NS&I Issues Two Fixed-Rate Bonds, Increases Selected Rates – Forbes Advisor UK

6 August: Two & Five-Year Options Added To British Savings Bond Range

National Savings and Investments (NS&I), the government-backed savings bank that oversees Premium Bonds, has launched two new fixed-rate bonds and increased rates on a handful of others, writes Bethany Garner.

The new two-year and five-year British Savings Bonds offer fixed rates of interest on deposits between £500 and £1 million. No withdrawals are permitted until the end of the account term, with the entire balance backed by the UK Treasury.

The two-year Bond pays 4.60% AER, while its five-year counterpart pays 4.10% AER.

Two versions of each bond are available – Guaranteed Growth, and Guaranteed Income.

With Guaranteed Growth Bonds, interest is calculated daily and added to the bond balance annually, where it compounds.

Guaranteed Income Bonds provide savers with monthly interest, paid out into a separate bank account. Both versions offer the same AER, but only the Guaranteed Growth Bond benefits from compounding.

NS&I has also increased rates on its three-year bond from 4.15% to 4.35% AER.

Finally, the latest issue of its one-year bond – which is only available to existing savers with an account nearing maturity – pays 5.15% AER.

Dax Harkins, chief executive at NS&I, said: “It is 15 years since we had two and five-year fixed–term bonds on general sale to new investments. These two new issues, along with a rate increase for our three-year bonds, provide NS&I savers with increased choice and longer-term security in a changing market.”

Despite their popularity with UK savers, who currently hold around 550,000 NS&I bonds, the interest rates paid on these accounts fall short of current market leaders.

At time of writing, HTB’s two-year fixed rate bond pays 4.95% AER on deposits from £1, while its five-year bond pays 4.55%.

Laura Suter, director of personal finance at AJ Bell, said: “The popular British Savings Bonds are back on sale – and despite offering less interest than the market leader, they are likely to sell out quickly once again.

“The one-year version of these bonds that went on sale in autumn last year sold rapidly, selling out in five weeks, and the bonds raised over £10 billion.”

2 August: Maximum £210 Available Over First Year

TSB has launched a current account switching offer worth up to £190, plus a choice of reward, writes Brean Horne.

New customers who switch to a TSB Spend & Save or Spend & Save Plus current account can receive £100 cash plus cashback worth £90 to £120 in the first year of opening an account along with the choice of one of three rewards.

To receive the £100 cash bonus, customers must make a minimum of five payments of any value using their debit card on their new Spend & Save or Spend & Save Plus account. This includes payments made via Google and Apple Pay.

Customers will also need to log into the TSB mobile banking app at least once by 27 September 2024.

If these conditions are met, TSB will pay £100 into the new account between 15 October 2024 and 25 October 2024.

Triple cashback

In addition to the £100 bonus, new customers also get the chance to earn triple cashback. This means Spend & Save account holders could earn a total of £90 over six months of their first year (with £15 being paid each month).

Spend & Save Plus customers can earn the same rate of cashback for the first six months and then £5 cashback a month for the remaining six – taking the total cashback earnings to £120 for 12 months.

To qualify for cashback, customers must complete the switch conditions to meet the £100 incentive and then make 20 payments of any value each month in the first six months of opening the new account. These payments can be made using a debit card, Google Pay or Apple Pay.

Customer Reward

Customers eligible for the £100 cash bonus will also be offered a reward if they make at least 20 payments using their new TSB debit card by March 2025.

The available rewards include:

a night away for two at a choice of leading hotels
two Odeon cinema tickets every month for three months
a Now TV entertainment six-month subscription.

At the time of writing, this is TSB’s only current account switching offer. This is a limited time deal and TSB will give notice of the withdrawal date ahead of time.

10 July: Barclays Offers App-Only Current Account Switch

Barclays has launched an app-only switching offer which pays new customers £175 when they make a full switch to one of the bank’s two current accounts, writes Bethany Garner.

The offer applies to Barclays’ standard Bank Account and its Premier Current Account, both of which must be opened via the Barclays app under the Current Account Switch Service (CASS) by 30 August 2024.

The switch must also include at least two outgoing direct debits and a minimum monthly credit of £800 to the new account. Unlike some switch incentives, the offer only applies when customers open the account in their sole name – joint accounts are not eligible.

Customers switching to the standard Barclays Current Account must additionally sign up for Blue Rewards – the bank’s reward scheme – before the cash bonus will be paid.

Blue Rewards costs £5 per month, and provides a range of benefits including an Apple TV+ subscription, up to 15% cashback with partner retailers, the ability to view Major League Soccer matches and an exclusive easy access savings account paying 5.00% AER (variable) on balances up to £5,000.

Barclays’ standard current account also comes with in-app money management tools, an arranged overdraft charged at 35.0% APR (variable) and the ability to purchase and spend euros or US dollars through an app-based travel wallet.

In addition to the Blue Rewards perks, the Premier Current Account, which costs £12 a month, offers an interest-free overdraft buffer of up to £500, access to preferential savings rates and an Avios Rewards programme.

To be eligible for Barclays Premier, individuals need a gross annual income of at least £75,000 (paid into the account), or a total balance of at least £100,000 in savings, or in a mix of savings and investments, held with Barclays or Barclays UK investments,.

Once the respective criteria are met, the £175 welcome bonus will be paid within 28 days. The deal is exclusive to new customers who did not hold a Barclays current account before 8 July 2024.

Barclays joins a string of rival high street banking providers in the latest wave of current account switching incentives.

Lloyds Bank and first direct are also paying new customers £175 to switch – but without the requirement to sign up for a monthly rewards programme. The first direct offer also includes a £25 Amazon voucher.

9 July: Strings Attached To Market-Leading Rate

Virgin Money is offering a 2% bonus rate on its one-year E-Bond, taking the AER to a market-leading 6.65%. But to qualify for the rate, savers must make a sizable investment through the Virgin’s Stocks and Shares ISA, writes Bethany Garner.

The E-Bond, which can be opened and managed online, usually pays 4.65% AER on deposits between £1 and £1 million, fixed for 12 months.

No withdrawals or closures are permitted until the end of the account’s term, and interest is paid annually.

To qualify for the 2% bonus rate, savers must jump through some hoops.

First, they’ll need to open a Virgin Money Stocks and Shares ISA and invest a minimum of £5,000 between 1 July and 30 September 2024.

Once the investment is made, they’ll earn the 2% bonus rate on their E-Bond – and continue to earn it for as long as they hold their investment within the ISA.

However, the bonus rate may not apply to the entire balance – it will only be paid on the portion of their cash deposit that matches their ISA investment.

For example, a saver who deposited £15,000 in their E-Bond and invested £5,000 in a Stocks and Shares ISA would earn 6.65% AER on the first £5,000 of their E-Bond balance, and the standard rate of 4.65% AER on the remaining £10,000.

Additionally, the bonus rate only applies on cash balances up to £20,000 since this is the maximum individuals can pay into ISAs each tax year.

The Virgin Money Stocks and Shares ISA offers three ready-made investment options with three risk levels: cautious, balanced and adventurous. Savers who want to open a fixed-rate bond without making a large investment can currently earn 5.25% AER (fixed) with Mizrahi Tefahot Bank, whose 12-Month Fixed Term Deposit account pays that return on deposits from £1,000. Savers earn the headline rate on their entire balance.

18 June: Sidekick, Vernon B Society Offer Attractive Returns

Wealth management app Sidekick has launched an easy access savings account paying up to 5.34% AER (variable), writes Bethany Garner.

This headline rate includes a 1% bonus, which lasts for 12 months and kicks in when customers invest at least £1,000 in the provider’s actively-managed Flagship portfolio. The bonus rate only applies to balances up to £20,000. Interest is calculated and paid daily.

The new account can be opened and managed through Sidekick’s app, and withdrawals are permitted at any time without notice or penalty.

Sidekick provides its savings account through GB Bank. This means customers’ cash savings are covered up to the value of £85,000 under the Financial Services Compensation Scheme (FSCS) should the provider go bust.

At 5.34% AER, the account is the market-leading easy access option at time of writing – paying 0.14 percentage points more than the previous leader, Ulster Bank. However, Ulster Bank’s 5.20% AER rate applies to the entirety of the account balance.

Sidekick is the second investing platform to launch a cash savings account this month, following in the footsteps of Trading212, which began offering a cash ISA last week (see story from 12 June).

Elsewhere, Stockport-based Vernon Building Society has launched a one-year regular saver paying a competitive 6.50% AER when savers deposit up to £250 per month. No withdrawals are permitted, but savers can close the account at any time.

The account is only available to Vernon members who have held an account with the building society since at least 1 May 2024, or to individuals residing in the following postcodes: BL, CH, CW, M, OL, SK, WA or WN (Greater Manchester and Cheshire). The minimum age for applicants is 16.

A saver who used the maximum allowance each month would earn £105.69 total interest at the end of 12 months.

While savers have the option to skip monthly payments, unused subscriptions cannot be rolled over into subsequent months. Interest on the regular saver is calculated daily and paid annually.

At 6.50%, the account falls 0.50 percentage points shy of the current market leaders. Both the Co-operative Bank and first direct pay 7.00% AER on their regular saver accounts.

14 June: Competition Heats Up In Current Account Market

The Co-operative Bank has launched a current account switch offer that pays new customers up to £150 – but the deal comes with strings attached, writes Bethany Garner.

The bank’s new switch incentive comprises a £75 welcome bonus plus five monthly instalments of £15.

To earn the initial bonus, customers must make a full switch to the Co-operative’s Standard or Everyday Extra Current Account, using the Current Account Switch Service (CASS).

They must also move across at least two direct debits, make 10 transactions with their new debit card and deposit at least £1,000, all within 30 days of opening.

To receive the remaining £75 in five monthly instalments of £15, switchers must open a Regular Saver account with Co-operative Bank and deposit at least £50 per month.

At the same time, they must continue to pay at least £1,000 per month into their new current account, maintain two direct debits and make 10 or more monthly debit card transactions.

This offer is only available to new customers who have not received a switch incentive from the Co-operative Bank since 1 November 2022.

The Standard Current Account is free to open and maintain, comes with an overdraft facility and can be managed online or through the provider’s app.

The Everyday Extra account comes with a £15 monthly fee, and includes worldwide travel insurance, breakdown cover and mobile phone insurance.

In launching the offer, Co-operative Bank joins first direct, Lloyds, Santander, TSB and Nationwide.

At time of writing, Nationwide offers the largest switching bonus at £200 – but only existing Nationwide customers can qualify.

12 June: Investment Platform Diversifies With Saving Option

Trading212, the app-based trading platform, has launched a cash Individual Savings Account (ISA) paying a market-leading 5.20% AER, writes Bethany Garner.

The variable rate account must be opened and managed through Trading212’s app, and there’s no minimum opening deposit. Transfers are also accepted from other ISA providers and, once opened, savers can access their cash at any time with unlimited withdrawals.

As a flexible ISA, cash can be withdrawn and replaced without the replacement counting towards savers’ annual ISA allowance.

Since Trading212 is not a bank, savers’ money is not covered by the Financial Services Compensation Scheme (FSCS). Instead, Trading212 holds customer money in a separate dedicated account, a process known as ‘safeguarding’.

At 5.20% AER, the account offers market-leading returns for easy access ISAs at time of writing. The former marker leader, provided by budgeting app Plum, pays 5.17% AER on balances from £100.

Currently, the four highest-paying easy access ISAs are offered by online and app-only providers, with their high street counterparts falling behind.

According to data from Moneyfactscompare, the UK’s highstreet banks paid an average of just 1.62% AER on their easy access cash ISAs as of 6 June – less than half the market average of 3.31%.

5 June: Chase Boosts Savings Rate To 5.1% Until 2025

Saffron building society is offering its members exclusive access to a regular saver account that pays 8% AER interest on balances from £1, writes Bethany Garner.

The Members’ Regular Saver is available to existing customers who have held a mortgage or savings account with the society for at least 12 months.

At 8% AER, the account offers market-leading returns for regular savers. However, since customers can only deposit up to £50 each month, and as interest paid on each monthly balance, the maximum they could earn on a total deposit of £600 is £26, paid at maturity.

By contrast, first direct’s regular saver pays a lower rate of 7% AER, but allows customers to deposit up to £300 each month. By making full use of this allowance, savers could earn £136.50 when the account matures after 12 months.

Saffron’s new account is part of its Members’ Month initiative, which involves a range of prize draws and giveaways throughout June.

Prizes range from theatre vouchers to mortgage payment contributions of up to £2,000.

Marcus Buck, head of marketing and product, said: “We wanted to focus on giving our members tangible rewards. That’s why we’ve brought Members’ Month back for the second year running.”

Chase, the online-only provider, has introduced fresh competition to the easy access market, by adding a 1% bonus rate to its Chase Saver account.

The bonus, which will remain in place until 16 January 2025, takes the account’s rate to 5.1% AER (variable) – just 0.1% shy of the current market leader.

At time of writing, Ulster Bank’s Loyalty Saver pays 5.2% AER (variable) on balances from £5,000. To be eligible, savers must hold a current account with Ulster Bank. The Chase bonus rate is available to new and existing customers, provided they hold no more than £50,000 in savings with Chase, and open a current account with the provider.

30 May: Top NS&I Rate Almost Double Latest Inflation Figure

National Savings and Investments (NS&I), the government-backed savings bank that oversees Premium Bonds, has raised interest rates on two of its savings accounts, and launched a new bond, writes Bethany Garner.

Its Income Bond and Direct Saver accounts now pay 4% AER (variable), up from 3.64%. Both are easy access accounts, which can be opened online from £1.

NS&I has also launched a one-year fixed-rate British Savings Bond, paying 4.50% AER on deposits from £500. It joins its three-year counterpart, announced in the spring Budget, which pays 4.15% AER.

Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “Savings rates have crept up a little at NS&I. They’ve kept it quiet, given the general election, but they’re not much to shout about anyway. You can do so much better elsewhere.”

The rate of inflation in April stood at 2.3%, meaning savers are able to achieve a healthy ‘real’ return on their deposits. In addition to the latest NS&I offers, some accounts are yielding over 5% AER on easy-access savings.

The market-leading easy access account is offered by Ulster Bank, which pays 5.20% AER on balances from £5,000 through its Loyalty Saver. This account is only available to existing Ulster Bank customers.

National Bank of Egypt’s UK arm provides the highest-paying one-year bond, offering savers an interest rate of 5.22% AER on deposits from £10,000. The account is available exclusively through the online savings platform, Raisin.

23 May: Society’s Takeover Of Virgin Money Gets Green Light

Nationwide building society will pay a cash bonus of £100 to all eligible current account customers from next month as part of its annual Fairer Share Payment scheme, writes Jo Thornhill.

As a mutual entity, Nationwide is owned by its customers, who are known as members. It launched the payment scheme last year as a way of distributing part of its profits to its membership.

This year the total pot to be paid out is £385 million.

To qualify, members must have held a Nationwide current account on 31 March 2024 (and the account must still be open in June), plus they must have at least £100 in a qualifying savings account or owe at least £100 on a Nationwide mortgage,also as of 31 March.

In March, Nationwide announced plans to buy Virgin Money for £2.9bn. This week, Virgin Money shareholders voted this week to accept the takeover, with 89% voting in favour. The deal is expected to be completed by the end of the year.

Nationwide members did not get a vote on the takeover as the society is not required to seek their permission. A petition to persuade it to consult the membership has so far attracted 5,000 signatures.

There are 9.2 million Nationwide current account customers, but only those who are eligible, of which there are an estimated 3.85 million, will receive the £100 flat rate payment. Last year a total pot of £344 million was split among 3.4 million customers, who also each received a £100 bonus.

The mutual has said it will write to eligible customers by 31 May, with payments paid directly into Nationwide current accounts between 13 and 28 June.

In addition to the Fairer Share Payment, Nationwide has launched a member exclusive savings bond with a rate of 5.5%, fixed for 12 months. It is open to all of the society’s 16 million members, and the maximum deposit limit is £10,000.

Nationwide is also offering a £200 cash incentive for members who don’t hold a current account with the society to switch to it. To qualify for the switching bonus you need to have been a member of Nationwide on 31 March 2024, with a qualifying savings or mortgage account.

20 May: Increase Reflects Rising Costs Of Home Improvements

Nationwide, the UK’s largest building society, has doubled the size of its personal loans from £25,000 to £50,000 to help customers plug the gap between borrowing availability and rising construction and labour costs, writes Laura Howard.

The loans, which represent the largest unsecured borrowing on the market, are available only to Nationwide’s current account customers.

Over a third (35%) of those taking out personal loans of between £20,000 and £25,000 with the society plan to use the money for home improvements.

But costs for a typical house extension range from £45,000 to £75,000, according to trade website, MyBuilder and are predicted to rise by a further 15% over the next five years, according to the Building Cost Information Service (BCIS).

Half of those carrying out building projects (57%) have had to already ‘shave or shelve’ their plans due to lack of finances, according to Nationwide.

Darren Bailey, head of personal loans at Nationwide, said: “With the impact of inflation and other external pressures, the costs of construction have seen significant increases in recent years.

“However, we recognise many people will want to continue with the home improvement plans, even if that means they have downscaled their plans to accommodate their budget. Our increased maximum personal loan size of £50,000 means we have an option to suit everyone.”

Customers can apply online, in branch or on the phone and receive the money the same day. Nationwide doesn’t apply an early settlement charge for paying the loan back early.

14 May: Bank Joins First Direct In Tempting New Customers

Santander has launched a switch incentive that pays customers £175 when they open an Edge or Edge Up current account, writes Bethany Garner.

The offer is available to both new and existing customers, provided they have not received a switch incentive from Santander in the past.

To receive the incentive, individuals must make a full switch to Santander via the Current Account Switch Service (CASS), move across at least two standing orders or direct debits, and credit their new account with at least £1,500, all within 60 days of opening.

The Edge current account comes with a £3 monthly fee, and pays 1% cashback on household bills up to the value of £20 per month.

The Edge Up account offers 1% cashback on household bills up to £30 per month, and 3.50% AER (variable) on balances up to £25,000. It charges a £5 monthly fee.

This marks the second time Santander has launched a switch incentive this year, having previously offered new customers £185 to switch in March. At £175, the new offer matches first direct’s long-running welcome bonus, which returned to the market on 7 May (see story below).

7 May: 1st Account Offers £175 Welcome Bonus

Online-only bank first direct, has relaunched its switch incentive, paying new customers £175 when they make a full switch to its 1st Account, writes Bethany Garner.

To receive the bonus, customers must make the switch using the Current Account Switch Service (CASS), move across at least two direct debits, deposit £1,000 into the account and make five debit card purchases within 30 days of opening.

This offer is only available to new customers, which is determined by not having held an account with first direct or HSBC (the brand’s parent company) since 1 January 2018.

The 1st Account, which is first direct’s only current account, also comes with a £250 interest-free overdraft buffer (subject to status), a linked regular saver paying fixed annual interest of 7% (gross) for 12 months (on deposits of between £25 and £300), and no debit card fees when spending abroad.

First direct’s switching offer is the only one currently on the market that pays a cash bonus. However, Virgin Money is offering new customers a bonus interest rate of up to 12% when they make a full switch to one of three current accounts (see story below).

2 May: Virgin Money Launches 12% Interest Account – With Catches

Virgin Money has launched a current account switching offer paying a headline interest rate of 12% (gross) – but it comes with some catches, writes Bethany Garner.

The attractive 12% return comprises a 10% ‘bonus’ rate which is paid on top of the provider’s standard 2%. The bonus rate only applies for 12 months between 1 July 2024 and 30 June 2025 – and only to the first £1,000 balance.

It means that the maximum interest an account holder could earn over this time is £120, providing the £1,000 balance was maintained.

For comparison, savers can currently access top rates of 5.18% (gross) fixed over 12 months with Smart Save. But the rate applies to much bigger balances of up to £85,000.

Customers accessing the Virgin deal must also make a full switch under the Current Account Switch Service and move across at least two direct debits. They must not have held an account with Virgin Money since 30 April 2024.

The switcher offer applies across Virgin Money’s M Account, M Plus Account and Club M Account and will be available until 31 May 2024.

At time of writing, Virgin’s is the only current account switching offer available, first direct having withdrawn its long-standing £175 welcome bonus in April.

24 April: Bank Launches Account After Coventry Takeover News

Co-operative Bank has launched a regular saver account offering 7% AER, fixed for 12 months, writes Bethany Garner.

Account holders can deposit up to £250 each month. There’s no requirement to make a deposit every month, but unused subscriptions cannot be rolled over.

Savers can withdraw their cash at any time.

Like many regular savers, the account is only available to the bank’s existing customers. Interest is calculated daily from the outset and paid at maturity, with the total deposit plus interest transferred to a Smart Saver instant access account.

If an account holder used their full £250 allowance each month – £3,000 in total over 12 months – and made no withdrawals, they would earn £114 in interest when the account matured.

Seven per cent of £3,000 is £210, but the amount earned is less because interest is calculated on the amount deposited throughout the 12 months, not the sum total.

The launch of the account follows the news that Coventry building society plans to buy Co-operative Bank, having outlined the terms of a £780 million takeover last week.

The move would be unlikely to impact Co-operative Bank customers in the short term, although their accounts would likely be transferred to Coventry at some point. If the merger is completed, the new group would have £89 billion of assets under management.

At 7% AER, the Co-operative’s regular saver rate matches the market leader, first direct, although its Regular Saver allows customers to deposit between £25 and £300 each month, with any unused subscriptions rolling over into subsequent months.

Unlike the Co-operative’s offering, however, first direct customers must make a deposit every month throughout the account’s 12-month term, and cannot access the cash until it matures.

As inflation eases, savers are increasingly taking advantage of competitive rates such as these. According to analysis by Aldermore Bank, UK adults deposited a collective £83 billion into savings accounts over the course of 2023, with the average saver setting aside £2,274 – an increase of 26% compared with 2022.

However, a survey by credit management company Lowell found that 33% of respondents report having less than £500 saved, and 13% said they had no savings at all.

3 April: Top Rate Of 4.15% Sits ‘Mid Table’ In Savings Charts

The ‘British Savings Bond’ announced by Chancellor Jeremy Hunt during his Spring Budget is available from today, writes Bethany Garner.

The three-year bond, provided by government-backed National Savings & Investments (NS&I), pays a fixed interest rate of up to 4.15% AER on deposits from £500 to £1 million.

The Bonds must be opened and managed exclusively online. No withdrawals or further deposits are permitted until the end of the three-year term.

Savers can choose between two versions of the Bond:

Guaranteed Growth Bond – offers 4.15% AER, with interest paid at the end of the term
Guaranteed Income Bond – offers 4.07% AER, with interest paid into a nominated account month.

With a rate of 4.15%, the Guaranteed Growth Bond falls 0.52 percentage points short of the top equivalent deal currently available – Zenith Bank’s three-year Fixed Term Deposit account which pays 4.67% AER.

According to Sarah Coles, head of personal finance at Hargreaves Lansdown, NS&I British Savings Bonds may be, ‘doomed to mid-table mediocrity’. She added that, “easy access and short-term fixed accounts offer higher rates right now, because longer fixes factor in expectations that interest rates will fall during the term.”

However, while higher rates are available elsewhere, British Savings Bonds could prove attractive to savers looking to safeguard larger balances; up to £1 million is guaranteed by the Treasury, compared to the £85,000 protection offered by regular banks and building societies under the Financial Services Compensation Scheme (FSCS).

Dax Harkins, chief executive at NS&I, said: “British Savings Bonds are there to help people save for the longer term and support their savings goals, safe in the knowledge that their investments are 100% protected.”

NS&I says it plans to offer the bonds for an ‘extended period’ as part of its efforts to increase savers’ deposits to £9 billion over the course of the new tax year which starts on 6 April (Saturday).

27 March: First Direct Enters Switching Market With £175 Incentive

Online-only bank, first direct, has re-launched its current account switch offer, which pays new customers £175 when they make a full switch to its 1st current account, writes Bethany Garner.

To qualify, customers must make their switch through the Current Account Switch Service, move across or set up at least two direct debits, and credit the new account with at least £1,000 within 30 days of opening.

The offer is only available to new customers, defined as individuals who haven’t held a first direct or HSBC current account since 1 January 2018. HSBC owns first direct.

The deal will be available until 22 April 2024, but could be withdrawn early if demand is high.

The same £175 welcome bonus previously ran between August 2022 and 26 January 2024.

The first direct offer is the latest in a flurry of providers to tempt new customers with a welcome bonus. At time of writing, individuals can earn up to £220 to switch current accounts, with five other providers currently running offers (see story from 18 March).

20 March: New App-Only ISA Pays Leading 5.15%

Plum, the budgeting app, has launched a tax-free cash ISA offering market-leading returns of 5.15% AER (variable), writes Bethany Garner.

