Best savings accounts that offer above-inflation rates

Pedro Goncalves

UK households are always looking for ways to make their money go further amid the cost of living crisis and savings accounts can help.

After years of low rates, high-yield savings accounts are having a moment as the Bank of England decided to keep interest rates on hold at 5%. While homeowners face higher mortgages, there is a silver lining in higher borrowing costs and consumers can find UK savings accounts offering higher than inflation rates.

The UK rate of inflation came in at 2.2% in August, unchanged from July, according to figures from the Office for National Statistics (ONS). It was at 2% in June and May.

Savers should shop around to find the best deals and check what rate they are on — as they could still be sitting on a product that does not beat inflation. Providers might also start to lower rates as interest rates fall, so consumers need to check if their money is well-placed for higher returns.

Read more: Funds set to benefit from falling interest rates

Liz Edwards, a money expert at Finder.com, has advised savers to lock in the best available rates. “Today’s decision, while disappointing for borrowers, serves as a reminder for savers to take advantage of higher rates on fixed-rate accounts,” Edwards said.

Finder’s research revealed that eight of the 16 largest UK banks have already reduced rates on easy-access savings accounts since the Bank’s base rate cut earlier this month.

Mark Hicks, head of active savings at Hargreaves Lansdown, echoed this sentiment: “The decision to keep rates steady is positive for savers. Had a rate cut occurred, we would have seen a swift follow-through from other banks and building societies.”

For those with money in easy-access accounts, switching to a fixed-rate account could be a prudent move to preserve returns.

The main factor you should be aware of when choosing a savings account is the difference between easy-access and fixed-term.

Easy-access accounts allow you to access your money when you need it. Fixed-term means you can’t access your cash for the duration of the deal. They usually offer better rates, but you must be comfortable with not touching your savings for a long period, usually between one and five years.

The best fixed-rate account offers 5.30% and is available from the GB Bank, via the Prosper platform.

This fixed-term personal savings account requires a minimum of £20,000 to be locked for six months. You can invest up to £85,000. Withdrawals are not allowed for the duration of the deal and you can only open this account via the Prosper app.

A 5.15% deal is available on the Raisin platform, provided by Mizrahi Tefahot Bank. This fixed-term personal savings account requires a minimum of £1,000 to be locked for 3 months. You can invest up to £85,000.

GB Bank also offers a 5.03% 6 month-deal via Prosper but which requires only £1,000 to open

Online banks typically offer higher rates than traditional bricks-and-mortar branches, which translate into better returns, giving you a more efficient way to save and reach financial goals.

If you prefer to go with a familiar name, the high-street lenders have slightly lower offers, but are still above inflation.

Tesco Bank offers the highest rate among high-street lenders, with a one-year fixed-rate savings account that pays 4.61%, with the minimum balance required being £2,000.

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Nationwide (NBS.L) has a fixed-rate savings product offering 4.35% for one year. The minimum deposit is just £1 and you must be registered with Nationwide's online bank.

Unlike easy-access savings, where interest rates can vary, fixed-rate accounts earn a set rate of interest for the period you choose, whether that's six months or one, two, three or even five years. Those are the most common deals, but some offers go up to 10 years and over.

You must leave your initial deposit for a fixed period without making withdrawals. If you touch your money, you forfeit any interest.

Easy-access savings accounts let you withdraw your money without notice. With that ease of access comes lower interest rates, but they are a good option for those who think they might need their money in a hurry.

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Be aware that rates on these accounts are variable, which means they can go up or down. You will be notified of any change ahead of time.

Ulster Bank has the highest paying offer for easy-access accounts at 5.20%. You need £5,000 to access this rate and there is no maximum limit.

The West Brom building society pays 4.9% with an easy-access account that pays interest monthly. If you invest a deposit of £1,000 the estimated balance after 12 months would be £1,049.

Oxbury has a 4.87% deal that pays interest monthly, for those with the minimum £25,000 to open the account, which is done via app. You can invest up to £2,000,000.

There are even higher-paying easy-access accounts, but they are not for new customers. Santander's (BNC.L) Edge Saver, for instance, offers 6%, but it is only for current account holders.

Can’t decide on whether you want to put your money away and not touch it for a long period or keep it accessible at all times? Maybe you should consider a notice savings account.

Notice savings accounts require you to give notice to your savings provider before you can withdraw your funds.

These are ideal for those who know when they might need their cash but don’t want the temptation of dipping into it at any time.

You need to give the bank or building society a set amount of advance warning before you can withdraw your money — usually between 30 and 120 days.

Santander via Prosper has a 365-day offer that pays 5.50%, the top offer on the market. You’ll need at least £20,000 to open it and can deposit up to £250,000. The same bank offers a 185-day notice account that pays 5.34% with the same requirements.

DF Capital has a 90-day notice account that pays 5.30. You need at least £1,000 to open, which can be done by phone, online or email.

Interest rates with notice accounts are variable, which means they could go up or down over time.

For those looking to make the most of their cash savings, regular savings accounts over 10% returns.

Most regular savings accounts require you to put money away each month with interest paid yearly. It is not uncommon for the offer to be available only to current customers.

Principality offers 8% in a six-month regular saver account. You open an account and pay in up to £200 each month. Interest is calculated on the money in the account each day and paid six months after opening.

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Yorkshire Building Society also offers an 8% rate on its £50 Regular eSaver. It requires a minimum deposit of £1 to open and you can in pay up to £50 each month.

The Co-op bank has a 7% deal for existing customers. Fixed for one year, you can save up to £250 per month and can skip months without penalties.

Every deal mentioned here is covered by the Financial Services Compensation Scheme, so you are protected up to £85,000 or double if it’s a joint account.

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