate, fixed-period savings account.

The best I can find are in this table, with ISA versions in the bottom half:

Account

Fixed interest rate (after basic tax)

Period

Minimum deposit

Transfers in?

FirstSave Fixed Rate Bond

3.05% (2.4%)

Five years

£1,000

N/A

FirstSave Fixed Rate Bond

2.95% (2.4%)

Three years

£1,000

N/A

Wesleyan Fixed Rate Bond

2.9% (2.3%)

Four years

£1,000

N/A

IBB Fixed Term Deposit

2.8% (2.2%) Sharia-compliant target profit

Two years

£1,000

N/A

FirstSave Fixed Rate Bond*

2.75% (2.2%)

Two years

£1,000

N/A

Wesleyan Fixed Rate Bond

2.5% (2.3%)

One year

£1,000

N/A

Newcastle Fixed Rate ISA**

2.55%

Three years

£500

Yes, from other providers

Halifax ISA Saver

2.50%

Five years

£500

Yes, from other providers

M&S Bank (HSBC) Fixed Rate ISA**

2.45%

Two years

£500

Yes, from other providers

Halifax ISA Saver

2.45%

Four years

£500

Yes, from other providers

M&S Bank (HSBC) Fixed Rate ISA**

2.35%

One years

£500

Yes, from other providers

*Wesleyan offers an identical savings account.

**M&S offers an identical ISA.

All these savings accounts and ISAs have internet access except Halifax's and M&S Bank's products.

The interest rates here are dreadfully low, especially in comparison to easy access accounts and ISAs, which have better withdrawal terms. Personally, I wouldn't open one of these accounts right now, unless I had a very specific reason to do so.

Even when fixed interest rates are higher, I usually prefer to stick with easy access accounts until special deals, such as inflation-beating accounts, come along.

The Cash ISAs shown here are particularly poor compared to easy access cash ISAs, paying about the same low level of interest, but with long tie-ins. They're not worth it, at present.

Remember you can open one new Cash ISA per year only, so you have to choose whether that'll be an account like this, or an easy access Cash ISA.

Notice accounts

You also get savings accounts and Cash ISAs that require you to give one month to six months' notice before making a withdrawal. Usually the interest rates aren't high enough, but I've found one Cash ISA today requiring 60-days' notice that's a good, and I think better, alternative to the fixed-rate accounts above:

Account

Interest rate

Guarantees

Minimum balance

Transfers in?

Coventry 60-Day Notice ISA

3.1% variable for one year

Guaranteed to pay 3.1% or above till end Nov 2013

£1

Yes from Coventry and other providers

Regular savers

Regular saver accounts (and, more rarely, regular saver cash ISAs) are usually appropriate for people who are saving monthly from their income and already have emergency savings only. If you don't have enough emergency savings, you should save regularly into an ordinary easy access savings account or ISA first.

You can't use regular savers to save lump sums. You must save monthly. If the interest rate is high enough, you'll do better with these savings than with other accounts. The table below shows the regular savers I have found that are worth considering:

Account

Interest rate (after basic tax)

Monthly savings

First Direct Regular Savings Account

8% (6.4%) fixed

£25 to £300

HSBC Regular Saver

4% (3.2%) or 6% (4.8%) fixed

£25 to £250

Norwich & Peterborough E-Family Regular Saver

5% (4%) fixed

£1 to £250

Norwich & Peterborough E-Regular Saver

4% (3.2%) fixed

£1 to £250

I have included online accounts only. This time I have shown products that are exclusive to existing customers or other groups, because these are generally the only ones worth having.

First Direct's excellent interest rate is available to existing current account customers only. HSBC's account is also for existing customers, paying 4% to customers with a plain bank account and 6% to Premier, Advance or Passport customers.

N&P's E-Family Saver is just for families with dependent children. Unusually, for both its regular saver accounts, you're allowed to make one withdrawal inside the 12 months before you're penalised. Even more unusual, the penalty for more withdrawals is small enough that you'll still earn an OK interest rate – as if you had an above average easy access savings account.

All these accounts last for one year. After that, you'll have to transfer to an easy access or other account. If you don't, you face terrible interest rates.

More on savings:

The current account that beats the best savings accounts

Savings accounts paying bonuses are disappearing

Premium Bonds winners

4Comments
16/01/2013 16:53
avatar
Just glad I managed to get 4.1% another 16 months left. These rates are pathetic
17/01/2013 02:45
avatar
with the current inflation rates most of the above rates are a rip off by the banks
26/01/2013 09:35
avatar
Steve
Screw the customers, screw the savers, and screw the country,we don't give a dam if we **** it up the government will bail us out and we can make a small fortune investing that cash on the stock market....
Happy days :)
Shame on you banks and bankers :)
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