With an interest rate cut looking more likely by the summer – following today’s news that annual inflation fell sharply to 3.4% in February – savings deals paying 5%-plus may now have a limited shelf life.

Currently 80% of UK savings accounts pay interest at above-inflation rates, according to data from Moneyfacts Compare.

However, the Plum ISA’s headline rate includes a bonus of 0.86% AER, which falls away after the first 12 months. It must also be opened and managed exclusively through the Plum app. The minimum opening deposit is £1.

While savers can transfer in a cash ISA balance held with another provider, accounts opened via transfer will not be eligible for the bonus rate, earning 4.29% AER (variable) instead.

As an easy access ISA, savers can make withdrawals at any time without notice or penalty. But the ISA is not ‘flexible’, which means any money that is withdrawn loses its tax-free status and counts towards the saver’s £20,000 annual ISA allowance if it’s re-deposited.

The account is offered under the Plum brand but is provided by Citibank which is fully regulated by the Financial Conduct Authority. This means that the first £85,000 held in the account is protected under the Financial Services Compensation Scheme (FSCS).

According to Bank of England figures, an average of £4 billion was paid into ISAs every month between March 2023 and March 2024 as savers sought to shield higher interest earnings from tax.

18 March: Banks Tempting Customers With Cash Offers

Santander has launched a switch incentive worth up to £185 when customers switch to one of four current accounts, writes Bethany Garner.

The offer comes just days after HSBC introduced its own switch incentive worth up to £220 (see story below).

To claim Santander’s £185 welcome bonus, individuals must make a full switch to one of its Everyday, Edge, Edge Up or Private current accounts using the Current Account Switch Service (CASS).

Within 60 days of opening, the new account must be credited with at least £1,500, and customers must set up or move across at least two direct debits. Once these criteria are met, the £185 bonus should be paid within 30 days.

The offer is available to new and existing Santander customers provided they have not received a switching bonus from the bank in the past.

Santander’s Everyday Current Account is free to open and maintain. It offers standard current account features such as online and mobile banking, along with an overdraft facility (eligibility permitting).

The Edge Current Account charges a £3 monthly fee but offers up 1% cashback on bills, supermarket and travel spending, capped at £20 per month. There’s also a linked savings account that pays 7.00% AER (variable) on balances up to £4,000 for 12 months.

The Edge Up Current Account also pays 1% cashback on bills and daily essentials – capped at £30 per month – in exchange for a £5 monthly fee. In-credit balances up to £25,000 earn 3.50% AER (variable), and customers can use their Edge Up debit card abroad for free.

The bank’s Private Current Account also pays 3.50% AER (variable) on balances up to £25,000, allows customers to hold cash in multiple currencies and offers fee-free spending outside the UK.

To open the account, individuals must have savings or investments worth at least £500,000, or an annual income above £250,000. It comes with a monthly fee of £5. At time of writing, Santander is one of five providers to offer customers a cash bonus when they switch. Here’s our run-down of what’s on offer.

14 March: Latest Offer Worth Up To £220

HSBC has launched a current account switch incentive of up to £220 when customers transfer to its Premier or Advance account, writes Bethany Garner.

HSBC is the fourth provider to launch a current account switch incentive in 2024 so far – one has since been withdrawn – and its £220 welcome bonus is the largest currently on the market (see story from 15 February below).

To get the headline £220, however, individuals must jump through a few hoops. The first £100 is paid when customers take the following actions within 60 days of opening the account:

make a full switch to the HSBC Premier or Advance account through the Current Account Switch Service (CASS)
make at least 20 HSBC debit card payments
register for mobile banking and log into the HSBC mobile banking app
open an Online Bonus Saver account and deposit at least £50.

The remaining £120 is paid in monthly instalments of £10, over the course of 12 months. Customers receive their £10 payment each month they:

credit the account with at least £1,500
make at least 20 debit card payments
log into the HSBC mobile app
deposit at least £50 into their Online Bonus Saver account.

To be eligible for the offer, individuals cannot have held an HSBC or first direct current account since 1 January 2019.

HSBC’s Advance account is free to open and maintain. It comes with a £25 interest-free overdraft buffer (eligibility permitting, charged at 39.90% thereafter), and a linked Regular Saver paying 5.00% AER.

The Premier account is also free to maintain, but only individuals with an annual income of at least £75,000 or £50,000 worth of savings and assets held with HSBC are eligible. It comes with benefits such as worldwide travel insurance and preferential savings and mortgage rates.

HSBC’s Online Bonus Saver pays 4.00% AER (variable) during months that no withdrawals are made. If savers make a withdrawal, the rate drops to 2.30% (AER). Any portion of the balance above £50,000 also earns this reduced rate, regardless of whether any withdrawals are made.

7 March: Building Society Commits To Branch Network

Nationwide building society is planning to buy Virgin Money for £2.9 billion, creating one of the UK’s biggest mortgage and savings providers with combined assets of over £366 billion.

The as-yet unfinalised deal, which is subject to regulatory and Virgin shareholder approval, means Nationwide would control 696 branches in the UK, which is the largest single-brand network and second only in size to that of Lloyds Banking Group.

Both companies are stressing that the deal, if completed, would benefit their customers in terms of product choice and enhanced customer service. No customer action is required at this stage, with existing products, including mortgages, continuing as normal.

The building society says it will stick with its pledge not to close any of its own branches, and it will maintain a presence wherever either brand is currently represented. However, already-announced Virgin branch closures may go ahead as planned.

The Virgin brand will survive the take-over, but will be retired after six years, when Nationwide will stop paying an annual royalty to Richard Branson’s Virgin Enterprises for the use of the name.

The UK’s biggest member-owned financial services business says it will not make any material changes to the size of the Virgin Money employee base in the near term.

Debbie Crosbie, Nationwide’s chief executive, said: “Nationwide will remain a building society, and a combined group would bring the benefits of fairer banking and mutual ownership to more people in the UK, including our continuing commitment to retain existing branches, as part of our ‘Branch Promise’ and leading levels of customer service.”

Nationwide has offered to pay 220p per share for Virgin Media along with a 2p per share dividend. The offer price was 38% more than Virgin Money’s closing share price on Wednesday. However, early trading on Thursday has seen the share price rise to 217p, which might prompt shareholders to push for a greater premium from Nationwide or from a rival bidder.

However, analysts analysts Peel Hunt said: “We think 220p is an attractive level. We doubt that Virgin Money UK’s share price would reach that level in any reasonable time horizon without a bid. In our view, VMUK shareholders should accept any cash bid at 220p.”

Virgin Money bought Northern Rock building society from the government in 2011 in the wake of the 2007-08 financial crisis. Virgin was previously sold to CYBG, the owner of Clydesdale and Yorkshire banks, in 2018.

David Hollingworth of broker L&C Mortgages commented: “Nationwide underlines its position as a superpower of the mutual sector in acquiring a substantial bank player in the mortgage market. The combination will create another Goliath furthering Nationwide’s ability to directly take on the big banking groups.

“This move would initially look to carry the drawback of reduced competition in the mortgage market. Virgin Money has been very competitive in the mortgage market and shown itself more than capable of going toe to toe with the major high street banks. At times it has shown an ability to bring a different way of thinking to the market and sought to innovate in its product options.

“It also has a solid heritage in being able to take a more flexible approach for the right customers to help borrowers that may be a little outside the standard high street offerings.

“That expertise will hopefully appeal to Nationwide rather than risk the gradual demise of the more individual approach that can be available through Virgin’s Clydesdale mortgage brand in particular.

“Borrowers have nothing to worry about and their mortgage will continue as normal. In fact, both brands are set to continue for some time to come, so the market should continue to benefit from differentiated ranges in the near term.”

27 February: ‘Take 5 Minutes To Find A Better Deal’

The Financial Conduct Authority, which regulates financial services in the UK, is urging consumers to move their savings to get a better interest rate, writes Bethany Garner.

It says over half of UK savers (52%) have either switched savings accounts, or considered doing so, to get a better return, while 69% of UK adults would consider switching savings accounts in the future.

Bank of England figures from last year suggest up to £250 billion may be languishing in non interest-bearing accounts. Banks have been criticised for failing to pass on the full effects of successive bank rate hikes to savers (see story from 31 July).

According to FCA figures, the amount held in non-interest bearing accounts reduced by £13 billion between July and December 2023. In the same period, deposits held in fixed-term and notice accounts, which typically offer higher returns, rose by £24 billion.

To encourage more consumers to switch, the regulator has launched a social media and radio campaign that will prompt savers to shop around for better rates.

The campaign also features an online savings calculator to help consumers work out how much interest they could earn.

Sheldon Mills, an executive director at the FCA, said: “We know people can be put off switching for a variety of reasons, but they could be making their money work harder. There are some great rates out there and it could take as little as five minutes to find a better deal.”

Adam Thrower, head of savings at Shawbrook Bank, said: “In the past year, savings rates hit their highest point in over a decade. It’s disheartening that many people haven’t seized this opportunity and may be losing out on hundreds of pounds in missed interest.

“People often stick to the names they know, missing out on the chance to boost their earnings with smaller banks that are equally secure when FSCS accredited and offering much better rates.”

15 February: Banks Inject Life Into Dormant Market

NatWest, Royal Bank of Scotland (RBS) and Lloyds have each launched current account switch incentives where customers are paid up to £200 to move to a new provider, writes Bethany Garner.

From today, NatWest and RBS – both part of the NatWest Banking Group – are paying individuals £200 to make a full switch to one of the following accounts:

Select
Select Silver
Select Platinum
Premier Select
Reward
Reward Silver
Reward Platinum
Premier Reward
Black account
Foundation account

The Select and Foundation accounts are free to open and maintain, while the others (including Select Silver and Select Platinum) charge a monthly fee in exchange for perks such as rewards, insurance and cashback.

To receive the bonus, customers must apply online or via app, use the Current Account Switch Service (CASS), and credit the account with at least £1,250 within 60 days of opening.

This offer is available to new and existing customers, provided they have not received a switching bonus from NatWest, RBS or Ulster Bank (part of the same group) since 1 January 2020.

Lloyds is offering a welcome bonus of £175 when customers switch to its fee-charging Club Lloyds current account. The incentive is available until 28 March.

To be eligible, customers must make a full switch using the Current Account Switch Service (CASS) and transfer at least two direct debits to the new account. The offer is available to new and existing customers as long as they have not received a switching bonus from Lloyds or Halifax (part of the Lloyds group) since April 2020.

The Club Lloyds account charges a £3 monthly fee, although this is waived when the account is credited with at least £2,000 per month.

Account holders can earn one reward each year, choosing from benefits such as six cinema tickets or a 12-month Disney+ subscription. It also pays interest on in-credit balances up to £5,000.

These new offers bring fresh competition to the current account switching market. Between 2 and 13 February, there were no cash switch incentives available (see story below).

2 February: TSB, Co-op & First Direct Last To Withdraw Offers

Following TSB’s decision to pull its £125 current account switching offer on Wednesday, there are no cash bank switching incentives available in the UK, writes Bethany Garner.

Co-operative Bank withdrew its £100 switching bonus on 19 January, just four days after launch.

Online-only bank, first direct, indefinitely paused its £175 switching offer – which had been available since August 2022 – on 26 January.

The lack of offers stands in stark contrast to the flurry of switch incentives run by providers such as HSBC, Nationwide and NatWest in 2023.

Throughout last year, around 1.5 million current account switches took place, according to data from the Current Account Switch Service (CASS). This marks a 50% increase from the 1 million switches carried out in 2022.

A CASS spokesperson said: “While CASS doesn’t explicitly track why consumers or businesses switch accounts, there is a subset of switchers who are attracted by cash incentives.

“Banks and building societies regularly launch switching offers to attract new customers, and we expect offers to re-enter the market.”

Despite a lack of cash welcome bonuses, some providers continue to offer switch incentives in other forms. Chase pays, for instance, new customers 1% cashback on debit card purchases (capped at £15 per month) for their first year.

Customers may also switch for a variety of other reasons. The CASS spokesperson said: “We found that online or mobile app banking was the top reason people prefer their new account to their old one, which has consistently been the case for a number of quarters.

“Interest earned was the second most popular reason for people preferring their new account, with non-financial benefits such as customer service and location of branches also ranking highly.”

30 January: Personal Savings Allowance Under Threat

Around 1.4 million UK taxpayers will see their Personal Savings Allowance (PSA) halved for the 2023-24 tax year, which could mean a surprise tax bill for many savers, writes Bethany Garner.

The PSA is the amount of interest paid on savings that can be earned tax-free. Any interest earned above your PSA is taxed the same way as other income: 20% for basic rate taxpayers and 40% for higher rate taxpayers.

Additional rate taxpayers, who pay income tax at 45%, are not entitled to a PSA.

With tax bands frozen until 2028, 3.8 million people will move to a higher income tax band in the 2023-24 tax year as their pay increases, According to the Office for Budget Responsibility (OBR). This is known as ‘fiscal drag’.

Analysis by Coventry Building Society suggests this will push 1.4 million earners from the basic rate tax band to the higher rate tax band, as their earnings exceed the £50,270 higher rate threshold, meaning their PSA will fall from £1,000 to £500.

A further 2.1 million will breach the £12,570 threshold, and move into the basic rate band, while 300,000 will be pushed into the highest additional rate band, reserved for those with annual income above £125,140.

Jeremy Cox, head of strategy at Coventry, said: “Higher rate taxpayers need just £10,000 earning a ‘best buy’ rate of 5% before the interest they receive uses up their £500 Personal Savings Allowance. After that they would be hit with 40% tax on any additional interest they are paid.”

If you’re employed or paid a pension, HMRC will automatically adjust your tax code and tax-free allowance to ensure you pay any tax owed on savings interest.

However, if you complete a self assessment tax return (for example, you’re self-employed or have additional sources of income) you should declare interest received therre. For the 2023-24 tax year, this return will be due on 31 January 2025.

Any individual who earns more than £10,000 from their savings in a given tax year will also need to complete a Self-Assessment return.

However, money held in an Individual Savings Account (ISA) is exempt from this tax. Every individual can pay £20,000 into ISAs every tax year.

Cox added: “Tax bills will steadily rise for anyone with non-ISA savings that has exceeded their Personal Savings Allowance. There are only a few months left to make full use of this year’s tax-free ISA allowance of £20,000.”

18 January: TSB & Co-op Launch £100+ Switching Bonuses

The Co-operative Bank and TSB have launched welcome offers that pay new customers more than £100 when they switch providers, writes Bethany Garner.

TSB is paying individuals £125 when they make a full switch to its Spend & Save current account via the Current Account Switch Service (CASS), plus a further £10 monthly cashback for their first six months.

Between the welcome bonus and cashback, switchers can earn up to £185 in total – £10 more than the former market leader, first direct, which pays new customers £175 to switch.

To receive the TSB bonus, new customers must set up at least two direct debits, make a payment with their new TSB debit card and log into the TSB Mobile Banking App by 15 March 2024.

Customers who have received a switching offer from TSB since October 2022 are not eligible.

Co-operative Bank’s switch incentive pays a £100 welcome bonus when customers make a full switch to one of its current accounts using CASS. There’s a further £50 available if they open a new savings account with the provider, too.

This offer is available to both new and existing customers, provided they complete a full switch from another current account provider, deposit at least £1,000 and set up two direct debits or standing orders.

To snag the extra £50, switchers must deposit at least £25 in their newly opened savings account.

Individuals who have received a switching offer from Co-operative Bank since 1 November 2022 are not eligible.

17 January: YBS Launches New Christmas Regular Saver

Yorkshire Building Society (YBS) has launched its latest Christmas Regular Saver which is open to both new and existing customers, writes Bethany Garner.

The account pays 6.00% AER (variable) on deposits of up to £150 a month and matures on 31 October 2024. By paying in the monthly maximum (starting from January and making no withdrawals) savers could accrue a balance of £1,552.03 with interest accounting for £52.03 of the balance.

Although withdrawals are permitted, savers can only access their cash penalty-free for a single day of their choosing between account opening and maturity.

The account is designed to support customers in saving for Christmas this year. According to YBS research, the average UK adult expected to spend £768 on Christmas 2023 – an increase of almost 50% compared with 2020. Almost one in three (30%) surveyed said they would use credit to cover the cost.

Savers stashed a total of £70 million in Yorkshire’s Christmas Regular Saver 2023, which paid a lower rate of 4.50% (variable).

Chris Irwin, director of savings at YBS, said: “We’re really proud to offer this popular account again this year, which encourages saving little and often, and also offers a competitive return.”

Nationwide’s Flex Regular Saver beats the account paying 8.00% (variable) and on larger monthly deposits of £200 – but customers must have a current account with the provider to be eligible.

Despite some accounts still paying inflation-beating returns, an estimated £400 billion is currently being held in accounts earning 1% or less, according to data from the business consultancy, CACI.

11 January: Prize Fund Rate Drops From 4.65% To 4.40%

National Savings and Investments (NS&I), the government-backed savings bank, is pulling £31 million from the Premium Bonds prize fund, with effect from its March draw, writes Bethany Garner.

The monthly prize fund will drop from £475.5 million to £444.4 million. This means the new prize fund rate – the effective rate of return on Premium Bonds – will reduce by 0.25 percentage points from 4.65% to 4.40%.

The number of prizes on offer will reduce by 72,022 – the majority of which will be worth £100, £50 or £25.

The number of larger prizes will also fall however with six fewer £100,000 prizes, and eight fewer £50,000 prizes. The current two £1 million prizes in each draw will stay in place.

The odds of each £1 Premium Bond winning a prize will remain at 21,000-to-one from March – still an improvement on the 24,000-to-one odds offered in the March 2023 draw.

The move follows six consecutive increases over the course of 2023 as interest rates rose, with the prize fund rate hitting a 24-year high of 4.65% in September.

Andrew Westhead, retail director at NS&I, commented: “These changes reflect our requirement to strike a balance between the interests of our savers, taxpayers and the stability of the broader financial services sector.

“After these changes, the Premium Bonds draw in March is expected to pay out over 5.7 million tax-free prizes totalling more than £444 million to savers across the UK.”

NS&I is designed to raise funds for the public purse but it is not allowed to offer interest rates that result in the private sector being unable to compete, hence the adjustment to the rates it offers as market conditions change.

6 December: Fixed Rate & Notice Account Deposits Soar £57Bn

Cash deposits held in fixed-term and notice accounts soared by £57 billion between January and October this year, as savers took advantage of rising interest rates, writes Bethany Garner.

Over the same period, easy access and non-interest bearing accounts were depleted by £86 billion, according to new figures from regulator, the Financial Conduct Authority (FCA).

Fixed rate and notice accounts offer some of the highest returns on the market – which are guaranteed for a set term – but require savers to forgo access to their cash.

In the third quarter of 2023 (between July and October), average returns on fixed rate and notice accounts increased from 2.95% to 3.52%. Rates on easy access accounts climbed to a lesser degree over the same period, from 1.66% to 1.99% on average.

Sheldon Mills, executive director at the FCA, commented: “There is a more competitive savings market now than in July – including many easy access accounts paying above 5%. But there are still low-paying accounts out there, particularly products that are no longer on sale.

She added: “We want firms to keep prompting customers in lower-paying accounts to move, and we encourage customers to shop around for the best savings deals.”

The top-paying one-year fixed rate bond and easy access account currently pay 5.80% and 5.22% respectively. Both deals are offered by Metro Bank.

28 November: Society Rewards Existing Customers

Coventry Building Society is launching a regular saver account paying 7% AER, writes Bethany Garner.

The 12-month Loyalty Regular Saver is available exclusively to existing customers who have held a savings account or mortgage with Coventry Building Society since at least 1 January 2022.

The minimum balance is £1, and savers can deposit up to £250 per month, with no obligation to make a deposit every month.

Any withdrawals made before the end of the account’s term incur a penalty fee worth 30 days’ interest on the amount withdrawn.

If a saver maxed out their £250 monthly allowance for the full account term (£3,000) and made no withdrawals, they would earn £113.87 in interest.

Jonathan Wilson, senior savings propositions manager at Coventry, said: “Our loyalty accounts offering exclusive rates to our two million members are a way of rewarding those who choose to keep saving with us.”

At 7% AER, the account’s interest rate falls one percentage point shy of the current market leader – Nationwide’s Flex Regular Saver, which pays 8% AER and permits three penalty-free withdrawals during its 12-month term.

However, this account has a lower monthly deposit limit of £200, and only Nationwide customers can apply. If a saver used the full allowance, and made no withdrawals, they would earn around £104.50 in interest.

Typically, regular saver accounts are only available to existing customers. At time of writing, the highest rate available to new customers is 5.75% AER – offered by Saffron Building Society’s Small Saver account.

However, Saffron’s offering only permits customers to deposit up to £50 per month during its 12-month term.

22 November: Deal Available With Linked Current Account

Nationwide Building Society has today launched a new children’s savings account that pays 5% AER (variable) on balances up to £5,000, writes Bethany Garner.

The society’s FlexOne Saver is available to children aged between 11 and 17, who hold a FlexOne current account.

There’s no minimum opening balance and, as an instant access account, withdrawals are permitted at any time without notice or penalty. Interest is calculated daily and paid annually.

At 5% AER, the account’s interest rate falls 0.80 percentage points shy of the current children’s account market-leader. At time of writing, Saffron Building Society pays 5.80% AER on its regular saver account.

However, returns on the FlexOne account outpace inflation, which fell to 4.6% in the 12 months to October 2023 (see story below).

Tom Riley, director of retail products at Nationwide, said: “It’s important to develop a savings habit at a young age and, as a building society, we want to help foster that.

“FlexOne Saver will also ensure that our youth current account remains one of the most compelling accounts available.”

Nationwide’s FlexOne children’s current account pays 2% AER (variable) on balances up to £1,000.

The FlexOne Regular Saver – a children’s regular saver account not currently available to new customers – will also see its interest rate rise to 5% AER from today.

15 November: Savers Can Beat Rising Prices With Top Offers

With inflation falling to 4.6% in the year to October 2023, many easy access savings accounts and fixed rate bonds are offering rates that beat inflation, writes Bethany Garner.

At time of writing, Metro Bank’s Instant Access Account pays up to 5.22% AER (variable) – 0.62 percentage points higher than the Consumer Price Index figure released today by the Office for National Statistics.

Elsewhere, Ulster Bank pays 5.20% AER (variable) on its Loyalty Saver, while Cynergy Bank’s Online Easy Access Account pays 5.15% AER (variable), including a bonus rate of 1.15% that drops off after 12 months.

Fixed rate bonds are also outpacing inflation, with top contenders paying upwards of 5.50%.

As of 15 November, Metro Bank offers a one-year fixed rate bond that pays 5.91% AER on deposits between £500 and £2 million – 1.31 percentage points above inflation.

Longer-term bonds offer similar rates. JN Bank pays 5.90% AER on its three-year bond, and 5.60% on both its four and five-year bonds. All three accounts have a minimum opening deposit of £1,000.

Kevin Mountford, co-founder of online savings platform Raisin, said: “Finally it looks like inflation is coming under control and the successive interest rate rises have had the desired effect.

“For now, this may also mean there’s reduced pressure on the Bank of England to further increase the base rate, though it’s unlikely we will see any immediate reduction on the current 5.25%.

“This said, things could start to change as we move into 2024, and while this represents more promising news for borrowers it could mean that for now fixed savings rates could start to fall.

“In the fixed rate bond market, we have already seen reductions from the dizzy heights of 6% – but competition within the UK should ensure that decent returns can be earned for some time to come.

“For those who can afford to lock money away, medium-term products could prove attractive, with a few three-year fixed rate accounts paying over 5.50%.”

14 November: Latest Issue Cut By 1.75 Percentage Points

National Savings & Investments (NS&I), the government-backed savings bank, has launched the latest issue of its Green Savings Bond, writes Bethany Garner.

The sixth iteration of the bond pays interest 3.95% AER a year fixed for three years.

It can only be opened online with a deposit between £100 and £100,000, all of which is protected by HM Treasury backing (bank and building society accounts are protected up to a maximum of £85,000 per person by the Financial Services Compensation Scheme).

No further deposits or withdrawals are permitted until the end of the three-year term.

NS&I says all deposits will be used to help finance green projects chosen by the government, such as increasing renewable energy production, building sustainable transport and reducing pollution.

At 3.95% AER, this latest issue of the bond pays an interest rate 1.75 percentage points lower than its predecessor, which offered an annual return of 5.70% AER.

This decrease may represent a broader trend. According to Moneyfacts data, average returns for longer-term bonds (those lasting at least 550 days) fell for the first time in over six months in October 2023.

As of 16 October, these bonds paid 5.11% AER on average, a decline from the 5.12% peak in September.

NS&I withdrew its one-year Guaranteed Growth Bond, which paid a chart-topping 6.20% AER, from the market on 6 October.

10 November: Aldemore Tops Bank Of England Bank Rate

Aldermore Bank has today launched two fixed rate bonds paying 5.40% AER, writes Bethany Garner.

The provider’s nine-month and 18-month Fixed Rate Savings Accounts allow savers to deposit between £1,000 and £1 million – though only the first £85,000 is covered by the Financial Services Compensation Scheme.

No further deposits are permitted, and savers can’t access their cash until the account matures.

Interest on these accounts is calculated daily, and paid at maturity.

At 5.40% AER, both accounts offer an interest rate that exceeds the Bank of England’s bank rate, maintained at 5.25% since August.

However, Aldermore’s offering falls 0.50 percentage points shy of the current market leader for fixed rate accounts. JN Bank pays 5.90% AER on its one-year and three-year fixed rate bonds.

Alex Myers, director of savings at Aldermore, said: “Our new fixed rate accounts are an ideal product for people saving for short or medium term goals, such as an upcoming holiday or a larger purchase on the horizon.

“These accounts also allow an extra layer of certainty, knowing exactly how much interest they will earn for the duration of their fixed term, helping savers protect their hard-earned savings.”

26 October: Incentives Trigger 63% Rise Year On Year

Almost 1.4 million current account switches took place between 1 October 2022 and 30 September 2023, according to the latest data from Pay.UK, writes Bethany Garner.

This represents a year-on-year increase of 63% from 2021 to 2022, with switch activity up in every quarter.

Pay.UK, which oversees the Current Account Switch Service (CASS), also found that March has been the busiest month for switching in 2023, with 155,116 switches taking place.

The overall uptick in current account switches is being driven by the number of attractive switching offers on the market.

At time of writing, HSBC is offering a welcome bonus of up to £205 for opening its Advance Account and linked Global Money Account, with the offer not dependent of the accountholder having to close their existing current account.

Nationwide is paying £200 for a full switch to its FlexDirect account, while First Direct has a £175 cash incentive to encourage new customers £175 to make a full switch to its 1st Account.

Although the offer has now been withdrawn, NatWest also ran a £200 switch incentive for much of 2023, which may explain why more consumers switched to NatWest between April and June than any other provider.

Despite these offers, a 2023 study by Atom Bank found that 49% of UK adults have never changed their current account.

John Dentry, product owner for CASS at Pay.UK, said: “The Current Account Switch Service marked its 10 year anniversary this quarter, and in that time the service has upheld an important role in supporting consumers and businesses to change their current account to better suit their needs.”

At present, 51 banks and building societies are signed up to CASS, with three new providers, Citibank, Allica Bank and Rothschild, joining in the third quarter of 2023.

Since its launch in 2013, around 9.8 million switches have been completed via the service. Of these 99.7% were within the CASS timescale promise of seven working days.

24 October: New Account Just Shy Of Market Leader

Paragon Bank, the online provider, has today launched a new issue of its Double Access savings account paying 5.25% AER, writes Bethany Garner.

The account pays 0.20 percentage points more than its previous iteration, which offered savers a rate of 5.05% AER. Double Issue refers to the fact that two withdrawals can be made each year without notice or penalty. From the third withdrawal, however, the interest rate drops to 1.50% AER (variable).

The headline rate is market-leading for double-access savers. Chorley building society’s Easy Access Saver Account pays 5.30% AER (variable) on balances from £500 to £500,000, but this account only permits one withdrawal per year. From the second withdrawal its interest rate drops to 2.50% AER (variable).

The minimum opening balance on the Paragon account is £2,000, and savers can deposit up to £500,000 (the first £85,000 is covered by the Financial Services Compensation Scheme, as is the case with any UK-authorised savings institution).

Derek Sprawling, savings director at Paragon Bank, said: “We’re pleased to launch the latest issue of our Double Access account, paying a market-leading rate.

“This product could suit those savers who are happy to lock their money away but may want to retain access to it in the event of a rainy day.”

5 October: New Deals Include Top-Paying 5.00% Easy Access ISA

App-only provider Moneybox has increased rates on its easy access cash ISA to a market-leading 5.00% AER (variable), writes Bethany Garner.

The account, which previously paid 4.75% AER, can be opened with a minimum deposit of £500 – although the new 5.00% rate includes a bonus of 0.85 percentage points that expires after the first 12 months.

While savers retain full access to their cash, only three withdrawals are permitted within any 12-month period. From the fourth withdrawal (or if the account balance falls below £500) returns fall to 0.75% AER (variable).

Easy access accounts

Fresh competition has also emerged among non-ISA accounts. Coventry Building Society has launched an easy access account paying 5.20% AER (variable). The Triple Access Saver can be opened and managed exclusively online, with a minimum £1 deposit.

Withdrawals are restricted to three per year. Any subsequent withdrawals incur a fee worth 50 days’ interest on the amount withdrawn.

Fixed rate savings

HSBC has today increased the rate on its One Year Fixed Rate Saver to 5.70% AER (fixed) – 0.65 percentage points above its usual return – to customers who open an account before 18 October.

Savers can deposit between £1,000 and £1 million into the account, with no further deposits or withdrawals permitted until the end of the account term.

However, HSBC’s offering still falls 0.50 percentage points short of the current market-leader, National Savings and Investments (NS&I), which pays 6.20% AER on its one-year Guaranteed Growth Bond on deposits of between £500 and £1 million.

Current accounts

Online-only bank, Starling, has increased the interest paid in-credit current account balances by 3.20 percentage points, to 3.25% AER (variable).

Balances up to £5,000 earn the new rate, including any portion held in one of Starling’s virtual piggy banks, known as ‘Spaces’.

At 3.25% AER, the current account’s interest rate now outstrips many high street easy access savings accounts.

At time of writing, HSBC pays just 2.00% AER (variable) on its Flexible Saver account, while Halifax pays up to 1.80% AER (variable) on its Instant Saver account.

29 September: Shawbrook Trumps Beehive By A Whisker

Shawbrook Bank has launched an easy access savings account paying a market-leading 5.11% AER (variable) – just 0.01 percentage points above former leader Beehive Money, writes Bethany Garner.

This latest issue of Shawbrook’s Easy Access Account can be opened with £1,000. The maximum balance is £85,000 for sole accounts or £170,000 for joint accounts, both in line with the Financial Services Compensation Scheme limit.

Savers can make as many withdrawals as they like from the online-only account without notice or penalty, in return for a minimum withdrawal amount of £500.

Interest on the account is calculated daily and added to the balance either monthly or annually.

At 5.11% AER, the account’s interest rate is pegged 0.01 percentage points higher than the former market leader, Beehive Money (see story below), just nudging it out of the top spot.

Adam Thrower, head of savings at Shawbrook, said: “Despite the recent base rate hold, we remain committed to offering competitive rates on our savings accounts.”

28 September: App-Only Beehive Money Account Pays Leading 5.10%

App-only provider Beehive Money – part of Nottingham Building Society – has launched a limited edition savings account paying a chart-topping 5.10% AER (variable), writes Bethany Garner.

The provider’s new Limited Issue Easy Access Account can be opened from £1,000 with a maximum balance is £85,000 – the maximum sum protected under the Financial Services Compensation Scheme.

The headline 5.10% rate includes a bonus of 2.45%, which applies until 31 October 2024. To get the best from this account, savers may then want to move their cash to a better deal.

As an easy access account, withdrawals are permitted at any time – so long as savers maintain a balance of at least £1,000. Interest is calculated daily, and credited to the account annually on 31 October.

While rising rates are welcomed by savers, higher returns mean a greater risk of exceeding their Personal Savings Allowance. The PSA limits tax-free interest earnings to £1,000 a year for basic rate taxpayers, or £500 for higher-rate taxpayers.

For example, a basic rate taxpayer could save £19,607 in Beehive’s easy access account before breaching their PSA, while an additional-rate taxpayer could deposit just £9,803.

The new Beehive account knocks Paragon Bank off the top spot for easy access accounts by 0.05 percentage points. However, it remains 0.10 percentage points under Santander’s limited edition Easy Access Saver. The account paid 5.20% AER but was withdrawn from the market just eight days after launch, having reached its full subscription (see 12 September story, below).

26 September: Providers Boost Rates But 1-In-5 Aren’t Saving

Coventry building society has launched a market-leading easy access cash ISA paying 4.90% AER on balances from £1, writes Bethany Garner.

The Four Access ISA is available to both new and existing customers, and is opened and managed exclusively online. It allows savers to make up to four withdrawals per year without penalty.

Any subsequent withdrawals incur a fee of 50 days’ interest on the amount withdrawn.

As a flexible ISA, savers can withdraw and replace cash in the same tax year, without the replacement counting towards their annual ISA allowance.

Bethaney Cozens, savings product manager at Coventry, said: “We’ve opened almost as many new ISAs so far this year as the last two years combined, as ISAs have become an increasingly popular option for members wanting to maximise their tax-free savings allowances in a higher interest rate environment.”

Elsewhere, budgeting app Plum has launched a savings option called Plum Interest, which aims to offer returns that mirror the Bank of England Bank rate.

The account invests savers’ cash into a low-risk money fund provided by asset management firm, BlackRock. Money funds invest in low-risk assets such as government debt (gilts) and high quality corporate bonds.

It currently pays a variable annual rate of 4.94%, and savers can add and withdraw cash at any time without penalty.

While just shy of 5% is a competitive offer, leading easy access accounts pay up to 5.10% AER (variable) at time of writing – albeit with withdrawal restrictions.

Climbing rates may be welcome news for savers, but new research suggests a growing number of individuals are not benefitting.

According to a study by online savings platform, Raisin, one in five UK adults (20%) admit they never save a portion of their monthly income.

The study, which surveyed 5,001 UK adults in July 2023, also found that just a third (33%) of respondents save at least 10% of their salary each month.

Faced with rising living costs, 25% of respondents described their financial circumstances as ‘unstable’, while a further 41% said meeting basic living costs was their top financial priority for the next 12 months.

According to Raisin, a lack of knowledge could be part of the problem, with 30% of survey respondents describing their financial knowledge as ‘low’ or ‘non-existent.’

21 September: Society Pays Chart-Topping 8% On Regular Saver

Eligible customers who switch to a Nationwide current account will receive a £200 cash ‘welcome bonus’ from today, writes Bethany Garner.

Both new and existing customers are eligible for the bonus, provided they complete a full switch from another provider, using the Current Account Switch Service, and transfer a minimum of two direct debits.

Individuals who have received a welcome bonus from Nationwide since April 2021 are not eligible.

The offer is available on three accounts: standard FlexAccount, packaged FlexPlus account and online-only FlexDirect account, which also pays 5% AER on in-credit balances up to £1,500 for 12 months.

The building society has also launched a market-leading regular saver account, paying 8% AER fixed for 12 months. Savers can deposit up to £200 per month, netting them up to £104 in interest.

At 8%, the account beats the regular saver launched by Yorkshire building society earlier this week (see story below), which pays 7% AER, fixed for 12 months.

According to Nationwide, by switching to its FlexDirect account, customers could earn up to £377 in their first year from earned interest and the welcome bonus.

19 September: YBS Launches Regular Saver Paying 7%

Yorkshire Building Society (YBS), has launched a new table-topping regular savings account to mark UK Savings Week, writes Bethany Garner.

The limited edition Loyalty Regular Saver account pays a rate of fixed 7.00% for 12 months with a £500 maximum monthly deposit. One penalty-free withdrawal is permitted during the 12-month term.

However, the deal is only available to customers who already hold a savings account or a mortgage with the YBS.

first direct also offers a 7% regular saver to existing customers. However, monthly deposits are limited to £300, making YBS the leading deal of its kind.

The account has been launched on the back of the Building Societies Association’s UK Savings Week. Running until 24 September (Sunday) the annual initiative aims to raise awareness around good saving habits. Around 11.5 million UK adults have less than £100 in cash savings, according to BSA figures.

Chris Irwin, director of savings at Yorkshire Building Society, said that regular savings accounts are, “one way to encourage establishing healthing savings habits.”

The easy access account market has also seen a new account from GB Bank. Launched in partnership with online savings and investment platform, Wombat, the account tracks the Bank of England Bank rate by minus 0.5 percentage points – currently offering a rate of 4.75% AER.

The account must be opened via Wombat’s mobile app, with a minimum deposit of £500 and savers can withdraw cash at any time penalty-free.

It carries a maximum balance of £250,000 plus interest, but only the first £85,000 will be covered by the Financial Services Compensation Scheme.

The next Bank rate announcement will be made on Thursday (21 September).

According to the latest figures from Moneyfacts, the average easy access rate now stands at 2.95% AER – the highest since 2008. However, the most competitive accounts, including those from Paragon, Tandem and Aldermore pay 4.50% or more.

Aldermore is also boosting rates by up to 0.25 percentage points from today.

The bank’s Easy Access account now pays 4.50% AER – up from 4.25%, while its Double Access Account has seen rates rise from 4.70% to 4.90%.

Its 30 Day Notice account now offers 4.55% AER, up from 4.30%, while the ISA equivalent pays 4.50%, up from 4.25%.

The 120 Day Notice Account will pay 4.80% from today, up from 4.55%.

Rates are also rising on a number of accounts exclusive to existing customers:

The 45 and 60 Day Notice accounts will now pay 4.60% AER, up from 4.35%
The 90 Day Notice account pays 4.65% AER, up from 4.40%
The 60 Day Notice ISA now pays 4.80% AER, up from 4.55%
The Help to Buy ISA (no longer available for new customers) will pay 3.85% AER, up from 3.60%.

12 September: Rate Falls To 2.5% From Tomorrow (Weds)

Santander is withdrawing its Easy Access Limited Edition 3 account at 11:59pm tonight. However, applications from new and existing customers will be accepted until then on current terms.

The account can be opened and managed online as well as in branch.

The Limited Edition account pays 5.20% AER/ 5.08% gross (variable) on balances between £1 and £250,000, as outlined in the story below.

Announcing the changes, Santander said: “Any applications received by 23:59 today (12 September 2023) will receive the Easy Access Limited Edition 3 rate once opened.

“From tomorrow, Santander’s Easy Access Saver account returns to sale offering 2.50% AER/gross for 12 months.”

5 September: Limited Edition Account Tops Easy Access Market

Santander has launched a market-leading easy access savings account paying 5.20% AER on balances up to £250,000, writes Bethany Garner.

The Easy Access Saver Account is available to both new and existing customers until 17 September, but the bank has cautioned it may be withdrawn sooner if demand is high.

It can be opened online, over the phone or in a branch from £1, and savers can make as many withdrawals as they like without notice or penalty.

Interest on the account is calculated daily and paid monthly or annually, and it matures after 12 months.

Andrea Melville, director of current accounts, savings and business banking at Santander, said: “We know now more than ever people want their money to go further and this account is one of the ways we are helping customers maximise their savings income.”

Santander has, this week, also increased rates on its fixed-term ISAs. The provider’s one-year fixed ISA now pays 5.05% AER, while its two-year fixed rate ISA saw rates increase to 5.10% AER.

While climbing interest rates may be welcome news for savers battling the corrosive effects of inflation on their cash, higher returns could tip them over their Personal Savings Allowance (PSA).

First introduced in 2016, the PSA allows basic-rate taxpayers to earn £1,000 (£500 for higher-rate taxpayers) in interest each year before it becomes liable for income tax.

A basic rate taxpayer could save £19,231 in a Santander Easy Access Saver before breaching their PSA, while an additional-rate tax-payer could deposit just £9,616 before income tax kicks in. Additional rate taxpayers do not receive a PSA.

By contrast, a basic rate tax-payer would need to deposit about £50,000 in an easy access account paying a more typical 2% AER before reaching their PSA threshold.

30 August: Govt-Backed Bond Tops Tables With 6.20% Returns

National Savings and Investments (NS&I), the government-backed savings bank that oversees Premium Bonds, today launched the latest issues of its one-year Guaranteed Growth and Guaranteed Income Bonds, writes Bethany Garner.

Both bonds pay 6.20% AER (fixed) – an increase of 1.20 percentage points since their last issue – positioning them as prevailing market leaders.

To open a Guaranteed Growth or Income Bond, savers must deposit a lump sum between £500 and £1 million. The entire balance is protected by HM Treasury backing.

Interest on the one-year Guaranteed Growth Bond is calculated daily and paid at maturity. Interest on the Guaranteed Income Bond is also calculated daily, but is paid monthly into a nominated bank account.

When the bond matures after 12 months, savers can withdraw their money or invest in another bond.

Andrew Griffith, economic secretary to the Treasury, said: “It’s vital that savers are able to benefit from recent interest rate rises, so I’m delighted that NS&I is releasing new Issues of Guaranteed Growth Bonds and Guaranteed Income Bonds at over 6% – the highest rate since they were launched.”

NS&I has also increased rates on new issues of its two, three and five-year bonds by up to 1.25 percentage points from today.

The bank’s two and three-year Guaranteed Growth and Guaranteed Income Bonds will both pay 5.80% AER, up from 5.10% and 5.22%, respectively.

Meanwhile, the latest issue of its five-year Guaranteed Growth Bond pays 5.50% AER – up from 4.25% – while interest on the Guaranteed Income bond has increased from 4.23% to 5.50% AER.

These bonds are not available to new applicants, but existing savers can apply when their current bond reaches maturity.

22 August: Latest Issue Paying 5.70% But Lags Market Leader

National Savings and Investments (NS&I), the government-backed savings bank that oversees Premium Bonds, has today increased the rate paid on its Green Savings Bond to 5.7% AER, writes Bethany Garner.

This latest issue of the three-year bond pays 1.50 percentage points more than its previous iteration, and marks the second issue of 2023.

NS&I’s Green Savings Bonds help finance sustainability projects across the UK as part of the Government Green Financing Framework, which aims to achieve net zero greenhouse gas emissions by 2050.

The minimum investment is £100, and savers can deposit up to £100,000 in each issue. No withdrawals are permitted during the three-year term.

More than £915 million has been invested in Green Savings Bonds since their launch in 2021, with £627 million invested between March 2022 and March 2023 alone.

Dax Harkins, chief executive at NS&I, said: “This is a great opportunity for savers who want to see a guaranteed return on their investment while also making a difference with their savings by helping to make the world greener, cleaner and more sustainable.”

While this latest issue of the bond pays a competitive rate of interest, it lags behind the current market leader for three-year bond by 0.35 percentage points.

At time of writing, Recognise Bank’s three-year fixed rate bond pays 6.05% AER. However, the minimum deposit is £1,000.

10 August: Shawbrook, Paragon Nudge Towards 5% Level

Shawbrook Bank has raised rates on two of its easy access savings accounts by as much as 0.77 percentage points, writes Bethany Garner.

The Easy Access account is paying 4.68% AER (variable) – up from 3.91%. The Easy Access ISA has received a boost of 0.65 percentage points, and now pays 4.43% AER (variable).

Both accounts have a minimum opening deposit of £1,000, and pay a reduced rate of interest if the balance falls below this threshold – 0.05% AER for the Easy Access account, and 0.25% AER for the easy access Cash ISA.

While the accounts allow unlimited withdrawals without notice, each withdrawal must be at least £500.

Elsewhere, Paragon Bank has increased the interest paid on its Double Access savings account, from 4.60% to 4.75% AER (variable).

The account allows savers to make two penalty-free withdrawals every 12 months. From the third withdrawal, the interest rate drops to 1.50% AER. Its minimum operating balance is £1,000.

As rates continue to rise, a growing number of savers are at risk of being liable for tax on their interest, however (see story from 25 July).

According to Shawbrook’s analysis of data collated by consultancy CACI, over three million savings accounts were liable for tax on earned interest in April 2023, marking a 13-fold increase compared with the same month in 2022.

Adam Thrower of Shawbrook said: “As rates continue to tick up, we’ve seen the demand for ISAs increase as people recognise the need to protect their savings from tax.”

8 August: Tandem Offers 5% Easy Access, Lloyds Boosts Rates

National Savings and Investments (NS&I), the government-backed savings bank that oversees Premium Bonds, is adding £66 million to its prize fund from September, writes Bethany Garner.

Around 27,000 extra prizes will be added from September’s draw, boosting the prize fund rate – the effective rate of return on premium bonds – from 4.00% to 4.65%, its highest level since 1999.

The majority of new prizes will be worth £50 or £100, but there will also be more prizes of £100,000 (+13), £50,000 (+27) and £25,000 (+53). There will continue to be just two £1 million prizes in each draw.

The odds of each £1 bond winning a prize will improve from one in 22,000 to one in 21,000 – the highest they have been since April 2008. There is no guarantee that any bond will ever win a prize.

NS&I is also upping interest rates on a number of savings accounts from 18 August. The Direct Saver will pay 3.65% AER (variable) – up from 3.40% – while Income Bonds will see rates rise by 0.25 percentage points to 3.65%.

The Direct ISA will see rates improve from 2.40% AER (variable) to 3.00%, while the Junior ISA rate will increase from 3.65% AER (variable) to 4.00%.

Cash held in an NS&I investment account will earn 1.00% AER (variable) – up from 0.85%.

Elsewhere, the app-only bank, Tandem, has boosted the interest paid on its easy access savings account to 5% AER (variable). The account includes a 0.35% bonus rate, which drops off after 12 months.

According to Moneyfacts, this is the first time an easy access account has paid 5% interest since 2009.

Lloyds Banking Group, which owns Lloyds Bank, Halifax and Bank of Scotland, is upping rates on an array of fixed and variable accounts by up to 0.30 percentage points from 22 August.

The Halifax Everyday Saver and ISA Saver will see rates increase by up to 0.30 percentage points, paying 1.45% on balances up to £99,999, 1.50% on balances between £10,000 and £49,999, and 1.80% on balances of £50,000 or more.

Its children’s savings accounts will also receive a boost. The Kids Saver account will pay 3.50% AER on balances from £1 to £5,000 – an increase of 0.15 percentage points – and 1.45% on balances above £5,000, up 0.30 percentage points.

The Money Smart Account – aimed at young savers ages 11 to 15 – will see rates increase by 0.15 percentage points, paying 3.40% AER on balances up to £1,000, and 1.45% on balances above this.

Its Junior Cash ISA will pay 3.65% AER (variable) – up from 3.50%.

The Halifax Help to Buy ISA (no longer available to new customers) will pay 2.90% AER on balances up to £12,000 – up 0.15 percentage points – and 1.45% on balances above this – up 0.30 percentage points.

Lloyds Bank is raising rates on its Everyday Saver and Cash ISA Accounts by up to 0.30 percentage points.

From 22 August, both accounts will pay 1.40% AER on balances up to £24,999, 1.45% on balances between £25,000 and £99,999, and 1.90% on balances of £100,000 or more.

The bank is also raising rates on its Club Lloyds Saver – exclusive to existing customers. Balances up to £24,999 will earn 1.70% AER – up from 1.50%. Balances between £25,000 and £99,999 will continue to earn 1.75% AER, and balances of £100,000 will continue to earn 2.20%.

Lloyds’ Help To Buy ISA (no longer available to new customers) will raise rates by up to 0.30 percentage points, paying 2.90% on balances up to £12,000 and 1.40% on balances above this threshold.

Its Childrens Saver will pay 3.15% AER on balances up to £5,000 – an increase of 0.15 percentage points – and 1.40% on balances above £5,000, up 0.30 percentage points.

Its Smart Start account (aimed at 11 to 15 year olds) will pay 3.15% AER on balances up to £1,000, and 1.40% on balances above this – an increase 0f 0.15 percentage points.

The Lloyds Junior Cash ISA will pay 3.15% AER – up from 3.00%.

Bank of Scotland is raising rates on its Access Saver and Cash ISA by up to 0.30 percentage points.

Both accounts are set to pay 1.45% AER on balances up to £9,999, 1.50% on balances between £10,000 and £49,999 and 1.80% on balances of £50,000 or more.

Its Childrens Saver account will pay 3.15% AER on balances up to £5,000 – up from 3.00% – and 1.45% AER on balances above £5,000, up from 1.15%.

Its Smart Start Account, available to savers aged 11 to 15, will pay 3.15% AER on balances up to £1,000, and 1.45% on balances above this threshold – an uplift of 0.15 percentage points.

The Bank’s Junior Cash ISA will also see a rate boost of 0.15 percentage points, to 3.15% AER.

Its Help to Buy ISA (no longer available to new customers) will see rates rise by 0.15 percentage points – to 2.90% AER – on balances up to £12,000, and by 0.30 percentage points – to 1.45% – on balances above this limit.

4 August: Providers Act Swiftly To Pass On Increase To Savers

Yorkshire Building Society (YBS) is raising rates across all its variable savings accounts in response to yesterday’s bank rate rise, writes Bethany Garner.

From 10 August, these accounts will receive an uplift of up to 0.25 percentage points.

This includes the society’s Rainy Day Saver, which pays a tiered rate of interest depending on the balance. It will offer 4.55% AER (variable) on balances up to £5,000, and 3.90% on balances above this level – up from 4.35% and 3.70% respectively.

Aldermore Bank is also upping rates across personal savings accounts by up to 0.25 percentage points from today (4 August).

The provider’s Easy Access account has seen rates rise from 4.00% to 4.25% AER (variable), while the Double Access Account now pays 4.60% AER (variable) – up from 4.25%.

Elsewhere, its 30 Day Notice account now pays 4.30% AER (variable) – up from 4.05% – and the rate paid on the 120 Day Notice account has increased from 4.30% AER (variable) to 4.55%.

The bank’s three-year fixed rate account now pays 5.51% AER – up from 5.51%.

The provider’s ISA rates have also improved. Its one-year Fixed Rate ISA now pays 5.54% AER (up from 5.35%), while its two-year counterpart pays 5.61% (up 0.16 percentage points). The three-year Fixed Rate ISA will pay 5.51% from today – up from 5.45%. The 30 Day Notice ISA rate has risen from 4.00% AER (variable) to 4.25%.

Aldermore has also increased rates on accounts available to existing customers only.

Banks have come under pressure in recent months for their failure to pass on the full effect of successive bank rate increases to savers (see story from 31 July).

The Financial Conduct Authority (FCA), the UK’s financial regulator, announced a plan earlier this week to tackle the issue.

Myron Jobson, senior personal finance analyst at interactive investor, commented: “Savings rates have picked up thanks, in part, to intense scrutiny from the FCA and MPs who have challenged some banks and building societies that had been miserly with their savings rate increases.

“However, any reprieve in cash savings rates is being drowned out by the stubborn persistence of high inflation.”

3 August: Nationwide Raises Rates By Up To 0.75 Percentage Points

Nationwide Building Society is increasing interest rates on a selection of savings accounts by up to 0.75 percentage points, writes Bethany Garner.

It follows today’s Bank Rate decision, which saw the Bank of England raise rates from 5% to 5.25%.

Nationwide’s one-year Triple Access Online Saver, and one-year Triple Access Online ISA, will pay 4.25% AER (variable), up from 3.50%. Both accounts allow three penalty-free withdrawals during their 12-month term.

The provider’s Flex Instant Saver account will pay 3.25% AER (variable) – up from 3.00% – while the rate paid on its Instant Access Saver will improve from 2.30% to 2.40% AER (variable).

The society’s member-only Loyalty accounts are also to receive a boost. The Loyalty Saver, Loyalty ISA and Loyalty Single Access ISA will see rates rise from 3.50% AER (variable) to 3.75%.

Its Instant Access Saver, Instant ISA Saver and Cashbuilder accounts – which pay interest at a tiered rate depending on the account balance – will pay between 2.25% and 2.35% AER (variable) – a rise of 0.10 percentage points.

However, savers will have to wait until 16 August for all rises to take effect.

Online-only bank, first direct, is also upping the rates on three of its savings accounts – from 10 August.

Its easy access FD Savings Account will pay 2.00% AER (variable) – up from 1.75% – while the Cash ISA rate is set to rise from 2.70% AER (variable) to 2.85%.

The FD Bonus Savings Account – which pays a boosted interest rate in each month savers avoid making a withdrawal – will see its non-bonus rate rise from 1.75% AER (variable) to 2.00%.

The account’s bonus rate will remain unchanged at 4.00% on balances up to £50,000, and 2.30% on balances above this limit.

Marcus by Goldman Sachs is also raising interest. The provider’s Cash ISA and Online Savings Account now pay 4.30% AER (variable), up from 4.00%. This includes a bonus rate of 0.34 percentage points (gross), which expires after 12 months.

Marcus by Goldman Sachs has also announced a rate rise. Its Cash ISA and Online Savings Account will now pay 4.30% AER (variable), up from 4.00%. This includes a bonus rate of 0.34 percentage points (gross), which expires after 12 months.

Interest paid on its Maturity Saver has increased from 3.64% to 3.94% AER, while savers taking out a new one-year Fixed Rate Saver account benefit from a higher rate of 4.80% AER, up from 4.50%.

All rises take effect from today.

Rachel Springall, finance expert at Moneyfacts, reminded all savers that, despite further rate rises being good news, the onus remains on them to ensure they squeeze the best returns on their cash: “It is imperative that savers take time to review their existing accounts and not presume any Bank Rate rise will be passed onto them, as this is never guaranteed.”

Experts have also warned that the continued rate hikes are likely to lead more savers to exceed the Personal Savings Allowance (PSA) threshold of £1,000 a year for basic rate taxpayers and £500 a year for higher rate tax payers.

1 August: Providers Begin To Heed Regulator Warning On Rates

Shawbrook Bank has launched a market-leading easy access account paying 4.63% AER (variable), with Saffron Building Society offering two accounts at 4.6% (AER) variable, writes Bethany Garner.

The moves come as the regulator, the Financial Market Authority, warns institutions that it will take action if they fail to pass on interest rate rises to their savings customers (see story below).

Shawbrook’s minimum opening balance on its Easy Access account is £1,000, and savers can deposit up to £85,000 (which is the limit of protection provided by the government if a financial institution fails under the Financial Services Compensation Scheme).

If the account balance drops below £1,000, the interest rate falls to 0.05% AER.

While savers can access their cash without notice, the minimum withdrawal amount is £500. Interest is calculated daily and paid either monthly or annually.

Shawbrook has also increased rates on two of its cash ISAs. The bank’s Easy Access ISA now pays 4.33% AER (variable) – up from 3.78% – while its one Year Fixed Rate Cash ISA pays 5.71% AER, up from 5.32%.

Both ISAs are market leaders in their categories at time of writing.

Adam Thrower, head of savings at Shawbrook, said: “As the UK braces for the highly anticipated 14th consecutive interest rate rise [the Bank of England’s Bank Rate announcement is on 3 August], savers should be seeing some of the best rates in decades.

“Brits being paid rates lower than 2.5% can earn substantially more if they switched today. Capitalising on the current rates should be a priority to maximise earnings on their savings.”

Saffron Building Society is also upping rates. From today, the provider’s E-Saver account will pay 4.60% AER on balances from £10 – up from 4.10%.

Savers can make unlimited withdrawals without notice, and save up to £500,000 – though only the first £85,000 is protected under the Financial Services Compensation Scheme (FSCS).

Interest on the account is calculated daily and can be paid either monthly or annually.

Saffron’s online MySaver account will also pay 4.6% AER from today, while its Enviro Saver – which includes an annual donation to an environmental charity – will pay 4.55%. Both accounts offer instant access to savings.

While these higher rates will be welcome news for savers, a growing number are now earning interest above their personal savings allowance (PSA) – the amount of interest individuals can earn on savings tax-free (see story from 25 July).

A basic rate (20%) taxpayer, who can earn £1,000 a year in interest before paying tax, could save up to £21,598 in Shawbrook’s Easy Access account, or £21,739 in Saffron’s E-Saver, before being liable for tax.

For a higher rate (40%) taxpayer, whose allowance is £500 a year, this drops to £10,799 and £10,869, respectively.

When top easy access rates were closer to 1%, a basic rate taxpayer could deposit around £100,000 without being liable for tax, with the sum standing at around £50,000 for higher rate taxpayers.

31 July: Providers Slammed For Not Passing On Bank Rate Rises

The Financial Conduct Authority (FCA), the financial regulator, will take action against banks and building societies that fail to pass on adequate Bank Rate rises to savers, writes Bethany Garner.

Since December 2021, there have been 13 successive bank rate hikes by the Bank of England, taking it from 0.1% to 5%.

Providers have come under fire for the widening gap between the rates they charge borrowers, which have largely matched the movement in the Bank Rate, and the rates they pay savers, which have noticeably failed to do so in many instances.

The latest Bank Rate will be announced this Thursday, when an increase to 5.25% is expected.

According to FCA figures, out today, the UK’s nine biggest savings providers passed on just 28% of Bank Rate rises to their easy access account customers between January 2022 and May 2023.

These providers performed better when it came to notice accounts and fixed term deposits, but still fell short of passing on the full effect of the rising bank rate – sharing 51% of increases with customers during the same period.

Under the new FCA plan, banks will be expected to justify how lagging easy access rates offer ‘fair value,’ and to proactively direct customers towards the highest rates on offer.

If providers are unable to justify low rates, the regulator has warned it will take action.

The intervention comes as Consumer Duty — rules designed to set higher standards of consumer protection across financial services – comes into force from today.

The Chancellor, Jeremy Hunt MP, said: “Banks should be passing on interest rate increases to savers, and we’re keeping a close eye on whether they do. Today’s new Consumer Duty gives the regulator the tools they need to take action where that isn’t happening.”

Alice Haine, personal finance analyst at Bestinvest, said: “Savers may finally see an end to dismal savings rates offered by high street lenders thanks to the FCA’s decision to crackdown on banks and building societies for being slow to deliver better interest rate rises to their customers.”

The regulator will also review easy access savings rates every six months, and publish a ranking that lists providers from the highest to the lowest rates.

Sheldon Mills, executive director of consumers and competition at the FCA, said: “We want a competitive cash savings market that delivers better deals for savers, where interest rates are reviewed quickly following base rate changes and firms prompt savers to switch to accounts paying higher rates.”

Ms Haines encourages consumers to scan the market for better rates, rather than stick with a single provider: “While it is great that the FCA can take stronger action against lenders under the Consumer Duty framework, with inflation still high at 7.9%, even the best rates deliver a negative return in real terms so finding the best deal is imperative.

“Those locking in a high fixed rate now could see their pot gain value in real terms if inflation continues to ease in the months ahead.”

The FCA has found that, since the start of 2023, the amount of cash held in easy access accounts has dropped by 4% – approximately £52 billion – while deposits into fixed-term accounts have risen 3%.

25 July: Millions More Liable For Savings Tax As Rates Climb

Over 3 million savings accounts were liable for tax on earned interest in April 2023 – a 13-fold increase compared with the same month in 2022 – thanks to improved rates, writes Bethany Garner.

As savings rates climb, a growing number of savers are earning interest above their personal savings allowance (PSA) – the amount of interest you can earn on your savings tax-free.

The rising rates have been driven largely by 13 successive bank rate hikes, which many providers have passed along, at least in part, to savers.

The PSA currently sits at £1,000 for basic rate taxpayers, and £500 for higher-rate taxpayers. Additional-rate taxpayers do not receive a PSA.

The report by Shawbrook Bank, based on data collated by consultancy CACI, found that depositing £17,500 in a top one-year fixed rate bond paying 6% could push a basic rate taxpayer over their PSA limit.

The interest here would be £1,050, of which £50 would be taxable at 20%.

For a 40% taxpayer, depositing £8,500 at 6% interest would earn them £510, tipping them into tax-paying territory.

With today’s leading easy access accounts paying upwards of 4%, a basic rate taxpayer could deposit just £25,000 before paying tax on the interest.

The figure for higher rate taxpayers would be £12,500.

By contrast, when top easy access rates were closer to 1%, a basic rate taxpayer could deposit around £100,000 without being liable for tax, with the sum standing at £50,000 for those paying at the top rate.

Whatever their tax band, savers can deposit up to £20,000 into an Individual Savings Account (ISA) each tax year without paying any tax on the interest.

Adam Thrower, head of savings at Shawbrook bank, said: “Higher rates are great for savers, and they are now finally getting attractive returns on their deposits. However, due to frozen tax thresholds, a basic rate taxpayer with £17,500 in savings could end up paying tax on the interest earned.

“As interest rates have continued to rise, many might find themselves nearing the threshold for taxation on their interest income.

“For those that are, ISAs are a great way of reducing your tax burden – although they do often come at a slightly lower interest rate.”

13 July: Savings Bonds Benefit From Chunky Improvements

National Savings and Investments (NS&I), the government-backed savings bank that oversees premium bonds, is increasing the interest on its fixed-rate bonds by up to 1.10 percentage points, writes Bethany Garner.

The latest issue of the bank’s one-year Guaranteed Growth Bond and one-year Guaranteed Income Bond will each pay 5% AER (fixed) – up from 4.00% and 3.90% respectively. Both products are available to new and existing customers.

NS&I is also raising rates on a number of bonds only available to existing customers approaching renewal.

The latest issues of its two-year Guaranteed Growth Bond, two-year Guaranteed Income Bond, three-year Guaranteed Growth Bond and three-year Guaranteed Income Bond will all pay 5.10% AER (fixed) – up to a full percentage point higher than their previous issue.

These rate changes closely follow NS&I’s announcement, on 30 June, that interest rates were rising on a range of variable rate accounts (see story below). The new rates kick in from today.

Dax Harkins, chief executive at NS&I, said: “Guaranteed Growth Bonds and Guaranteed Income Bonds are popular with our customers and I’m pleased that we’re able to announce these changes today for new and existing customers to take advantage of.”

Elsewhere, NS&I is changing the way its fixed rate Savings Certificates work.

From 23 July, savers renewing their certificates won’t be able to withdraw cash before the end of the new term.

Prior to this change, money could be withdrawn from the certificate at any time – in exchange for a penalty fee worth 90 days’ interest.

Savings Certificates allow customers to deposit a lump sum between £100 and £15,000, and earn a fixed rate of interest (tax-free) for between two and five years.

The savings bank also offers an index-linked certificate, which pays a rate of interest equivalent to the current Consumer Price Index (CPI) plus 0.01%.

Savings certificates are no longer on sale to new customers, and the change in withdrawal policy only applies to existing savers approaching renewal.

7 July: HSBC, Coventry BS, Yorkshire BS Boost Returns

Three providers have boosted rates across a range of savings accounts from today, as the Financial Conduct Authority urges banks to do more to support savers, writes Bethany Garner.

The moves follow rate rises across the stable of brands run by Lloyds Banking Group yesterday (see story below).

HSBC is boosting a handful of savings rates from today.

The bank’s Fixed Rate Saver accounts have seen rates increase by 0.65%. Its one-year Fixed Rate Saver will pay 5.05% AER from today, while its two-year counterpart will pay 5.10%

Meanwhile, HSBC’s Premier Loyalty ISA and Advance Loyalty ISA saw rates increase by 0.20%, to 3.20% and 2.70% AER respectively.

Coventry Building Society is increasing returns paid on variable rate accounts by up to 0.60 percentage points from today.

Its Easy Access Account and Easy Access ISA will pay 2.85% AER – up from 2.50% – while the Limited Access ISA will pay 4.10% AER, up from 3.50%.

Meanwhile, its 30 Day Notice Account and 30 Day Notice ISA will both see rates climb by 0.30 percentage points, to 2.90% AER, while the Easy Access ISA (Online) is receiving a 0.40 percentage point boost – taking the interest rate to 3.20% AER.

The provider’s Limited Access Saver (Online) will now pay 4.30% AER – up from 3.55%.

Coventry’s Regular Saver, Regular Saver ISA, Regular Savings Account and First Home Saver (2) will all see rates improve from 4.40% to 4.80% AER.

The mutual’s Junior Cash ISA has also received a 0.40 percentage point boost, and now pays 4.70% AER.

A number of accounts that are no longer open to new applicants – such as the Privilege ISA, Privilege Reward ISA and Help to Buy ISA – have received an uplift of up to 0.40% percentage points.

The society has also recently launched two fixed rate cash ISAs. Its Fixed Rate Cash ISA 30.09.2024, which matures next September, pays 5.30% AER, while the Fixed Rate Cash ISA 3009.2025, which matures in September 2025, pays 5.40%. Both accounts are market-leaders at time of writing.

Yorkshire Building Society launched a range of fixed rate cash ISAs yesterday. Its one-year fixed rate ISA pays 5.10% AER, while its two and three-year equivalents both pay 5.20% AER.

Marcus by Goldman Sachs is also raising interest rates on three of its accounts.

From today, the provider’s Online Savings Account and Cash ISA will see rates rise from 3.73% to 4.00% AER. This includes a bonus rate of 0.34 percentage points (gross), which expires after 12 months.
The Maturity Saver account will pay 3.64% AER – up from 3.39%.

These improved rates come as the bosses of four major banks – HSBC, Barclays, NatWest and Lloyds – met with the Financial Conduct Authority (FCA) yesterday to discuss the growing disparity between rates charged for borrowing and rates paid to savers.

The UK’s financial watchdog says it has begun to see banks and building societies improve savings rates, but wants progress to accelerate. It expects providers to pass on interest rate rises to savers more quickly, and help customers access the best rates available.

These changes will fall under the FCA’s new Consumer Duty guidelines, which come into effect at the end of July.

Consumer Duty will require banks, building societies, insurance providers and other financial services firms to maintain a higher standard of consumer protection, and prove they are acting in the best interest of customers.

The FCA will also report what the savings market is doing as a whole to help support savers at the end of this month.

Victor Trokoudes, founder of financial app Plum, said: “Banks want to maximise the difference between the rate they lend at and their cost of deposits in order to grow their new interest margin. That means they’re effectively incentivised to pay the lowest possible rate to their depositors to maximise profits.

“[Yesterday’s] announcement suggests the FCA was hoping to embarrass the high street banks into action by shining a light on the issue. It remains to be seen to what extent banks will accelerate rate rises and more effectively communicate better value products to their customers. Even after their recent rate increases, most high street banks still offer an easy access rate of less than 2%.”

6 July: Halifax, Bank Of Scotland, Lloyds Accounts See Increases

Lloyds Banking Group has announced it is boosting rates across a range of savings accounts, writes Bethany Garner.

The group – which owns brands including Lloyds Bank, Halifax and Bank of Scotland – is increasing rates on a number of fixed and variable accounts by as much as a full percentage point.

These new rates come as the chief of Lloyds Bank – along with representatives from HSBC, Barclays and NatWest – prepare to meet the Financial Conduct Authority today to discuss the widening gap between rates charged to borrowers and rates paid to savers.

Fixed rates

From 12 July, the Halifax one-year fixed rate ISA and one-year Fixed Saver will both see rates increase by 0.50 percentage points, to 5.30% AER. Their two-year counterparts will also increase by the same amount to 5.35% AER.

Lloyds Bank is raising rates on its one and two-year fixed rate accounts. The one-year Fixed Rate Cash ISA and one-year Fixed Bond will pay 5.45% AER from 12 July – up from 4.95%.

The bank’s two-year Fixed Rate Cash ISA and two-year Fixed Bond will also receive a boost of 0.50 percentage points, to 5.50% AER.

Bank of Scotland’s one-year Fixed Rate Cash ISA and one-year Fixed Bond are undergoing the largest rate hikes, with both accounts paying 5.45% AER from next week – a full percentage point increase.

Their two-year counterparts will see rates increase by 0.95 percentage points from next week. The two-year Fixed Rate Cash ISA will pay 5.50% AER, while the two-year Fixed Bond will pay 5.00%.

Variable rates

Rates are also set to rise by up to 0.80 percentage points across several of the group’s variable rate accounts.

From 20 July, the Halifax Everyday Saver and ISA Saver Variable accounts will pay between 1.15% and 1.65% AER – up from a range of 0.95% to 1.35% AER. These accounts pay a tiered rate of interest depending on the saver’s balance.

Elsewhere, the ISA Reward Bonus Saver and Reward Bonus Saver will see rates rise by 0.80%, to 4.20% AER, while the ISA Bonus Saver and Bonus Saver accounts are set to pay 4.10% AER – up from 3.30%.

The bank’s Kids Saver and Junior ISA accounts will receive uplifts of 0.20 and 0.25 percentage points respectively, paying 3.25% and 3.50% AER.

While Help to Buy ISAs are no longer available to new customers, existing account holders will also see their rates rise by 0.25 percentage points to 2.75% AER.

Lloyds Bank is upping rates on the Easy Saver and Cash ISA Saver. From 20 July, the accounts will pay 1.10% to 1.80% – up from 0.90% to 1.50%. Both accounts pay a tiered rate of interest that varies depending on the customer’s balance.

The Club Lloyds Saver, which also pays a tiered rate of interest, will see rates rise by 0.20 percentage points to between 1.50% and 2.20% AER.

Both the Club Lloyds Advantage Saver and Advantage ISA Saver will undergo the largest increase, with rates rising 0.80 percentage points to 4.00% AER.

Lloyds’ Junior ISA and Child Saver accounts will also receive a boost of 0.25 and 0.35 percentage points respectively, taking both accounts to 3.00% AER.

Existing Help To Buy ISA customers will see an uplift of 0.25 percentage points, with the account paying 2.75%.

Bank of Scotland’s Access Cash ISA and Access Saver, which pay a tiered rate of interest depending on the balance, will see rates rise to 1.15% to 1.65% AER.

The bank’s Advantage ISA Saver and Advantage Saver will both pay 4.00% from 20 July – representing a jump of 0.80% percentage points.

Both the Junior ISA and Childrens Saver accounts will see rates boosted to 3.00% AER – up from 2.75% and 2.65% respectively.

Finally, existing Help To Buy ISA customers will receive a rate increase of 0.25% percentage points, taking the account AER to 2.75%.

6 July: Shawbrook Looks To Stimulate Switching Market

Shawbrook Bank is launching an easy access savings account paying a market-topping 4.35% AER (variable) on balances above £1,000, writes Bethany Garner.

The instant access account can be opened online, and allows savers to make unlimited deposits and withdrawals without notice. Interest on the account is calculated daily, and can be paid either monthly or annually.

With this new rate, Shawbrook joins a flurry of providers boosting savings returns in the wake of the Bank of England’s decision to increase the bank rate to 5.00%.

The move also comes as chief executives from four major banks – HSBC, Barclays, NatWest and Lloyds – prepare to meet the Financial Conduct Authority later today to discuss the growing gap between rates charged to borrowers and rates paid to savers.

At time of writing, these high street banks lag behind lesser-known providers when it comes to savings rates.

While Shawbrook’s new account is a market-leader in the easy access category, it currently shares the top spot with Family Building Society’s Online Saver.

This easy access account – also paying 4.35% AER (variable) – can be opened online from £100, with interest calculated daily and paid annually.

Adam Thrower, head of savings at Shawbrook, said: “Our research shows that almost half (46%) of Brits have yet to take advantage of higher rates, and instead have been keeping their savings in low-paying or non-interest earning current accounts.

“Our new market-leading easy access account should encourage those who have savings in current accounts or other low-paying accounts to switch.”

Renewed competition among providers to offer the top rate may be welcome news for savers, but stubbornly high inflation continues to erode returns.

Annual inflation, as measured by the Consumer Price Index (CPI) sat at 8.7% in the year to May 2023.

5 July: Mutual Reveals Rise Ahead Of Bank Grilling Tomorrow

Nationwide Building Society is raising rates on several savings accounts from next week, with some increases as high as 0.80 percentage points, writes Bethany Garner.

The move comes as chiefs from four major banks – HSBC, Barclays, NatWest and Lloyds – prepare to meet the Financial Conduct Authority tomorrow to discuss the widening gap between rates charged for borrowing and rates paid to savers.

The Treasury Select Committee of MPs has also written to the banks demanding to know why interest rate increases take longer to reach their savings account customers.

Nationwide’s increase is the second time it has hiked rates in recent months – with a handful of accounts having already received a boost from 1 July.

From 14 July, Nationwide’s Instant Access Saver, Instant ISA Saver and Cashbuilder accounts – which pay a tiered rate of interest depending on the saver’s balance – will pay between 2.15% and 2.25% AER, up from 1.35% to 1.50%.

Its regular savings account – Start to Save 2 – is set to pay 5.50% AER, up from 5.25%.

The society’s member-only Loyalty accounts will receive an uplift, too. Interest paid on the Loyalty Saver, Loyalty ISA and Loyalty Single Access ISA is increasing from 3.30% to 3.50% AER.

Nationwide is also hiking rates on its children’s accounts by up to 0.75%. The Child Trust Fund, Junior ISA and Future Saver accounts will all pay 4.00% AER – up from 3.25%.

Meanwhile, from 1 August, Nationwide is raising rates on a selection of limited access accounts.

The provider’s Triple Access Online ISA and Triple Access Online Saver will see rates increase from 3.30% to 3.50% AER – though this new rate falls to 2.15% if savers exceed their withdrawal limit.

Elsewhere, the society is launching a suite of one-year fixed rate accounts from today.

Its new Fixed Rate Online Bond, Fixed Rate Branch Bond and Fixed Rate ISA will all pay a competitive 5.10% AER on balances from £1.

3 July: Premium Bond Odds To Improve From August

National Savings and Investments (NS&I), the government-backed savings bank, is adding £30 million to the Premium Bond prize fund from August, writes Bethany Garner.

This takes the prize fund rate – the effective rate of return paid by the fund in aggregate – from 3.70% to 4.00%, its highest level since 2007. No individual bondholder is guaranteed any return from the fund.

The odds of each £1 bond winning a prize is set to increase from August – improving from one in 24,000, to one in 22,000.

The majority of new prizes added to the monthly draw will be worth £25 to £100, but the number of larger prizes is also rising.

There will be an additional six £100,000 prizes, 13 more £50,000 prizes and 24 more £25,0000 prizes. There will still be just two £1 million prizes in each draw.

This change follows hot on the heels of NS&I’s last prize fund hike, which saw £39 million added to July’s prize draw (see story from 23 June).

Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “It’s a boost for over 22 million people with bonds and may well attract even more savers in the coming months.

“Anyone considering snapping up Premium Bonds needs to understand the price they pay. In an average month a typical bond holder will win nothing, and unless you’re unusually lucky you won’t get close to a return of 4%.

“While interest rates are higher, you’re missing out on more interest elsewhere by opting for Premium Bonds.

“However, there will be plenty of people who think this is a price worth paying for the chance of winning a life-changing sum of money. You could be one of the 1,310 people in August who win £25,000 or more – or one of two to take away £1 million.”

NS&I has also announced that it is upping interest rates on two easy access savings accounts. From 13 July, NS&I’s Direct Saver and Income Bond will both see rates rise from 2.85% to 3.40% AER.

29 June: Easy Access Account Pays 4.30% As Providers Up Rates

More providers have boosted rates across a range of savings accounts in the wake of the latest Bank Rate hike, writes Bethany Garner.

HSBC has announced it will raise rates by up to 0.40% across a number of savings accounts from tomorrow (30 June).

Interest on the bank’s instant access Premier Savings account will rise from 1.60% AER (variable) to 2.00%, while the Flexible Saver will pay 1.75% AER (variable) – up from 1.35%.

HSBC’s Online Bonus Saver will also see an uptick in the amount of interest paid. The account pays a higher rate on the first £10,000 – but from tomorrow, this threshold is rising to £50,000.
The account also pays a bonus rate each month that savers avoid making a withdrawal.

From tomorrow, balances up to £50,000 will earn 4.00% AER (variable) if savers have not made a withdrawal in the previous month, or 2.30% AER if they have.

The standard rate paid on any portion of the balance above £50,000 is also increasing, from 1.35% to 1.75% AER (variable). When savers have not made a withdrawal in the current month, the bonus rate on this portion of the balance will continue to be 2.30% AER.

HSBC says the changes could net savers with at least £50,000 up to £680 in additional interest each year.

Online-only bank First Direct, an HSBC subsidiary, is boosting rates on three of its savings accounts.

The bank’s one-year Fixed Rate Saver will pay 5.00% AER from today – up from 4.60% – while its easy access FD Savings Account will see rates rise by 0.40% to 1.75% AER from 30 June.

The FD Bonus Savings Account will pay up to 4.00% AER (variable) on balances up to £50,000. Cash above this threshold will continue to earn 2.30% AER.

The Bonus Savings Account pays a lower rate of 1.75% AER (up from 1.35%) when savers have made a withdrawal the previous month.

Newcastle building society has launched a market-leading easy access account paying 4.30% AER (variable) on balances from £1 to £250,000.

The Base Rate Tracker account guarantees an interest rate that does not fall more than 0.70% below the current bank rate until the end of 2025.

It’s available to both new and existing customers, and can be opened online or in a branch. Savers can access their cash any time without notice, and interest is paid monthly.

Yorkshire building society has announced it will raise rates by up to 0.50% across all variable rate savings accounts from 6 July.

The provider’s Internet Saver Plus account, Rainy Day account, and Regular Saver accounts will all see rates jump by 0.50%.

The Internet Saver will pay 4.00% AER (variable) – up from 3.50% – while the Rainy Day account will offer 4.35% AER on balances up to £5,000, and 3.70% AER on balances above £5,000.

Meanwhile, the society’s Access Saver Plus account will see rates rise from 3.05% to 3.35% AER.

While rising rates may be welcomed by many savers, those forced to dip into their funds to make ends meet may not see the benefit.

According to the latest Bank of England figures, UK households withdrew £4.6 billion (net) from banks and building societies in May.

27 June: Providers Reserve Best Deals For Existing Customers

Lloyds Bank is rewarding existing customers with exclusive cash ISA rates, writes Bethany Garner.

The bank has launched two fixed-rate ISAs, paying up to 5.05% AER on balances from £3,000.

While the accounts are open to anyone, only customers who have held a personal current account with Lloyds for at least 40 days receive the highest rates – which include a 0.05% bonus.

Its one-year fixed rate ISA pays 4.95% AER to new customers, and 5.00% to existing customers. At time of writing, this bonus rate edges the account into position as market-leader.

Its two-year counterpart pays 5.00% AER to new customers, and 5.05% to existing customers – just 0.05% shy of the current market leader.

Interest on both ISAs is calculated daily, and paid either monthly or annually.

Lloyds is not the only provider to offer better deals to its existing customers.

Nationwide Building Society recently paid out £100 to qualifying members under its profit sharing programme, Fairer Share (see story from 19 May).

Nationwide also offers a range of members-only Loyalty accounts, which pay up to 3.30% AER at time of writing.

Elsewhere, Saffron Building Society recently launched a market-leading regular saver, available exclusively to members who have held an account with the provider for at least 12 months.

The Members’ Month Loyalty Saver pays 9% AER (fixed), and allows savers to pay in up to £50 each month for a year.

23 June: New Market-Leaders Emerge To Boost Competition

Several savings providers have boosted returns across a range of savings accounts, as interest rates continue to climb, writes Bethany Garner. Here’s what’s happening.

Halifax has increased interest rates by 0.50% on four of its fixed-term accounts today.

The bank’s one-year fixed rate ISA, and one-year Fixed Saver, saw rates rise to 4.80% AER.
Elsewhere, its two-year fixed rate ISA, and two-year fixed rate Saver, will now pay 4.85%.

Lloyds Bank has increased the returns on its fixed rate products by up to 0.50%.

The one-year Fixed Rate Cash ISA and one-year Fixed Bond will pay 4.95% AER from today – an increase of 0.50%
The two-year Fixed Rate Cash ISA and two-year Fixed Bond now pay 5.00% AER, representing a rise of 0.45%.

Shawbrook Bank announced the launch of four fixed rate cash ISAs today (Friday 23 June) with its one-year fixed rate ISA paying a market-leading 4.82% AER (fixed).

The bank’s two, three and five-year fixed rate ISAs pay competitive 4.93%, 4.82% and 4.65% respectively.

Accounts are online-only and require a minimum deposit of £1,000. The maximum deposit matches the £20,000 annual ISA allowance. No further deposits are allowed and early withdrawals are subject to the loss of 90 days’ interest.

Paragon Bank has increased rates across 10 of its savings accounts, also effective from today.

Fixed rate bonds

One-year fixed rate and 18-month fixed rate accounts now pay 5.40% AER – up from 4.95%
The two-year fixed rate account pays 4.45% AER, an increase of 0.50%
Newly-launched three-year fixed rate account now pays 5.30% AER
Green three-year fixed rate account now pays 5.30% – up from 4.85%
Five-year fixed rate account now pays 5.00% AER – up from 4.50%.

Fixed rate ISAs

Paragon’s three-year fixed rate ISA has increased its rate from 4.35% AER to 4.75%
Five-year fixed rate ISA now pays 4.65% AER, up from 4.00%

Notice accounts

The bank’s 120 day Notice account rate has risen from 4.00% AER to 4.60%
Its 180 day Notice account will pay 4.65% AER, representing a chunky increase of 0.60%.

National Savings & Investments

National Savings and Investments (NS&I), the government-backed savings bank that oversees premium bonds, has made the following changes:

Junior ISA rate increased from 3.40% to 3.65% AER. Around 89,000 young savers will benefit from the rise
Adding £39 million to its prize fund taking the effective prize fund rate to 3.70%, with effect from the July draw.

The majority of new prizes will be worth £50 or £100 – but there will also be eight additional prizes at £100,000, 16 at £50,000, and 32 at £25,000.

Each draw will continue to feature just two £1 million prizes, and the odds of each bond winning a prize remains unchanged at 24,000 to 1.

Marcus by Goldman Sachs is hiking interest rates on two savings accounts from 21 June (Wednesday):

Online Savings Account now pays 3.75% AER (variable) – up from 3.50%
The Cash ISA pays 3.75% AER (variable), an increase of 0.25%

Both accounts include a 12-month bonus rate of 0.34%.

Nationwide building society has announced it will raise interest rates on several accounts from 1 July as follows:

Members-only Loyalty Saver, Loyalty ISA and Loyalty Single Access ISA accounts will pay 3.30% AER (variable) – an increase of 0.10%
1 Year Triple Access Online ISA will see rates rise from 3.20% to 3.30%.
Instant Access Saver, Instant ISA Saver and Cashbuilder accounts – which pay a tiered rate of interest depending on the customer’s balance – will pay between 1.35% and 1.50% AER, up from between 1.25% and 1.50%.

While climbing rates is welcome news for savers, providers have come under fire for failing to pass on full rate rises to savers (see story below).

The Bank of England raised interest rates by 0.5 percentage points yesterday to 5% – the highest level for 15 years.

8 June: Loyal Customers ‘Squeezed By Measly Interest Rates’

MPs who last month quizzed Nationwide, Santander, TSB and Virgin Money about low rates of interest on their easy access savings accounts have published the responses they received.

The cross-party Treasury Select Committee is concerned that the rates on offer are too low compared to the Bank of England Bank Rate.

In February, when the Committee launched its enquiry, leading banks and building societies were paying between 0.5 and 0.65 per cent for easy access savings accounts. The range has since risen to between 0.7 and 1.35 per cent.

The Bank rate was 4% in February and now stands at 4.5% after two increases of 0.25 percentage points.

The Bank of England has noted that the ‘pass-through’ of interest rate rises to savers has been “unusually weak”.

The Financial Conduct Authority, the market regulator, has also expressed concerns about low rates on offer to savers, threatening interventions if the situation does not improve.

Harriett Baldwin MP, chair of the Committee, said: “It’s clearer than ever that the nation’s biggest banks need to up their game and encourage saving.

“While other products are available to those who shop around, the measly easy access rates on offer lead us to conclude that loyal customers are being squeezed to bolster bank profit margins.

“We remain concerned that the loyalty penalty is especially prominent for elderly and vulnerable customers who may still rely on high street bank branches.”

In their responses, the four institutions argue that they offer a range of savings products, with rates on offer that are much higher than on their ordinary savings accounts. Each provider said it communicates with customers to make them aware of accounts that have higher rates of interest on offer.

The Bank Rate is widely expected to rise to 4.75% or 5% when the next decision on interest rates is announced on 22 June.

7 June: Banks To Reimburse Victims Of Fund Transfer Fraud

From 2024, banks and other payment process companies will be required to reimburse customers who fall prey to authorised push payment (APP) scams, the Payment System Regulator announced today.

APP scams see victims tricked into sending money directly to a fraudster, who may be posing as a legitimate company or government body. According to figures from trade body UK Finance, £485.3 million was lost to APP fraud in 2022 alone.

The forthcoming regulations will apply to transfers made through Faster Payments – the system through which the regulator says most APP fraud takes place.

When the new rules come into force, banks and other companies that use the Faster Payments system will be required to reimburse the victims of APP scams.

These regulations will apply to over 1,500 payment service providers from 2024.

The cost of reimbursement will be evenly split between the company that sent the money – such as the victim’s bank – and the company responsible for the running of the account that received the fraudulent payment.

Victims must be repaid within five business days.

However, victims could be denied a reimbursement if their provider believes it was caused by ‘gross negligence’, or if they wait more than 13 months to report the scam.

Victims deemed ‘vulnerable’ to APP scams cannot be denied reimbursement on the grounds of gross negligence.

The PSP says it will provide clear guidance on minimum reimbursement claims and what level of excess victims may have to contribute towards the claim they make – suggested at £35. The regulator will also publish data on how well firms are protecting their customers from APP fraud.

As well as supporting the victims of APP fraud, the PSP say these new rules will encourage banks, building societies and other firms that handle payments to step up their fraud prevention efforts.

Chris Hemsley, managing director of the PSR, said: “Once implemented, our changes will deliver a major shift from the status quo, giving everyone across the payments ecosystem a reason to act to prevent fraud from happening in the first place.

“That means everybody who makes payments can do so with much greater confidence, knowing that they will be better protected against fraudsters.”

While the PSP hopes these regulations will reduce instances of APP fraud – and support customers who do fall victim – there are some limitations.

In their current form, the regulations will not apply to international payments, or those made through other systems such as CHAPS, BACS, card purchases and cryptocurrency transfers.

These regulations form part of a larger effort to crack down on financial fraud, which has been on the rise as unscrupulous scammers take advantage of people’s increased financial vulnerability amidst the cost-of-living crisis.

In May, the government announced its new fraud strategy, which will place a blanket ban on cold calls offering financial products.

It will also ban ‘Sim farms’ – where criminals send fraudulent text messages to thousands of people at once – and bar scammers from impersonating the phone numbers of banks and other legitimate businesses.

While these measures will be welcomed by consumers, remaining vigilant is vital. To reduce the likelihood of falling for a scam, Citizens Advice advises individuals watch out for the following warning signs:

Offers that seem too good to be true
Communications that do not appear genuine
Pressure to act quickly
Requests to use an unusual payment method
Communications that request personal information.

5 June: 12-Month Deal Accepts £250 Monthly Deposits

Skipton building society has launched a regular saver account offering 7.5% AER, fixed for 12 months, writes Bethany Garner.

The account is available exclusively to Skipton Building Society members who joined before 31 May 2023. Account holders can set aside up to £250 each month, but there’s no obligation to make a deposit every month.

Any unused subscriptions can also be rolled over into subsequent months, provided savers do not deposit more than £3,000 over the account’s 12-month term.

Interest is calculated daily and paid when the account matures after 12 months. Withdrawals are not permitted, but savers can close the account any time – although this means sacrificing the interest earned so far.

Savers who set aside the maximum subscription of £250 per month would earn £121 in interest.

Skipton is not the only provider to bring out a competitive regular saver account this month. Last week, Saffron Building Society launched its Members’ Month Loyalty Saver – a members-only account paying 9% AER (fixed for 12 months), when savers deposit up to £50 per month.

As savings rates continue to climb, research by online provider, Atom Bank, has found that 50% of UK adults have never switched savings accounts.

The study, which surveyed 2,000 UK adults in April 2023, found that 24% of those who have not switched savings accounts avoided the process because they believe it will be ‘too much hassle.’

This hesitancy could be costing savers hundreds of pounds. According to Atom’s analysis, individuals who hold £10,000 in an easy access account could earn an additional £227 of interest each year by transferring the balance from a high street bank to a challenger bank.

At time of writing, the average easy access rate offered by Barclays, HSBC, NatWest, Lloyds, TSB, Virgin Money and Nationwide paid 0.88% AER (variable) – considerably lower than the 3.88% AER (variable) offered by the current market leader, Principality Building Society.

Mark Mullen, chief executive officer at Atom Bank, said: “The myth remains that switching banks is a time-consuming and difficult process. Savers today have the best rates at their fingertips, and just a few clicks on a decent app can earn them an extra few hundred pounds a year.

“The sooner people realise this, the sooner big banks will be forced to change their ways.”

1 June: First Direct Also Boosts Savings Returns

Saffron Building Society today launched a market-leading savings account paying a 9% AER, writes Bethany Garner.

The Members’ Month Loyalty Saver is only available to existing customers who have held a Saffron Building Society account for at least 12 months.

At time of writing, this limited edition account – available until 30 June 2023 and lasting for a 12-month term – is the only savings account on the market to pay an interest rate that beats the official headline rate of inflation, which stands at 8.7%.

Savers can pay in up to £50 each month, and the minimum opening deposit is £1.

Interest on the account is calculated daily, and paid at the end of the 12-month term. An account holder who deposited £50 each month and avoided making any withdrawals would earn £29.25 in interest.

Savers can access their cash any time, but are limited to one withdrawal per calendar month. The account can be opened online or in a branch.

The account’s launch coincides with Saffron’s first Members’ Month celebration, which rewards customers with events including a daily £100 prize draw over the month of June.

Colin Field, chief executive officer at Saffron, said: “We have introduced this chart-topping product to coincide with the launch of our first Members’ Month. The Members’ Month Loyalty Saver has been developed to show big support to our small savers.”

With its 9% interest rate, Saffron beats out the former market leader for regular saver accounts, First Direct, by 2%.

First Direct’s Regular Saver account pays 7% AER (fixed for one year) when customers deposit between £25 and £300 per month. A saver who deposited £300 into their account each month would earn £136.50 in interest at the end of its term.

First Direct also announced today it is raising interest rates by up to 0.50% on three of its other savings accounts from 8 June 2023.

The bank’s Bonus Savings Account – which pays an enhanced interest rate each month savers avoid making withdrawals – will offer 3.50% AER on balances up to £25,000 (up from 3.00%), and 2.30% AER on balances greater than £25,000 (up from 2.00%).

A lower rate of 1.35% will be paid each month the customer makes a withdrawal (up from 1.30%).

Meanwhile, First Direct’s easy access FD Savings Account will see rates increase from 1.30% to 1.35% AER (variable) from 8 June, while its Cash ISA rate will increase from 2.30% to 2.50% AER (variable).

First Direct and Saffron are not the only providers raising rates in the wake of the latest bank rate hike, which saw the Bank of England raise its bank rate to 4.5% – the 12th consecutive increase in 18 months.

Elsewhere, the online savings bank Shawbrook launched a one-year fixed rate bond paying a market-leading 5.06% AER, and a cash ISA paying 4.43%, fixed for 12 months.

19 May: Society Unveils Member-Only 2-Year Bond At 4.75%

Eligible customers of Nationwide building society will receive a £100 bonus under its Fairer Share reward programme, announced today.

As a mutual organisation, Nationwide’s customers are ‘members’ who effectively own the society. It is funding the payments and a member-only Fairer Share Bond out of its annual profit of £2.2 billion for the year to April (up from £1.6 billion in 2021/22).

To be eligible for the £100 payment, a member must have a:

qualifying current account and
qualifying savings or mortgage account.

The current account must already have been open on 31 March and the member must also have an open current account in June.

For savings accounts, the member must have had at least £100 in total in one or more Nationwide personal savings accounts or cash ISAs at the end of any day in March 2023.

For mortgages, the member must have owed Nationwide at least £100 on a residential mortgage on 31 March 2023.

You can access the society’s eligibility checker here.

Will I pay tax on this payment?

The Fairer Share £100 payment counts as taxable savings income, which means it is treated in the same way as any interest you earn on your savings account or current account. If you are a 20% basic rate taxpayer, you can earn interest of £1,000 each financial year without paying tax – this is your Personal Savings Allowance (PSA). If you pay 40% higher rate tax, the amount on interest you can earn tax-free is £500 a year thanks to your PSA – so £100 would represent a fifth of your allowance. If you pay the additional rate of tax at 45%, you do not have a PSA.

No tax will be deducted from the payment by Nationwide, but the society will report it to HM Revenue & Customs (HMRC), as is required. You must account for any tax you owe for a particular financial year via a self-assessment tax return.

Payments will be made automatically to qualifying members – there is no need for action. The society will get in touch with eligible members from today, and payment will be made into current accounts from 13 June to 30 June.

Nationwide says it intends to make such payments annually, provided it would not be detrimental to its financial strength.

The new Fairer Share Bond, which is already on sale, is a two-year fixed-rate bond paying 4.75%. It is available to Nationwide members who were customers of the society yesterday, 18 May.

This rate is slightly below the 4.95% paid by a number of other financial providers.

17 May: Govt-Backed Bank’s Direct ISA Gets Quarter Point Uplift

National Savings and Investment (NS&I), the government-backed savings bank that oversees premium bonds, has increased the interest rate on its Direct ISA by 0.25 percentage points, to 2.40% AER, writes Bethany Garner.

This marks the second time the bank’s ISA rate has been hiked since the start of 2023, and will benefit more than 333,000 NS&I savers.

Despite the increase, NS&I’s ISA rates fall behind current market leaders. At time of writing, the leading variable rate cash ISA, provided by Furness Building Society, pays 3.55% AER 1.15% points higher than the Direct ISA.

NS&I has also increased the value of its premium bond prize fund five times in the last 12 months, taking the total to £331.5 million (see story from 14 February).

11 May: Nationwide, Santander, TSB, Virgin Called To Account

Pressure is mounting on bank bosses over poor interest rates on their savings accounts, despite a huge uplift in the Bank of England Bank Rate over the past year, writes Jo Thornhill.

The influential cross-party Treasury Select Committee of MPs has written to the bosses of Nationwide, Santander, TSB and Virgin Money, questioning the interest rates on easy access savings products and how Bank Rate rises are passed on to customers.

The Committee also asked providers how they communicate with those of their customers who have cash in lower paying accounts regarding higher savings rate deals that may be available.

Nationwide, Santander, TSB and Virgin Money have been given until 24 May to respond.

In the letters, Harriet Baldwin MP, chair of the Committee, highlights the increased pre-tax profits recorded at each of the banks in 2022, which she states were £1.9 billion for Santander, £1.6 billion for Nationwide, £595 million for Virgin Money and £183 million for TSB.

The inference made in the letters is that profits are being boosted at the expense of loyal savers, who have not benefited from increased savings rates.

Yorkshire building society is to add 0.25% onto the rates paid on its variable rate savings accounts. It means instant access accounts will pay a minimum rate of 3.05% (3.25% for restricted access accounts). New accounts will pay a minimum of 3.05%. The change will take effect from 17 May.

Digital bank Chase is to increase the rate on its saver account from 3.1% to 3.3% – just short of the full quarter-point Bank rate increase – for new and existing customers, with effect from 22 May.

Last month, the Financial Conduct Authority wrote to the Committee in response to its request for more evidence on savings rates and competition in retail banking. Nikhil Rathi, FCA chief executive, agreed with the MPs’ opinion that many savers have lost out as interest rates have risen.

He said: “It is, and has been, standard practice for firms to offer more attractive rates to new savers, while leaving existing savers earning less competitive rates. We expect that the harm from this practice (and the loyalty penalty faced by longstanding customers) will have increased as the base rate has risen.”

In her letter to Mike Regnier, UK boss of Santander, Ms Baldwin said: “The Bank of England has increased the base rate from 0.25% in January 2022 to 4.25% currently. The interest rate on the Santander ‘everyday saver’ account for deposits is currently 0.7%.

“Please could you therefore answer: How does Santander UK determine how increases in the base rate are passed on to its savers? Why is the interest rate on its ‘everyday saver’ account so much lower than the base rate? And How does Santander UK communicate with its consumers, in particular those with large balances in their ‘everyday saver’ account, to make them aware of what could be more suitable, higher rate savings options available to them.”

Nationwide, Santander, TSB and Virgin Money have said they will respond separately by the deadline.

A Santander spokesperson said: “We have received the letter from the Treasury Committee and look forward to providing them with our response. Over the last few months we have launched some market-leading rates across our Cash ISAs and savings accounts.

“Our 123 current account offers 2% interest on balances up to £20,000 and our Edge current account has a linked savings account paying 4%. Both of these accounts allow customers to withdraw money with no penalty.”

A Nationwide spokesperson said: “Our average deposit rate has been at least 42% higher than the market average in recent months and we will pay the best rates we can sustainably afford.

“We are different from banks because we are owned by our members, so we always look for opportunities to reward them with even better value.”

2 May: Bank Boosts Rates Across Range Of Products

Aldermore is increasing its interest rates by up to 0.40 percentage points across a range of savings deals including its Easy Access and Notice accounts and its fixed rate bonds, writes Jo Thornhill.

The bank’s Easy Access account is boosted to 3.4% (AER Annual Equivalent Rate) from 3.15%. Its Double Access Account Issue 1, which allows two withdrawals per year, is already among the market leading rates, although its rate remains unchanged at 3.55% AER.

The four-year fixed rate bond is also now market leading at 4.65% (AER), up from 4.45%.

Aldermore is increasing its fixed rate bonds across the board. Its one-year rate is now 4.6% (AER) up from 4.35% and its two- and three-year rates are both now paying 4.65% (up from 4.45% AER).

At the same time the bank has upped the rates on its Notice accounts and its Notice Isa. The 30-day notice account (non-Isa) is paying 3.45% (AER) up from 3.2% and the equivalent 30-day notice Isa is paying 3.2% (AER) up from 2.8%.

Ewan Edwards, director of savings at Aldermore said: “Offering customers good value on their savings is incredibly important and with these increases savers can rest easy knowing their hard-earned cash is working hard for them.

“Our increases today are across a range of different account types so you can get a great rate no matter what your saving goal is.”

28 April: Rates Climb By Up To 0.35% From Monday

Nationwide Building Society is raising interest rates on several savings accounts from 1 May, writes Bethany Garner.

Rates are set to rise by as much as 0.35% across Nationwide’s variable rate accounts.

Two limited access accounts – the Limited Access Saver and eSavings Plus accounts – will see interest rates increase by 0.35%, from 1.40% to 1.75% AER.

The provider’s Instant Access Saver (issue 10) will pay 1.55% AER from May – an increase of 0.25% – while both the Loyalty Saver and Loyalty ISA account will see rates rise by 0.20%, to 3.20% AER.

Meanwhile, rates paid on regular savings accounts such as the Flex Regular Saver will rise by 0.25%.

Nationwide is also increasing rates across its children’s savings accounts. The provider’s Child Trust Fund, Junior ISA and Future Saver accounts will all see rates rise by 0.25% – from 3.00% to 3.25% AER.

Tom Riles, director of retail products at Nationwide, said: “As a mutual, we are always keen to support savers and pay the best rates we can sustainably afford, which is why we are increasing rates on all variable rate accounts, including our popular Loyalty and Triple Access accounts.”

Nationwide is the latest provider to announce rate increases in the wake of last month’s bank rate hike from 4.00% to 4.25%. Marcus by Goldman Sachs raised rates on two of its popular accounts this week. Both the provider’s Cash ISA and Online Savings Accounts now pay 3.30% AER (variable).

It’s worth noting that this includes a bonus rate of 0.34%, which savers must actively apply to their account. The rate expires after 12 months, and savers could be offered a more competitive bonus rate in the interim. In this case, they can opt in to the new bonus rate, which replaces the old one even if it hasn’t expired.

24 April: Reduction In Permitted Deposits To Limit Fraud

Regulator the Financial Conduct Authority (FCA) is taking steps to reduce money laundering via the Post Office, writes Bethany Garner.

According to the National Economic Crime Centre (NECC), hundreds of millions of pounds are laundered through Post Office cash deposits each year.

Under the measures from the FCA, customers paying in cash will be encouraged to use their debit card rather than a paying-in slip where possible, which the regulator says will allow increased monitoring.

The maximum cash deposit for a single transaction is also set to be reduced from its current limit of £20,000, though new limits are yet to be confirmed.

To support these anti-money laundering efforts, Post Office staff will receive additional training in spotting suspicious activity. Banks and building societies will also be required to enhance their fraud monitoring activities.

Newly curbed deposit limits could impact customers who rely on cash for day-to-day money management – particularly those who do not have access to a physical branch of their bank.

The move may also affect digital banking customers, since many app-only providers accept cash deposits through the Post Office.

Local businesses that don’t have a bank near-by may equally struggle with a reduced cap on cash deposits.

Sheldon Mills, executive director of consumers and competition at the FCA, said: “We have worked in partnership with law enforcement, industry and government to ensure people and businesses can still draw on the vital cash banking services provided by the Post Office, while addressing gaps that criminals could abuse.”

20 April: MPs Join Condemnation Of Harm Done To Savers

Loyal savers have suffered increasing financial harm over the past year, according to the financial regulator, because banks have failed to pass on interest rate rises fairly, writes Jo Thornhill.

In a letter to the parliamentary Treasury Select Committee, the chief executive of the Financial Conduct Authority, Nikhil Rathi said: “It is, and has been, standard practice for firms to offer more attractive rates to new savers, while leaving existing savers earning less competitive rates.

“We expect that the harm from this practice (and the loyalty penalty faced by longstanding customers) will have increased as the base rate has risen.”

The Bank of England Bank Rate has risen from 0.1% at the end of 2021 to its current level of 4.25%, but the average interest rate on easy access savings is languishing at around 2%, according to financial data analysts Moneyfacts.

The next Bank Rate announcement is on 11 May.

The FCA’s letter comes in response to concerns expressed by the Committee last month that banks were earning disproportionate profits by increasing rates on mortgages far quicker than on their savings products.

Mr Rathi added that the FCA had ‘challenged’ some of the worst culprits who had failed to increase savings rates, or did so with a ‘material time lag’ compared to prompt increases to mortgage rates.

He told the Treasury Select Committee he expected that the FCA’s new Consumer Duty, which will come into force for new and existing products from 31 July, would benefit all groups of savers.

The new rules will place greater emphasis on financial providers offering fair and good value products to all customers.

Mr Rathi said change would require a “significant culture shift from firms”, adding that he has stressed to banks the FCA’s interest in how they have been “moving mortgage rates and savings rates, the considerations they balance and the governance around decisions made.”

He said: “Once the Consumer Duty is in force the FCA will be able to identify and act against practices that do not deliver good outcomes for consumers.”

In response to today’s FCA letter, Harriett Baldwin, chair of the Treasury Select Committee, said: “The regulator has now given us official confirmation that the UK’s biggest banks are profiting from interest rate rises and that loyal savers are being increasingly harmed.

“While it’s welcome to hear the financial regulator is monitoring this situation, we will be keeping a close eye to ensure they act on these assurances. Consumers should continue to shop around to get the best rates possible.

“With banks set to release their first quarter results in the coming weeks, we will be monitoring whether firms are continuing to squeeze profits from their loyal savings customers.”

14 April: Provider Leads Market For Non-App Accounts

Family Building Society has increased the rate on its Online Saver account to 3.40% AER, writes Bethany Garner.

The Online Saver account can be opened and managed exclusively online, and the minimum opening deposit is £100.

Savers can access their cash at any time without penalty, though the minimum withdrawal is £100.

At 3.40%, Family Building Society now offers the market-leading rate for non-app easy access accounts – and the highest in a decade, according to analysis from Savings Champion.

At time of writing, the overall market leader is app-only provider Chip, which offers an instant-access account paying 3.55% AER. Another app-based bank, Tandem, takes the runner-up spot with an instant access account paying 3.50% AER.

The rates offered by challenger banks such as these have outpaced traditional high street banks in recent years.

At time of writing, Halifax, Lloyds Bank, Santander and Barclays all paid interest rates under 1% on their standard easy access accounts.

Savers who rely on in-person banking services, or are unable or unwilling to use online or mobile banking, are likely to miss out on the most competitive rates in this climate.

Coupled with the hundreds of branch closures scheduled for 2023, accessing competitive savings accounts on the high street looks set to become even more challenging.

6 April: Provider Marks New Tax Year With Rates Up To 4.25%

Nationwide Building Society is launching two fixed rate cash ISAs paying interest up to 4.25%, writes Bethany Garner.

The building society’s one-year Fixed Rate ISA comes with a rate of 4.10% AER, up 0.35% percentage points from its last issue.

Meanwhile, its two-year Fixed Rate ISA will pay 4.25% AER, representing an increase of 0.25% percentage points.

Each account can be opened with a lump sum between £1 and £20,000, and partial withdrawals are not permitted mid-term.

Both ISAs are available to new and existing customers, and can be opened in a branch, online or via the Nationwide app. The building society also accepts transfers from existing cash ISAs from other providers.

These new rates place Nationwide in close competition with current market leaders. At time of writing, the leading one-year fixed rate cash ISA, provided by Santander, pays 4.15% AER on balances from £500.

Virgin Money just bags the top spot for two-year fixed rate ISAs, with an interest rate of 4.26% AER on balances from £1.

Tom Riley, director of retail products at Nationwide, said: “Cash ISAs are an important product for savers, as interest doesn’t count towards the Personal Savings Allowance. They are a tax-efficient way to save for the short or long term.

“That’s why, to start the new tax year, we’re launching two fixed-rate ISAs offering some of the most competitive rates currently available on the market.

”The launch of these ISAs closely follows rate hikes on several other Nationwide savings products – including the One Year Triple Access Online Saver, now paying 3.00% AER (see story below).

31 March: Major Account Provider Responds To Bank Rate Hike

Nationwide is hiking interest rates on several of its savings accounts from 1 April, with many increases as high as 0.50% percentage points, writes Bethany Garner.

In raising its rates, the UK’s largest building society follows providers such as Yorkshire and Coventry building societies and Aldermore Bank, which increased rates in response to the latest bank rate hike (see story below).

From tomorrow, the interest rate on Nationwide’s One Year Triple Access Online Saver is set to rise by 0.50% points, from 2.50% to 3.00% AER, while both the Limited Access Saver and eSavings Plus accounts will see rates rise from 1.25% to 1.40% AER.

Elsewhere, the provider’s easy access rates will rise from 0.75% – 0.90%, to 1.00% – 1.25%. Interest paid on these accounts varies depending on the saver’s balance, with accounts worth £50,000 and above earning the highest rate.

Nationwide is also raising rates on three of its Loyalty accounts – the Loyalty Saver, Loyalty ISA, and Loyalty Single Access ISA – from 2.50% to 3.00% AER. Loyalty accounts are not currently open to new applications.

Tom Riley at Nationwide, said: “We remain committed to supporting savers, which is why we have increased rates on our popular loyalty, triple access, and instant access savings accounts where most balances are held.”

While many of these increases are chunky, Nationwide accounts fall behind current market leaders. At time of writing, the leading variable rate cash ISA, provided by Furness Building Society, pays 3.30% AER – 0.30% points higher than Nationwide’s highest paying ISAs.

Online-only provider, Chip, takes the top spot for easy access accounts, with an interest rate of 3.40% AER (variable).

24 March: Savings Rates Climb – But Many Fall Short Of Full Bank Rate Rise

Yorkshire and Coventry building societies, Aldermore Bank and app-based banks Monzo and Atom are among the savings account providers to have raised rates following yesterday’s increase in Bank Rate from 4% to 4.25%, writes Laura Howard.

Yorkshire has passed on the full increase across its easy access accounts, which now offer returns of 2.80% – or 3.0% on accounts with restricted access. All new accounts at Yorkshire will pay a minimum of 2.80%.

Aldermore has upped savings rates across a range of accounts, including its fixed rate cash ISAs, 1-year fixed rate bonds and ‘double access’ accounts (which permit up to two withdrawals per year).

But while Aldermore’s 1-Year Fixed Rate ISA benefits from the full hike – rising from 3.70% to 3.95% – its 2-Year Fixed Rate ISA increases by 15 percentage points to 3.90%, and its 3-Year by just five percentage points to 4.0%.

Monzo has increased the rate payable on its Instant Access account by just under the full Bank Rate hike – from 3% to 3.2%.

Digital bank Chase will increase rates on its 3.00% Saver Account by 10 percentage points to 3.10% from 3 April.

Rachel Springall at Moneyfacts points out that not all savings providers’ rate hikes may be directly linked to yesterday’s announcement – some may have been previously priced in.

Research from data provider Defaqto shows, with rates on cash the highest they have been for 10 years, it’s much easier for savers to breach the Personal Savings Allowance threshold.

The Allowance shields basic rate taxpayers from paying tax on the first £1,000 of interest earned a year. For higher rate taxpayers, the threshold is £500 a year.

Katie Brain, consumer banking expert at Defaqto, said: “It may be worth considering an ISA account instead this year in order to save without the tax liability.

“It is also worth noting that some of the best rates being offered across all accounts are not necessarily from the high street banks. It’s worth looking at building societies and challenger banks that are offering top rates right now, to get the most from your savings.”

7 March: ‘Forgotten’ Funds Remain Accountholders’ Property

The official Dormant Assets Scheme will direct £76 million from forgotten bank accounts towards cost-of-living support for financially vulnerable households, writes Bethany Garner.

Launched in 2011, the Dormant Assets Scheme aims to reunite funds held in products such as current and savings accounts with accountholders who, for whatever reason, have not touched their money for 15 years or more.

Unclaimed cash is redirected towards social and environmental initiatives. So far, the scheme has raised £892 million for these causes.

It should be stressed that money held in a dormant account continues to belong to the accountholder, and can be reclaimed at any time. The Scheme retains a pool of cash to cover this eventuality.

The government says £45 million of funding from the scheme will be distributed among 69,000 individuals struggling with the cost of living crisis. No-interest loans will be made via the government-backed body Fair4AllFinance.

The remaining £31 million will support charities and social enterprises working to improve households’ energy efficiency through schemes such as upgrading boilers, improving insulation and installing heat pumps or solar panels.

For the first time, community wealth funds can also apply for Scheme grants. These funds support communities in deprived areas, with local residents deciding how the money is spent.

Lucy Frazer MP, culture secretary, said: “This will have a real impact on people’s lives, help alleviate debt and provide money saving solutions for charitable organisations.”

In a bid to unlock additional funding, the Scheme will soon cover pensions, securities, investment accounts, and funds held in insurance or wealth management products. Currently, only bank and building society accounts are covered.

The change is expected to raise an extra £738 million.

14 February: Banks Bonus Battle To Attract Customers

Eligible customers who make a full switch of their current account to NatWest will receive a £200 cash welcome bonus from today, writes Laura Howard.

A full switch means using the Current Account Switching Service, which entails closing down your old current account.

Customers won’t be eligible if they are switching between banks within the NatWest Group – NatWest, RBS and Ulster Bank – or if they have been paid a switching bonus by any of these banks between 1 October 2017 and 13 February 2023.

The £200 welcome offer applies across NatWest’s full range of current accounts – Select, Reward, Premier Select and Premier Reward – and is also available on accounts at RBS and Ulster Bank.

To qualify for the welcome bonus, customers must apply online or via the NatWest app. They must then deposit a minimum of £1,250 into the account and log into the NatWest banking app within 60 days. The £200 welcome bonus will then be paid into the account within seven days.

First Direct, Lloyds Bank and TSB are also currently offering cash incentives to new customers switching current accounts.

14 February: £15 Million Boost To Premium Bond Prize Pay-Outs

National Savings and Investments (NS&I), the government-backed savings bank that oversees premium bonds, is increasing the value of its prize fund for the fifth time in 12 months, writes Bethany Garner.

From March 2023, NS&I will add around £15 million to its premium bonds prize fund. The majority of new prizes added to the monthly draw will be worth £50 or £100, but the number of larger prizes is also rising.

There will be an additional three £100,000 prizes, six more £50,000 prizes, and 12 more £25,000 prizes. There will continue to be just two £1 million prizes in each monthly draw.

However, the number of £25 prizes will fall by almost 250,000. The total number of prizes will remain the same, and the odds of each bond winning will remain at 24,000 to 1.

These changes will increase the effective prize rate from 3.15% to 3.35%, but it is possible to hold premium bonds and never win a prize. Prizes are paid tax-free.

NS&I is also increasing the interest rates on its Direct Saver and Income Bond products from 2.60% to 2.85% as of today.

Ian Ackerly, chief executive of NS&I, said: “We are committed to ensuring our products remain attractive and our customers can continue to save with confidence.

“Today’s changes mean that we continue to balance the interests of savers, taxpayers and the broader financial services sector.”

13 February: PO Cash Deposits At £1.4 Billion In January

The amount of cash deposited across the Post Office’s 11,500 branches increased by 9.3% in January compared to December 2022, writes Bethany Garner.

Account holders deposited £1.4 billion during January, up from £1.28 billion in December 2022.

The increase was largely driven by activity in Northern Ireland, where personal cash deposits soared almost 100% as households cashed in government energy vouchers.

On 16 January, the first 500,000 of these £600 energy vouchers were issued to households in Northern Ireland which don’t pay energy bills via direct debit.

They combine the £400 Energy Bills Support Scheme and £200 Alternative Fuels Payment into a single, one-off payment for every household in Northern Ireland. Vouchers will continue to be issued until the end of February.

Martin Kearsley, banking director at the Post Office, said: “We expect a significant amount of cash to be deposited in February too, and we expect cash deposits to remain higher than before the voucher scheme started as more people recognise they can do their everyday banking at Post Offices.”

Meanwhile, personal cash withdrawals decreased by 20% month on month, as consumer spending fell back following its Christmas uplift.

Business cash deposits totalled £1.09 billion in January, roughly the same as December.

As the number of bank branches and cash machines declines across the UK, the Post Office is likely to play a significant role in preserving access to cash.

According to Link, the UK’s largest cash machine network, the number of free-to-use ATMs dropped to 39,429 at the end of 2022, down by 25% since 2018.

9 February 2023: Time-Limited Offer Pays Up To £10 A Month

Nationwide current account customers will automatically earn cashback on supermarket spending from today, writes Bethany Garner.

Account holders will earn back 5% of what they spend – up to a maximum of £10 a month – when using their debit card at supermarkets and convenience stores.

Supermarket fuel is excluded, however.

The offer applies across all of Nationwide’s adult current accounts – FlexAccount, FlexPlus, FlexDirect, FlexStudent, FlexGraduate and FlexBasic.

The scheme will run either until 30 April 2023 or until £99 million has been paid out to customers —whichever is sooner.

Cashback will be paid directly into the customer’s current account. The minimum cashback payment is £3, which means account holders must spend at least £60 a month to qualify. Earning the maximum £10 cashback requires a monthly supermarket spend of £200.

The offer is available to both new and existing current account customers.

Tom Riley, director of retail products at Nationwide, said: “Food costs have risen sharply and many households now think carefully about how and where they shop. We’re helping members with £10 monthly cashback on supermarket spending.”

In launching the scheme, Nationwide joins the ranks of banks and building societies, such as Chase and Santander, offering cashback to their current account customers. At 5%, albeit capped at £10 per month, Nationwide’s cashback rate is a competitive first foray into this arena.

7 February: Chunky Rise From 3% On New 3-Year Bond Issue

NS&I, the government-backed savings bank, has launched a new issue of its three-year Green Savings Bond paying 4.20% AER, writes Bethany Garner.

This new rate is up from the 3% AER offered when the bond was last issued in August 2022, and places it just below the current market leader, Gatehouse Bank, which offers a three-year bond paying 4.45% AER.

Laura Suter, head of personal finance at AJ Bell, commented: “The [Green Savings Bonds] rate now is a far cry from the paltry 0.65% interest paid on these accounts when they were first launched almost 18 months ago.

“Someone who put £5,000 into the bonds at launch will be earning just £32.50 a year in interest, compared to the £210 a year that a new customer will be getting now. If they had invested £20,000 that difference in interest jumps to more than £700 a year.”

Savers can invest between £100 and £100,000 in the latest Green Savings Bond issue, and interest is credited to the account once a year. Cash held in the bond can’t be accessed until it matures after three years.

The bonds will help finance sustainability projects across the UK as part of the Government Green Financing Framework, which aims to achieve net zero greenhouse gas emissions by 2050.

Projects include improving energy efficiency, developing sustainable energy sources and tackling pollution.

Ian Ackerly, chief executive of NS&I, said: “This is an excellent new opportunity for savers who want to grow their funds over the next three years, at the same time knowing their investment will make a difference by helping finance the government’s green projects.”

6 February: Stock Market Bond To Pay 6.25%

The Royal Masonic Benevolent Institution Care Company (RMBI) has launched a six-year investment bond with an interest rate of 6.25%, writes Bethany Garner.

The minimum investment is £500, and subsequent investments must be multiples of £100. Savers can purchase bonds until 28 February 2023 – no further investments are allowed beyond this date.

RMBI – a charity that provides elderly and dementia care services across England and Wales – is issuing the bonds to support its work, including the replacement of six of its care homes.

Paying a fixed annual interest rate of 6.25%, it outstrips the most competitive fixed rate bonds on the market. However, as a retail bond it differs from bonds offered by banks and building societies in a number of ways.

First, as an investment rather than a savings account, it must be purchased through an investing platform. Platforms including AJ Bell and Hargreaves Lansdown are listing the RMBI bond.

Investors can also sell bonds before they reach maturity, and their value can go down as well as up. The RMBI bonds are expected to be admitted to the London Stock Exchange in March.

Interest on the bonds is paid in two instalments per year – each equivalent to 3.125% of the sum invested – on 7 March and 7 September. The first payout is scheduled for 7 September 2023, and the bond will mature on 7 March 2029.

Mark Lloyd, managing director of RMBI Care Co. said: “A successful bond issuance will enable us to become even more innovative in meeting the wider needs of our communities and increase the number of people we can support.”

The bonds are issued by RBC Bonds PLC, which has previously issued bonds for 12 other charities, raising £377 million.

1 February: NS&I 4% Offer Highest Since 2010

NS&I, the government-backed savings bank, is offering one-year fixed rate bonds for the first time since 2019, writes Bethany Garner.

The one-year Guaranteed Growth Bond will pay 4.00% AER, while the one-year Guaranteed Income Bond will pay 3.97% AER.

Today’s new rates are the highest NS&I has paid on these products since 2010.

Savers can invest a lump sum of between £500 and £1 million into a bond. Interest is calculated daily and paid monthly — into the bond itself or a linked current account, depending on whether savers choose the Guaranteed Growth or Guaranteed Income Bond.

When 12 months have elapsed, the cash can be withdrawn or reinvested.

NS&I is also raising rates across its two, three, and five-year fixed rate products, which are only available to existing customers whose product is about to mature.

The bank’s two and three-year Guaranteed Growth Bonds will pay 4.20% AER from today, up from 3.56%, while its five-year Guaranteed Growth Bond rate will rise from 3.80% to 4.25% AER.

Ian Ackerly, NS&I chief executive, said: “It continues to be an exciting time for savers and I’m pleased that we are able to bring back on general sale our popular one-year fixed-rate Bonds with two new Issues.”

Mr Ackerly added that around 494,000 existing customers could also benefit from these rates should they choose to reinvest when their bond or certificate matures.

24 January: Rates Rise For NS&I Savers ‘To Highest In A Decade’

National Savings and Investment (NS&I), the government-backed savings bank that oversees premium bonds, is increasing the number of available prizes for the second time this year, writes Bethany Garner.

Interest rates have also increased on several of its savings accounts, reflecting the direction of rates across the market in recent months.

From February 2023, NS&I will add around £15 million to the premium bonds prize fund, creating almost 3,000 extra prizes in the monthly draw.

The majority of new prizes will be worth £50 and £100, but the number of larger prizes is also rising. There will be three additional £100,000 prizes, six more £50,000 prizes, and 12 more £25,000 prizes.

There will continue to be just two £1 million prizes in each monthly draw, and the odds of winning will remain at 24,000 to 1.

These changes will increase the effective prize rate from 3.00% to 3.15% – the amount of interest paid in total on the fund. It is possible, of course, to hold premium bonds and never win a prize.

Ian Ackeryl, NS&I chief executive, said: “Today’s changes will provide a welcome boost for savers of all ages across the country, with more premium bonds prizes and some of the highest interest rates we’ve seen in over a decade.”

NS&I has increased interest rates on four of its variable rate savings products from today, affecting roughly 870,000 customers.

The bank’s Direct Saver and income Bonds now pay 2.60% AER (variable) — up from 2.30% — while its Direct ISA rate has risen from 1.75% AER (variable) to 2.15%.

Its Junior ISA rate has also risen from 2.70% AER (variable) to 3.40%.

Myron Jobson, senior personal finance analyst at Interactive Investor, said: “NS&I savings rates have been given another shot in the arm following successive base rate increases.

“They represent marked increases, especially on the Direct ISA and Junior ISA, which bodes well for savers — but the rates are far from market-leading.”

January 17: Transactions And Amounts Withdrawn Increase In 2022

The number of cash machines fell last year, despite a rise in transactions and average amounts withdrawn, according to data from Link, the ATM network, writes Jo Thornhill.

The report from Link shows customers withdrew £83 billion from cash machines last year, compared to £79 billion in 2021. There was also a 5% increase in the total number of ATM transactions – rising from just over 1 billion to 1.024 billion.

But overall the number of cash machines fell from 52,547 to 51,253, driven by a fall in the number of charging ATMs. The number of free-to-use machines increased slightly by 13.

The average amount withdrawn during 2022 was £1,564 per person last year (up from £1,462 in 2021). Northern Ireland is the most heavily cash-reliant UK nation, where consumers withdrew an average of £2,266 last year (the figure was £2,070 in 2021).

The government announced plans to protect access to cash for all communities in May last year and is working with the Financial Conduct Authority and the banking industry to address cash access issues.

Graham Mott, director of strategy at Link, said: “These numbers aren’t surprising. It’s easy to forget that there was quite a significant lockdown at the beginning of 2021 and therefore 2022 was the first year we’ve had since 2019 where there were no interruptions.

“What we know is that our relationship with cash and ATMs has changed. While many people are now happy to use contactless or digital payments, our research shows there are very few people that are completely cashless. We also know that people are visiting cash machines less often, but on average take out more cash.

“It’s extremely good news that the government is introducing legislation to help protect free access to cash. There are still over five million people who rely on access to cash and face-to-face banking services.

“Digital payments and banking may be fantastic for some, but at the moment, they don’t work for all, which is why this legislation is so important.”

16 January: Upward Trend On Bond Rates Stalls As Stability Returns

Returns for savers looking to lock away their cash may be as good as they are going to get – for now, writes Laura Howard.

Average interest rates on fixed rate bonds failed to rise in January for the first time in 12 months, according to the latest savings trends report from Moneyfacts, the market analyst.

Returns on the average one-year fixed bond remained unchanged at 3.51%. Longer-term fixed bond returns dropped to 3.85% from 3.89% in December – the first fall since March 2021.

Rachel Springall, finance expert at the data provider, said: “The savings market appears to have entered a period of stability – a notable contrast from recent months of volatility.

“The average one-year fixed bond rate remained unchanged for the first time in a year and the average shelf life of fixed accounts overall rose by two days to 29 days.”

Variable savings rates – paid on easy access and notice accounts as well as the equivalent cash Individual Savings Accounts – continued to rise for the 11th consecutive month. However, the proportion of accounts that pay above the Bank rate – currently at 3.5% – fell.

The next interest rate decision will be taken by the Bank of England on Thursday 2 February.

11 January: Cash Withdrawals Fifth Higher Last Year

Cash withdrawals from Nationwide building society ATMs soared by 19% in 2022 – the first annual increase in 13 years, writes Jo Thornhill.

Nationwide data shows 30.2 million cash withdrawals were made from its 1,200 ATMs last year – up from £25.4 million in 2021 – as more households turned to using physical cash to help with budgeting in the cost of living crisis.

The average cash withdrawal amount was £105 – down 2% on the previous year, but an increase of 25% on 2019, before the pandemic.

The use of cash has steadily declined in recent years, most sharply at the start of the pandemic, when the number of withdrawals at Nationwide cash machines, for example, dropped by more than 40%.

Otto Benz, director of payments at Nationwide, said: “For the first time in years we are seeing a natural rise in cash withdrawals as people return to using cash to help avoid getting into debt from the rising cost of living.

“ATMs play a vital role in society, enabling people to easily access cash. However, over the years, they have offered greater capability for people to manage their money, whether that’s checking their balance or paying a household bill.

“Far from the end for cash, it shows that the future of money management is constantly evolving. Taking advantage of the additional services that ATMs provide can be a speedy and convenient experience.”

9 January: Post Office Reports Surge In Cash Withdrawals

The volume of personal cash withdrawals across the Post Office’s 11,500 branches increased by 6.7% in December compared to the previous month, writes Bethany Garner.

Account holders withdrew £892 million during December – 11% more than in December 2021, according to the latest Post Office Cash Tracker report.

The rise in cash withdrawals may be connected to the growing number of consumers using physical cash as a budgeting tool amidst the cost-of-living crisis.

According to a separate survey from LINK – the UK’s largest ATM network – 9% of shoppers expect to use more cash in the next six months, while 13% said that keeping track of their finances was more challenging when using card payments rather than cash.

As high street banks continue to close branches, consumers who rely on cash may also be turning to Post Office services. According to consumer group Which?, more than 5,300 branches have closed since 2015.

While the volume of personal withdrawals grew in December, business deposits have dipped. The value of deposits made by businesses at the Post Office dropped by 2% month-on month, from £1.11 billion to £1.09 billion.

The drop may be linked to the recent tightening of money laundering controls, which limit the amount of cash some businesses can deposit at its branches.

Martin Kearsley, banking director at the Post Office, said: “December was a torrid month for the hospitality sector amongst others, with strikes and freezing weather reducing footfall and cash takings across pubs, cafes and restaurants especially; and in turn contributing to a fall in deposits at Post Offices.

“Over-zealous limits imposed on the amount they are able to deposit is resulting in more businesses no longer being able to accept cash, impacting both their ability to trade as they would like, as well as their customers who need to or choose to budget using cash.”

Throughout 2022, the Post Office handled £32.1 billion in cash deposits and withdrawals — an increase of 19.6% compared with 2021.

A further 193 bank branch closures are scheduled for 2023.

20 December: Regulator Imposes £49m Sanction After Botched IT Project Harms Customers

Total fines levied by the Financial Conduct Authority (FCA) so far this year have reached £214m across 25 businesses that have fallen foul of its rulebook, writes Andrew Michael.

Nearly half this figure came from a £108 million penalty imposed on Santander UK earlier this month relating to the risk of financial crime in the retail banking sector.

The latest institution to face a hefty penalty is TSB, which has been fined a combined £48.65m by the FCA and its sister regulator, the Prudential Regulation Authority, for failures in risk management and governance following a botched IT upgrade that affected branches and blocked customers from accessing its services in 2018.

Although TSB completed a data transfer, the company’s IT platform immediately experienced technical failures. This led to disruption in the continuity of the bank’s services including branch, telephone, online and mobile banking.

All of TSB’s branches and a significant proportion of its 5.2 million customers were affected by the initial issues, and some customers continued to be blighted for several months after the initial problems arose.

TSB has already paid £32.7m in redress to those who suffered detriment from impaired services.

Mark Steward, the FCA’s executive director of enforcement and market oversight, said: “The failings in this case were widespread and serious which had a real impact on the day-to-day lives of a significant proportion of TSB’s customers, including those who were vulnerable.”

Other organisations fined by the FCA this year include Metro Bank (£10m), Citigroup Global Markets (£12m) and Julius Baer International (£18m).

According to the FCA, total penalties imposed last year totalled £568m, although nearly half of this, £265m, was a fine levied by the courts on NatWest Bank following the regulator’s successful prosecution of the bank for failing to comply with money laundering regulations.

The FCA levies fines according to a five-step formula laid out in the regulator’s handbook in a section on penalties.

The five steps cover ‘disgorgement’ – where the regulator seeks to deprive a firm from any benefit derived from a breach of the financial rulebook – along with the seriousness of the rule breach in question, mitigating and aggravating factors, adjustment for deterrence and a settlement discount.

Each FCA enforcement notice explains its reasoning for a particular level of financial penalty, plus a calculation about how it decides the final amount.

In terms of what is done with the money raised from the fines imposed by the regulator, an FCA spokesperson said: “We recoup some of our costs and the rest goes to HM Treasury.”

14 December: NS&I Ups Savings Rates And Increases Number Of Prizes

National Savings and Investment (NS&I), the Government-backed savings bank that oversees Premium Bonds, is increasing the number of prizes available from the New Year – and has hiked up savings rates on several accounts, writes Bethany Garner.

From 1 January 2023, NS&I will add around £80 million to the Premium Bonds prize fund, creating 15,750 extra prizes in the monthly draw.

Most of the new prizes will be worth £50 and £100, but the number of larger prizes is also rising.

The number of £100,000 prizes will increase from 18 to 56, while the number of £50,000 prizes will increase from 36 to 112. The number of £25,000 prizes will rise from 71 to 223.

There will continue to be just two £1 million prizes in each monthly draw, and the odds of winning will remain at 24,000 to 1.

The change will increase the effective prize fund from 2.20% to 3.00%.

Ian Ackerley, chief executive of NS&I, said: “The New Year increase to the Premium Bonds prize fund rate will mean that customers will have seen the prize fund rate triple in less than a year. This means a bigger prize pot and more higher value prizes for our customers.”

NS&I has also increased interest rates on three of its variable rate savings products with immediate effect affecting more than 570,000 customers.

The bank’s Direct Saver and Income Bonds now pays 2.30% AER (variable) — up from 1.80% — while its Investment Account rate has risen slightly from 0.40% to 0.60% AER (variable).

9 December: ‘Edinburgh’ Reforms Aim To Boost UK Competitiveness

Jeremy Hunt, Chancellor of the Exchequer, has unveiled wide-ranging plans to repeal and reform City regulations in a move that will significantly re-draw the UK’s financial services rule book, Andrew Michael writes.

Mr Hunt said that today’s proposals, dubbed the “Edinburgh reforms” after the location of a meeting between Mr Hunt and banking chiefs, are designed “to seize the benefits of Brexit”.

He added that the deregulation drive would help to “turbocharge growth” in the UK and place it in a strong position to compete with international rivals.

The Treasury believes that many of the proposed changes are only possible because of “freedoms” gained by the UK from leaving the European Union.

The Chancellor unveiled 30 reforms spanning a wide section of the UK’s financial services interests.

These include a relaxation of the so-called ‘ring-fencing’ rules that apply to banks – drawn up in the aftermath of the 2008 global financial crisis – to a consultation about the potential for a new central bank digital currency.

Ring-fence rules for banks that have both retail and investment arms were introduced after the 2008 crash to keep the two parts separate. This was designed to reduce risk and prevent banks from the risk of contagion and collapse.

Many problems in the 2008 financial crisis were caused by difficulties in investment banking operations resulting in unmanageable stresses in the retail equivalent, causing the whole bank to be damaged.

The current rules require lenders with more than £25 billion in deposits to formally split consumer operations from their investment banking subsidiaries to protect retail customers.

Implementing the rules has been expensive, with some lenders arguing that their introduction risked “ossifying” the banking sector. Ring-fencing itself has also been called into question, given that investment banking was virtually non-existent at several of the UK lenders caught up in the financial crisis.

Any relaxation, however, is also likely to attract criticism. Former deputy governor of the Bank of England, Sir Paul Tucker, told the Financial Times earlier this year that “ring-fencing helps protects citizens from banking Armageddon”.

Mr Hunt said there are also plans to change the tax treatment of investment trusts in the property sector, and to reform the rules around short selling, where traders bet that the price of an asset such as a company’s shares will fall.

The government also published today its first consultation on proposals to modernise the Consumer Credit Act with the intention of “simplifying the regime to encourage innovation in the credit sector and cutting costs for consumers and businesses”.

Matt Barrett, head of Adaptive Financial Consulting, said: “The government’s announcement of a loosening of financial services regulation to increase competition is welcome in principle. However, in practice, it will need to be executed carefully to ensure financial institutions that have spent many years and a significant amount of investment preparing for the implementation of EU-wide regulations are not caught offside.”

Chris Cummings, chief executive of the Investment Association, said: “The Investment Association shares the government’s vision for an open, sustainable and internationally competitive financial services industry that serves the interests of investors and the wider economy.

“Today’s Edinburgh Reforms are a very welcome acknowledgment of the need for reform to boost the UK’s place as a leading global financial services hub, and importantly, recognises the place of investment management at its heart.”

Myron Jobson, senior personal finance analyst, at Interactive Investor, says: “The reform of the Consumer Credit Act will mark the biggest shake up in consumer credit in generations. Attitudes to credit have changed since the Act was introduced half a century ago. The growth in digital lending is happening due to changes in consumer behaviour. Safeguards will likely be updated to account for this trend.

“It is also important that the language around credit is made clearer. The reason many borrowers get into difficulty is because they don’t fully understand the consequences of what they’re taking on.”

1 December: First Direct Doubles Regular Saver Rate To Market-Leading 7.00%

First Direct is doubling the interest rate on its Regular Saver account from 3.50% to 7.0% AER, writes Bethany Garner.

It is the highest savings rate the market has seen since January 2013, when a 8% regular saver was available, also from First Direct, according to Moneyfacts.

The new market-leading rate will be fixed for 12 months. It’s only available to First Direct current account holders, and to new customers who can currently earn a £175 incentive when they make a full switch of their current account.

The Regular Saver allows savers to pay in between £25 and £300 each month, with interest calculated daily and paid on the anniversary of the account’s opening. If savers don’t pay in the maximum £300 one month, they can carry over the unused subscription into future months.

It does not allow partial withdrawals. Customers who want to access their cash must shut down the account completely. If this is before the end of the 12-month period, savers only earn 0.65% AER, which is First Direct’s Savings Account Variable Rate.

First Direct is also raising rates across its other savings accounts. The rate on its easy access deal has been increased from 0.50% to 0.65% AER (variable), its cash ISA rate has risen from 1.40% to 2.30% AER, while its one-year Fixed Rate Saver now pays 3.50% AER – up from 2.25%.

Chris Pitt, chief executive of First Direct, said: “We are committed to giving savers a good return on their money, particularly in the context of the increases in the cost of living and the current high inflation environment.”

Rachel Sprignall at Moneyfacts, added: “Regular savings accounts are rigid than easy access accounts and harsh penalties can be applied if payments are missed or withdrawals are made, so they are most suitable for savers who need a strict savings plan and who wish to avoid dipping into their cash early.

“Savers will need to compare regular savings accounts carefully, as some are only available to current account customers or even local customers.”

29 November: Halifax Launches £175 Switch Incentive

Halifax is the latest bank to offer new current account customers a generous cash incentive when they switch, writes Bethany Garner.

From today until 19 December 2022, the bank will pay a welcome bonus of £175 to non-Halifax customers who switch to its Reward Current Account or Ultimate Reward Current Account.

In order to claim this incentive, customers must make a full switch using the Current Account Switch Service.

In launching the offer, Halifax joins several other providers vying for new customers with cash incentives.

At time of writing, HSBC is offering a £200 welcome bonus to new Advance Account customers — provided they have not held an HSBC account or opened a First Direct account since 1 January 2019.

Nationwide is also offering £200 to switch to its FlexAccount, FlexPlus, or FlexDirect accounts. To be eligible for the bonus, customers cannot have switched to a Nationwide current account since 18 August 2021.

First Direct is offering new customers £20 when they open a 1st Account, or £175 for a full switch. To qualify for the £175 bonus, switchers cannot have previously held a First Direct account, and cannot have opened an HSBC current account since 1 January 2019.

Cash bonuses are not the only perk banks are using to attract new customers. Santander, for example, recently launched a current account that offers cashback up to £20 a month.

The Santander Edge current account costs £3 a month to maintain, and pays 1% cashback on bills, and 1% cashback on groceries.

Customers can earn up to £10 a month in each category, and cashback is earned on both debit card spending and direct debits.

Account holders can also open a linked easy access savings account paying a competitive 4.00% AER on balances up to £4,000. This includes a bonus rate of 0.50% that expires 12 months after opening.

Santander Edge has replaced the bank’s 1|2|3 Lite current account.

Meanwhile, Lloyds Bank has launched two new package accounts — Silver, and Club Lloyds Silver.

The Silver account, which comes with a £10 monthly fee, includes European family travel insurance, AA roadside breakdown cover and mobile phone insurance for two devices.

The Club Lloyds Silver account offers the same benefits, as well as interest on balances up to £5,000 and occasional perks such as cinema tickets, magazine downloads or movie rental. Maintaining the account also costs £10 a month, plus a monthly Club Lloyds fee of £3.

The Club Lloyds fee is waived each month customers pay in at least £1,500.

29 November: Deposits in fixed rate savings accounts hit record

The nation’s savers paid a record £11 billion into fixed rate savings accounts in October – a huge increase from the £3 billion deposited in the previous month and the highest level on record, writes Jo Groves.

On average, interest across all fixed rate savings accounts – also known as fixed rate bonds – climbed to 3.3%, according to the latest Money and Credit report from the Bank of England, attracting savers seeking higher returns in the face of soaring inflation.

Laura Suter, head of personal finance at AJ Bell, said: “People made the most of a leap in savings rates and shifted their money into fixed-term accounts in their droves in October. Rates leapt up following the mini-Budget and fierce competition in the savings market.”

Fall in popularity of easy access accounts

However, October also saw a £5 billion net outflow from easy access savings accounts. And contributions to the government’s NS&I accounts fell to their lowest level since January as the cost-of-living crisis prompted households to dip into savings to make ends meet.

Returns on easy access savings accounts continue to lag behind the Bank rate, which currently stands at 3%.

The average interest rate on existing accounts in October was just 0.52%, a small increase from September’s average rate of 0.43%. However, much better returns are available for savers prepared to shop around.

Interest rates on fixed rate bonds

Savers are being rewarded for locking their money away, with the best returns on fixed rate bonds with terms of two years or more currently paying in excess of 4.50% AER.

Laura Suter said: “The average rate on two-year fixed-rate bonds hit 3.55% in October, the highest since 2009, while three-year bonds also hit a 13-year high.”

Some experts have suggested this may be ‘almost as good as it gets’ for fixed rate savings. Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said:

“Predictions of a recession may well mean interest rates don’t rise as much in the coming months, and are likely to fall as we go through a difficult year or so.

“This is factored into fixed rates, so there’s a growing chance that rates won’t go much higher from here.”

24 November: Rates Nudge Up On Tax-Friendly Savings Accounts

The interest rate lever is one of the few devices that the Bank of England can pull to head off the effects of steepling inflation on the UK’s finances, writes Andrew Michael.

More formally referred to as the ‘Bank rate’, this crucial figure affects both the cost of borrowing, as well as the returns on savings and it has increased no less than eight times over the past year.

In December 2021, Bank rate stood at a lowly 0.1%. Today (24 November), the figure is 3%.

While the worst of the economic turbulence – during the former Prime Minister Liz Truss’ time in office – has subsided, inflation rose in the 12 months to October to 11.1% which represents more than five times the government’s target.

Soaring inflation makes it more likely that the Bank’s rate-setting Monetary Policy Committee will impose a further interest rate rise when it next convenes on 15 December.

While this would be further bad news for mortgage customers on variable rates – as well as those coming to the end of their current fixed rate deal – it’s music to the ears of savers.

What’s more, amid all this year’s turmoil, cash individual savings accounts – often shortened to cash ISAs – have been making a comeback, with the top easy access accounts paying up to 2.80% AER with interest rates in excess of 4% available for customers prepared to lock away their cash for two years.

Large numbers of savers had abandoned these tax-friendly accounts when interest rates plunged in the wake of the 2008 financial crisis. But cash ISAs are now steadily regaining their appeal – and with good reason.

According to savings data from HM Revenue & Customs, 8.1 million cash ISAs were opened during the 2020/21 tax year (the latest figures available).

Although this figure was significantly down on 2019/2020, which saw 9.7 million accounts taken out, the figure was on a par with 2018/19 and a million more than the 7 million cash ISAs that were opened during the 2017/18 tax year.

Personal Savings Allowance

In recent years, government figures show that around one-in-10 people paid tax on the interest earned from their savings after the personal savings tax allowance was introduced in 2016.

This concession from HM Revenue & Customs means that around 27 million UK basic-rate taxpayers can earn up to £1,000 a year from a high street savings account without paying tax.

The allowance is reduced by half, to £500, for the UK’s five million or so higher-rate taxpayers. Additional tax rate payers do not receive a personal savings allowance which means they pay tax on all savings interest earned in traditional accounts.

With interest rates rising significantly this year, savers in regular high street accounts risk using up their personal savings allowance much more quickly compared with very recent history when interest rates were closer to zero.

This strengthens the case for cash ISAs because they allow savers aged 16 or over to shelter up to £20,000 each year from tax.

What is a cash ISA?

Cash ISAs come in a range of varieties including easy access, those which require some notice – say, 30 days – as well as fixed-rate accounts that can offer terms of between 12 months and five years.

Although you can spread your £20,000 allowance across several different types of ISA , you can only open one cash ISA each tax year.

There are various pros and cons associated with cash ISAs:

Pros

Easy to open and run
Provides fixed rates over up to five years
Allow you to avoid paying tax on savings interest worth £1,000 or more a year
Covered up to £85,000 by the Financial Services Compensation Scheme
Can be inherited by a partner or spouse without affecting their own ISA allowances.

Cons

Returns likely to fall short of those achieved by higher risk products such as stock and shares ISAs
Can offer inferior interest rates compared with regular savings accounts
If you earn less than £1,000 in interest a year, there’s no real tax benefit and a higher-rate regular savings account may be a better choice.

Choosing a cash ISA

The interest rate on offer is the main consideration for most savers choosing a cash ISA. But there are other factors to consider:

Withdrawal rules. Some products allow penalty-free withdrawals at any time, but those offering superior returns may impose a lock-in requirement of between two and five years

Rate and term. Fixed-rate cash ISAs with set terms tend to offer higher rates. But where interest rates are continuing to rise, it’s worth considering whether it makes sense to lock away your cash

Ease of use. Rules differ amongst cash ISAs from being opened and managed online, to requiring a branch visit. Other stipulations may include a minimum opening balance, the need to keep up regular payments, and the notice required for withdrawals

Many cash ISAs are described as ‘flexible’ which means you can replace any funds you withdraw in the same tax year without affecting your annual ISA allowance.

14 November: Savers See Interest Rates Rise For Ninth Consecutive Month

Saving rates have risen for the ninth consecutive month, with some accounts now paying decade-high rates, writes Bethany Garner.

The average easy access savings rate has surpassed 1% for the first time since 2012, while fixed rate bonds of 18 months or longer currently pay a 12-year high of 3.77%.

The data from Moneyfacts UK Savings Trends Treasury Report also revealed that one-year fixed rate bonds have reached 3.29% – their highest average rate since 2009.

Rachel Springall, finance expert at Moneyfacts, said: “The average longer-term fixed rate has risen to its highest point since February 2010, but considering consecutive rises in interest rates, whether savers are prepared to lock away their cash for longer than a year is debatable.”

But while rates climb across the board, ISAs (Individual Savings Accounts) continue to lag behind. The average notice ISA now pays an interest rate of 1.72%, compared with the 1.91% paid by non-ISA equivalents.

Similarly, the average one-year fixed rate ISA pays 2.98% — 0.79% lower than the average for one-year fixed rate bonds (3.77%).

Easy access cash ISAs are the exception, paying 1.26% on average compared with the 1.16% average paid by standard easy access accounts.

Ms Springall commented: “These are encouraging signs for savers who wish to utilise their ISA allowance.

“However, it remains the case that the rate gap between fixed ISAs and bonds is obvious, so savers will need to weigh up any tax-free allowance they have before they commit.”

While rate increases may be welcome, continued high inflation is eroding returns on savers’ cash. Annual inflation, as measured by the Consumer Price Index (CPI), hit 10.1% in September.

The onus is on savers to compare deals and find the highest-paying account for the access required to their cash.

25 October: Rates Rise For Over 2.7 Million NS&I Savers

National Savings and Investment (NS&I), the government-backed savings bank, is raising rates for over 2.7 million savers, writes Bethany Garner.

From today, the interest paid on its variable-rate Direct Saver and Income Bond accounts will rise by 0.60%, to 1.80% AER — the highest rate these accounts have offered in over a decade.

The rate NS&I pays on its Direct ISA has also risen from 0.90% to 1.75%, while its Junior ISA interest rate is up from 2.20% to 2.70% AER.

From 1 December, NS&I will increase rates on 10 fixed-rate accounts.

Every fixed-rate account NS&I has earmarked for an increase will see interest rates rise by at least 1%. Its one-year Guaranteed Growth Bond will see the steepest rise, from 1.85% to 3.60% AER.

Ian Ackerly, chief executive of NS&I, said: “The changes come in the same month that we increased the Premium Bonds prize fund rate. Some of the rates we’re now paying – including on Premium Bonds – are the highest they have been in over a decade, which is great news for our savers.”

21 October: Cash ISAs Make A Comeback

Amid all the recent economic turmoil, cash individual savings accounts – cash ISAs – have been making a comeback.

You can find out more about cash ISAs and the best rates here.

Large numbers of savers abandoned these tax-free accounts when interest rates plunged in the wake of the 2008 financial crisis. But cash ISAs are now steadily regaining their appeal, and with good reason: savings elsewhere are becoming increasingly vulnerable to tax on the interest they generate.

Government figures show that only around one-in-10 people paid tax on the interest earned from their non-ISA savings accounts after the personal savings tax allowance was introduced in 2016.

This allowance means the UK’s 27 million basic-rate (20%) taxpayers can earn up to £1,000 a year from a high street savings account without paying tax. For five million higher-rate (40%) taxpayers, the allowance is reduced by half, to £500.

Additional tax rate (45%) payers do not receive a personal savings allowance which means they pay tax on all savings interest earned in traditional non-ISA accounts.

With interest rates rising significantly this year, savers in regular high street accounts risk using up their personal savings allowance much more quickly compared to when interest rates were closer to zero.

This strengthens the case for cash ISAs because they allow savers aged 16 or over to shelter up to £20,000 each year from tax.

When do I start paying tax on non cash ISA savings?

So how much can you have in a non-ISA cash account before your interest starts attracting tax?

Laura Suter, head of personal finance at AJ Bell, said: “When the Bank rate was 0.1% [as recently as last December], if your savings were earning that amount of interest, a basic-rate taxpayer would need to have £1 million in cash savings to hit their £1,000 tax-free limit.

“However, fast forward to today, and with the top easy-access savings account paying 2.35%, that same basic-rate taxpayer would only need to have £42,500 in savings to hit the limit. Someone in the higher-rate income tax bracket would only have a £500 tax-free savings limit, meaning they would need to have £21,250 in savings before they hit their limit.

“Those putting their money in fixed rate accounts are getting far higher rates, but this means they face a tax hit even with more modest savings. The top two-year bond at the moment pays 4.5%, meaning a basic-rate taxpayer with £22,200 would hit their tax-free limit, while a higher-rate taxpayer could only have just over £11,000 before they would have to pay tax.”

What is a cash ISA?

Cash ISAs come in a wide range of products, including easy-access, as well as variable-rate and fixed-rate accounts that usually offer terms that last between one and five years.

Although you can spread your £20,000 allowance across several different types of ISA , you can only open one cash ISA per tax year.

There are pros and cons associated with cash ISAs:

Pros

easy to open and run
good short-term (up to five years) home for savings that require
allow you to avoid paying tax on savings interest
covered up to £85,000 by the Financial Services Compensation Scheme
can be inherited by a partner or spouse without affecting their own ISA allowances.

Cons

over the longer term, returns may fall short of those achieved by products such as stock and shares ISAs
may offer inferior interest rates compared with regular savings accounts. If you earn less than £1,000 in interest a year, there’s no real tax benefit and a higher-rate regular savings account may be a better choice.

Choosing a cash ISA

The interest rate on offer is the main consideration for most savers choosing a cash ISA. But the right account will also depend on:

Withdrawal rules Some products allow penalty-free withdrawals at any time, but those offering superior returns may impose a lock-in requirement of between two and five years.
Rate and term Fixed-rate cash ISAs with set terms tend to offer higher rates. But where interest rates are continuing to rise, it’s worth asking if it makes sense to lock away your cash
Ease of use Rules differ amongst cash ISAs from being opened and managed online, to requiring a branch visit. Other stipulations may include a minimum opening balance, the need to keep up regular payments, and the notice required for withdrawals.

Many cash ISAs are described as ‘flexible’ which means you can replace any funds you withdraw in the same tax year without affecting your annual ISA allowance.

19 October: Savers Urged To Be Proactive As Inflation And Returns Rise

The top rate for easy access savings accounts has more than doubled since last year, but with inflation stubbornly high, savers must be proactive in finding the best deals, writes Bethany Garner.

Although rising interest rates are welcome news for savers, inflation — which hit 10.1% in the 12 months to September according to figures today from the Office for National Statistics — continues to erode the value of cash.

Rachel Springall at Moneyfacts, said: “It’s imperative savers do not become apathetic to switching at a time when competition in the top rate tables is rife.

“Top fixed rate bonds are reaching heights not seen for many years as challenger banks compete to entice savings deposits. But this has also seen deals change within a short time frame, so swift movement is wise to grab a top rate savings deal.”

The top rate easy access accounts currently pay 2.55% AER, while the highest rate savers could access a year ago was just 0.65% AER, according to Moneyfacts. Interest on the top one-year fixed rate bond is up 1.89 percentage points compared with October last year.

The latest provider to boost its rates is Nationwide. The building society is upping returns across a range of savings accounts by up to 1.20 percentage points for existing customers from 1 November.

Personal Savings Allowance

But higher savings rates are also pushing more savers beyond their Personal Savings Allowance – the threshold at which tax begins to be charged on interest earned.

Figures from investment platform AJ Bell show that, in December 2021, when Bank rate stood at 0.1%, basic rate taxpayers – who can earn £1,000 of interest tax-free a year – could hold £154,000 in a top easy access account before paying tax. As of 4 October 2022, this balance had dropped to just £42,500.

Higher rate taxpayers – who can earn £500 of interest tax-free a year – could hold up to £77,000 in a top-paying savings account, which compared to £21,250 on 4 October.

If the Bank of England continues to hike interest rates and institutions pass on the increase in full or in part to their customers, more savers will be hit with tax on their interest – many for the first time.

Laura Suter, head of personal finance at AJ Bell, said: “If the Base rate hits the 6% it’s expected to next year, and easy access savings rates matched that, then a basic-rate taxpayer could only have £16,650 in their account before they hit the limit — and for a higher-rate taxpayer this would drop to £8,300.”

To avoid paying tax on their interest, Ms Suter expects savers will turn to ISAs – a savings ‘wrapper’ in which individuals can save up to £20,000 each tax-free.

However, since ISAs typically pay lower interest rates, savers may be faced with the choice between higher rates or a lower tax bill.

13 October: First Direct To Double Cash ISA Rate

First Direct is doubling the interest rate on its cash ISA from 0.70% to 1.40% AER (variable) on 20 October, writes Bethany Garner.

The mobile-first bank is also raising rates across three other savings products. Its easy access Savings Account will pay 0.50% AER (variable) from 20 October — up from 0.40%.

Its Bonus Savings Account will pay up to 1.65% AER on balances below £25,000, and 0.75% AER on balances above £25,000. The account rewards savers for not accessing their cash. If they make a withdrawal, the new rate drops to 0.50% AER for that calendar month.

From the later date of 28 October, First Direct’s one-year Fixed Rate Saver will rise by a full percentage point, from 1.25% to 2.25% AER.

First Direct is the latest of several providers to increase rates on its savings accounts in response to consecutive Bank rate hikes.

While news of increases is welcome, stubbornly high inflation is still eroding any real returns on savers’ cash. With annual inflation running at 9.9%, the onus is on savers to compare deals and find the highest-paying account for the access required to their cash.

5 October: Barclays Rainy Day Saver Pays Up To 5.12% AER

Barclays has launched a linked savings account paying a top rate of 5.12% AER (variable), writes Bethany Garner.

The bank’s new Rainy Day Saver is an easy access account which allows eligible savers to make unlimited deposits and withdrawals – and can be opened with just £1.

At 5.12% AER, the returns on the account are more than double those offered by leading open-to-all easy access savings accounts.

However, only Barclays current account holders who are signed up to the Blue Rewards scheme are eligible. Blue Rewards charges a monthly fee of £5 but, providing your Barclays current account is credited with at least £800 a month and has at least two outgoing direct debits set up, this fee is repaid into your Rewards Wallet. This can be accessed and managed online or on the Barclays app.

The top rate of 5.12% AER only applies to balances of up to £5,000. Any balances above this threshold earns a much lower 0.15% AER (variable).

You can hold up to £10 million in the Rainy Day Saver but savers with more than £5,000 who don’t need access to their cash will find higher returns from a fixed rate savings account.

For example, £10,000 deposited in a fixed rate bond paying 4.50% AER would earn £450 in 12 months. The same deposit left untouched in Barclays’ Rainy Day Saver for 12 months would earn £263 of interest.

5 October: Headline Rate Hits 4.75%

Nationwide Building Society is launching three fixed rate online bonds and raising interest rates for several other accounts, writes Bethany Garner.

The UK’s largest building society is now offering:

one-year fixed rate bond paying 4.00% AER
two-year fixed rate bond paying 4.50% AER
three-year fixed rate bond paying 4.75% AER.

Each account can be opened and managed exclusively online or through Nationwide’s mobile banking app. The minimum opening deposit is £1.

Meanwhile, the interest paid on Nationwide’s existing fixed rate accounts is set to rise by 0.50%:

one-year fixed rate bond will now pay 3.25% AER
two-year fixed rate bond will now pay 3.50% AER.

Nationwide has also announced it will increase rates on its triple access savings accounts.

The One Year Triple Access Online Saver will pay 2.10% AER — up from 1.75% — and the One Year Triple Access Online ISA will now pay 2.00% AER, up from 1.50%.

These accounts allow up to three withdrawals throughout their 12-month term. If any additional withdrawals are made, the interest rate drops to 0.30% AER.

Nationwide’s Flex Instant Saver account, which allows unlimited deposits and withdrawals, will see rates doubled from 1.00% to 2.00% AER over the next 12 months. This account is available to Nationwide current account holders only.

The society is offering a £200 switching incentive to those who switch to its current accounts from other banking providers.

Tim Riley, director of banking and savings at Nationwide, said: “We understand there are plenty of savers who are happy to lock their money away for a period of time, which is why we will be offering highly competitive rates on our bonds.”

29 September: Family Building Society Offers Premium On Bank Rate

The Family Building Society has launched a Two Year Tracker Rate Bond — a savings account with a variable interest rate that moves in line with the Bank of England Bank rate.

Currently at 2.60% AER (gross), the account’s interest rate is set at 0.85% above the current Bank rate. It changes to track the Bank rate as it stands on the first day of each month.

The Bank rate rose from 1.75% to 2.25% in September, so the bond will pay 3.10% AER from 1 October.

To open the account, savers must deposit at least £5,000. Once 15 days have elapsed, no additional deposits can be made. Withdrawals are not permitted until the account matures two years after opening.

It’s worth nothing that some fixed-rate savings accounts are currently paying higher rates. For instance, the 2-Year Fixed Term Deposit from Investec offers an AER of 4.25% (gross) on balances from £1,000.

However, if the bank rate continues to rise – it has risen seven times since December 2021 – the Family bond could outpace these top-paying accounts.

With annual inflation at 9.9% eroding the value of savings, an account that passes on bank rate rises to consumers without requiring them to shop around could be beneficial.

If the bank rate goes down, though, savers locked into this two-year fixed term account could miss out on better returns elsewhere.

27 September: NS&I Adds £76 Million To Premium Bonds Prize Fund

National Savings and Investment (NS&I), the Government-backed savings bank that oversees Premium Bonds, is raising its prize fund from 1.40% to 2.20% from 1 October 2022.

The change will add around £76 million to the Premium Bonds prize fund, creating 97,752 new prizes in the monthly draw.

Most of these will be cash sums of £50 or £100, but the number of larger prizes is also rising. From October, the number of £100,000 prizes will increase from 10 to 18, while the number of £50,000 prizes will rise from 20 to 35.

There will continue to be just two £1 million prizes each month.

Overall, the odds of each Premium Bond being a winner will improve from 24,500 to 1, to 24,000 to 1.

Ian Ackerley, chief executive of NS&I, said: “This is the second increase to the Premium Bonds prize fund rate that we have made in less than six months.

“These changes have helped us ensure that Premium Bonds remain attractive, while also ensuring that we continue to balance the interests of savers, taxpayers and the broader financial services sector.”

Premium bonds are held by over 21 million people in the UK. Instead of earning interest, bond holders are entered into a monthly prize draw for tax-free cash sums, which range in value from £25 to £1 million.

Each £1 invested in Premium Bonds equates to one entry into the prize draw, but the minimum investment level is £25. Savers can choose to cash out all or a portion of their bonds at any time.

Although winning a large cash prize may help some savers beat inflation, they could equally win nothing.

Laura Suter, head of personal finance at AJ Bell, said: “Savers shouldn’t cling to the ‘projected prize fund figure’ as many Premium Bonds holders get zero return on their savings.“Most savers would be better off with a standard easy-access savings account that pays out a guaranteed rate of interest.”

26 September: Over 11 Million Brits Have Less Than £100 In Emergency Funds As UK Savings Week Gets Underway

An estimated 11.5 million UK adults have less than £100 in emergency savings, according to research by the Building Societies Association (BSA) – the organisation behind the inaugural UK Savings Week which starts today.

The campaign aims to raise awareness of the importance of saving habits, and offer guidance to consumers on reaching their saving goals.

Andrew Gall, head of savings and economics at BSA, said: “While the midst of a cost-of-living crisis might seem like an odd time to launch activities encouraging good savings habits, those who are able to save can benefit from building their resilience to future shocks.”

The BSA’s research, which surveyed 2,000 UK adults in August 2022, revealed that a growing number of consumers are dipping into savings to meet everyday expenses.

According to the survey, 36% of consumers are turning to savings to meet the mounting cost of essentials. A further 55% of savers say they are setting aside less due to cost-of-living pressures, while 35% have stopped saving altogether and 13% have no savings at all.

However, the research also found that 64% of respondents, who currently have no savings, say they would be able to set aside £10 a month.

A significant portion of consumers may not be getting the best returns, however. Almost a quarter (23%) of savers do not check interest rates before opening an account, while a third (33%) check rates but do not compare them with other accounts.

While some savings providers have begun passing on the benefit of the latest interest rate rise to savers in the form of more competitive savings accounts, many have yet to do so.

And with annual inflation running at 9.9%, effectively eroding the value of cash more quickly, the onus is on savers to compare deals and find the highest-paying account for the access required to their cash.

22 September: Returns Inch Higher But Savings Still Battered By Inflation

Savers were handed positive news today when the Bank of England’s rate-setting Monetary Policy Committee (MPC) raised interest rates for the seventh time in a row. At 2.25% the Bank rate is now at its highest level in 14 years.

Yorkshire Building Society was quick off the mark following the announcement. Within minutes of the news, it confirmed it will raise interest rates on all its variable rate savings accounts – but by 0.30 percentage points compared to the 0.50 percentage point increase in the Bank rate.

The society’s easy access Internet Saver Plus Issue 12 will pay 1.80% AER from October. The rate on its Loyalty Regular Saver Issue 2 will rise to 5.3% AER.

The rates will be applied to accounts automatically on 5 October. Other banks and building societies are expected to pass on rises to customers in the coming days.

Marcus by Goldman Sachs has also announced it will be raising rates on both its variable rate accounts — the Online Savings Account and Cash ISA – by 0.30%.

Both accounts are currently paying 1.80% AER, which includes a 12-month bonus rate of 0.25%. Remember this bonus rate will drop off on the anniversary of opening the account, so it may be worth checking whether better options are available after the first year.

While news of increases is welcome, stubbornly high inflation is still eroding any real returns on savers’ cash. Inflation, as measured by the Consumer Prices Index (CPI), hit 9.9% in the 12 months to August – which was over 14 times more than the average easy access savings rate over the same period, according to research from investment platform interactive investor.

Any delay between the latest hike and increase in savings rates will further widen the gap between inflation and returns.

Becky O’Connor, head of pensions and savings at interactive investor, said if the rise in the Bank rate is passed on to savers and has the effect of bringing down inflation, cash savings could, once again, start to look attractive: “This could be especially welcomed by older people, who often have more built up in savings, and also often prefer the lower risk of cash compared to the stock market for their life savings.

“People with savings have had years of low returns and this latest rate rise, which is significant, could really turn the tables back in their favour.”

21 September: Competitive Offers Prompt Increase In Guaranteed Rates

Savers are turning to fixed-term savings accounts to lock in increasingly competitive rates.

Investment platform Hargreaves Lansdown reported a 40% uptick in the number of new fixed-term deposits it has received over the last 12 months.

Fixed-term savings accounts offer guaranteed interest rates for a set period in exchange for forfeiting access to your cash.

Tom Higham, acting head of savings at Hargreaves Lansdown, said: “We’re seeing considerably more clients using fixed term deposits over easy access. Up to 80% of all new flows are heading into fixed term deposits, up from around 50% a year ago.

“People are cashing on fixed terms because the rates are higher than they’ve been for a decade or more.”

At 1.75%, the Bank of England Bank Rate currently stands at a 14-year high. Bank rate is expected to rise further tomorrow (September 22) when members of decision-making Monetary Policy (MPC) hold their next meeting.

Mr Higham expects banks and building societies to continue passing on increases in Bank rate to savings accounts.

However, he added that savers are only looking to fix in their cash for a maximum period of two years as they are anticipating interest rates to continue to rise until inflation starts to fall.

25 August: NS&I Pays 3% AER On Latest Green Bond Issue

National Savings & Investments, the government backed savings institution, has launched the third issue of its Green Savings Bond, which will pay interest at 3% a year for a three-year fixed term.

Higher rates are available for this length of fix – JN Bank is paying 3.45%, for example – but the NS&I bond guarantees that deposits will be used to help finance green initiatives as part of the UK Government Green Financing Framework.

This will include projects to tackle climate change, improve sustainability and increase renewable energy capacity.

Interest at 3% AER over three years on a £10,000 deposit would yield a profit of around £930. Deposits are permitted in the range £1,000 to £100,000 but it is important to remember that the money cannot be accessed during the term.

Customers need to be 16 or over to purchase the Bonds from NS&I.

The new rate compares to the 1.30% paid on the second tranche of Green bonds issued in February.

NS&I announced increased rates across its fleet of savings products in July after increasing the Premium Bonds prize fund in June.

The organisation contributed £1.3 billion to government coffers in the first quarter of the financial year 2022/23. All savings and investments lodged with NS&I benefit from a 100% government guarantee.

Its products rarely have market-beating rates so as not to unfairly disrupt competition in the commercial market.

24 August: One-In-Three Adults Have No Access To ‘Rainy Day’ Cash

More than half of UK adults are set to use money put aside for an emergency because of the worsening cost-of-living crisis, writes Andrew Michael.

Research from wealth manager Charles Stanley shows that nearly three-quarters of adult Brits (71%) have a ‘rainy day’ fund that would last the average saver just shy of five months.

But due to the challenging economic climate, more than half of respondents (54%) told the company they are worried about using up their emergency savings, leaving them unprepared for any future financial crises.

Charles Stanley found the average emergency fund would last its owner four months and three weeks. Just over a quarter of people (28%) said their reserves would cover them for between two weeks and two months, while 10% said they would run out of money after a fortnight.

Of those with emergency savings, a quarter (25%) of respondents said they have never needed it, while just under one-in-10 (9%) said they dip into it less than once a year.

One-in-eight people (12%) said they have never further topped up their reserves, although more than a third (36%) claimed they added monthly amounts to their savings. One-in-10 (10%) of respondents said they topped up their emergency stash on a weekly basis.

Charles Stanley said nearly one-in-three individuals (29%) do not have a reserve fund. Nearly two-fifths of workers (38%) earning less than £20,000 a year said they do not have a reserve fund. This proportion fell to just over a quarter (28%) of employees paid between £20,000 and £30,000 and reduced further for those earning commensurately higher amounts.

About a quarter of workers in employment said they did not have an emergency fund, while this figure rose to 46% of the job-seeking unemployed.

Lisa Caplan, director of OneStep Financial Planning at Charles Stanley, said: “Saving into a rainy day pot is not always people’s first priority, but those who have managed to prepare will be grateful for it during the cost-of-living crisis.

“As ever though, we are seeing common themes when we look at who slips through the net. The picture is less positive for women, low-earners, and those looking for work.”

23 August: Building Society Passes On Latest 0.5% Rate Hike

Nationwide Building Society has announced it will raise interest rates on all variable rate savings accounts from 1 September 2022.

These accounts are seeing interest rates rise by 0.50%, in line with the latest bank rate increase:

Flex Regular Saver rate rises to 3.00% AER
Start to Save 2 rate rises to 3.00% AER
Future Saver rate rises to 2.00% AER
Junior ISA rate rises to 2.00% AER
Child Trust Fund rate rises to 2.00% AER
Smart Limited Access rate rises to 1.50% AER
Flex Instant Saver rate rises to 1.00% AER

The 1 Year Triple Access Online Saver will offer a new rate of 1.75% AER for the next 12 months, while the 1 Year Triple Access Online ISA rate is set to rise to 1.50% AER.

Nationwide’s Flex Saver and Flex ISA accounts will see the largest increase of 0.55%, taking rates to either 0.65%, 0.70%, or 0.75% AER depending on the account balance.

The Help to Buy ISA will undergo a slightly more modest rate increase of 0.40% to 1.75% AER. The Loyalty Saver, Loyalty ISA and Loyalty Single Access ISA accounts will see rates rise by 0.35% to 1.60% AER.

Rates on Nationwide’s easy access accounts — the Instant Access Saver, Instant ISA Saver and Cashbuilder — are set to rise by 0.15% to either 0.25%, 0.30% or 0.35% AER depending on the account balance.

Tom Riley, director of banking and savings at Nationwide, said: “As a mutual we are always keen to support savers and pay the best rates we can sustainably afford, which is why we are increasing rates on all variable rate accounts, particularly regular savers, loyalty and children’s accounts as well as our popular Triple Access Accounts.”

Banks generally have been criticised in recent weeks for not passing on rate increases to their customers following increases in the Bank of England bank rate, which now stands at 1.75%.

There is speculation that the rate could rise to 2.25% when the Bank next announces its new level on 15 September – an increase that would heap more pressure on institutions to pay more to savers.

5 August: Bank Rate Rises – But Savers Still Battle Inflation

The Bank of England’s recent hike in interest rates from 1.25% to 1.75% will be welcome news to debt-free savers who have been battling against historically-low interest rates for well over a decade.

However, with inflation currently at a 40-year high of 9.4% – eroding the value of savings faster than at any time in the past four decades – it becomes especially important to shop around for the best deals, even if savings providers pass on the full rate increase.

Sarah Pennells, consumer finance specialist at Royal London said: “[Savers] will be encouraged that savings rates, if passed on fully, will see rates come out of the doldrums.

“But banks and building societies don’t necessarily raise interest rates on all their savings products and may not increase them by the same amount, so it’s worth waiting a few weeks before checking comparison websites and best-buy tables to see if you can get a better interest rate.”

Kevin Brown, savings specialist at Scottish Friendly, said: “Anyone still able to save should be encouraged to do so as rates are likely to rise. But be aware that if the gap to inflation widens, returns in real terms will continue to fall.”

He added: “The best way to combat that may be to consider investing some of your money”.

Newcastle Building Society has already announced it will pass on the full rate increase to ‘99% of its customers’, while Coventry Building Society has committed to increasing its savings rates from 1 September.

The latest 0.5 percentage point increase marks the biggest single leap the BoE has implemented since 1995, and takes the Bank rate to its highest level in 14 years.

21 July: NS&I Boosts Rates To Deliver Competitive Offer

National Savings & Investments (NS&I) has increased interest rates across a swathe of products to bring them into line with competitor offerings.

The interest rate paid on Direct Saver, Income Bonds, Direct ISA and Junior ISA, will increase from today (21 July 2022).

The interest rate paid on Guaranteed Growth Bonds, Guaranteed Income Bonds and Fixed Interest Savings Certificates will increase from 1 August 2022. These products are not currently on sale, so the new rates are only available to existing customers.

More than 1.3 million people will see a boost to their savings as a result of the increases.

The rate on the Direct Saver and Income Bonds products will more than double from 0.50% to 1.20%, the Direct ISA from 0.35% to 0.90%, and the Junior ISA from 1.50% to 2.20%.

More substantial increases are taking place on guaranteed and fixed interest products. For example, three-year Guaranteed Income Bonds are increasing from 0.36% to 2.50%.

Details of the changes can be found here.

Earlier this year NS&I increased the Premium Bonds prize fund, which improved the odds of winning from 34,500 to 1 to 24,500 to 1 and saw an additional 1.4 million prizes paid out in June.

11 July: Cost-Of-Living Crisis Bites Into Savers’ Lockdown Gains

Financial gains made by UK savers during lockdowns imposed on them by the Covid-19 pandemic have been slashed back as a result of the ongoing cost-of-living crisis and need to meet rising prices, according to wealth manager Quilter.

Research carried out on behalf of the company found that just over half (53%) of the nation set aside money in savings and investments during the spate of coronavirus lockdowns that were imposed on the country during 2020 and 2021.

Quilter said that baby boomers – those born between 1946 and 1964 – were most likely to have saved money during pandemic-enforced lockdowns. Of this cohort, well over half (59%) said they were yet to dip into those funds.

In contrast, the wealth manager found that around one-in-seven (15%) of those who had saved money during lockdowns had already spent the cash they had put to one side.

In addition, more than a third of people (39%) told Quilter that they had already made a significant dent in their savings, with many spending up to three-quarters of the money they had squirreled away.

Quilter added that nearly half (46%) of Brits with lockdown savings had needed to dip into their money in the second quarter of this year. This was a significant increase compared with the first three months of 2022, thanks mainly to rising food costs followed closely by soaring fuel prices.

Ian Browne, financial planning expert at Quilter said: “While many people were able to save during the lockdowns and have had those funds to fall back on during the cost-of-living crisis, almost half were unable to save in the first place and could be left in a financially vulnerable position.”

“Even those who were able to put some money aside have seen their savings rapidly swallowed up by rising costs, particularly on day-to-day bills such as food, car fuel and heating and electricity.”

16 June: Take Advantage Of Bank Rate Hike, Savers Told

Financial experts have urged savers to take advantage of today’s decision by the Bank of England (BoE) to raise the Bank Rate by a quarter of a percentage point.

As expected, the BoE hiked interest rates from 1% to 1.25% which means bad news for mortgage customers on variable rate deals, but offers a glimmer of hope to savers looking to make maximum use of their money held on deposit.

With the latest data showing that consumer prices rose by 9% in the year to April, finding the highest-possible rate is vital for savers if they want to partly offset high inflation levels.

Alice Haine, personal finance analyst at the investment platform Bestinvest, said: “For cash savers, an interest rate rise is always a good thing, as they can secure higher rates on their savings pots – that is of course if they have spare cash to save in the first place.

“Saving rates have been creeping up to the highest levels seen in a decade, with some accounts now offering up to 1.56% for easy access accounts and up to 3% for fixed-rate products.

“Every penny in additional interest is a bonus when high inflation is eating away at the purchasing power of incomes. With many households dipping into emergency pots to meet rising food, fuel and energy bills, you need to make sure your money is working as hard as it can.”

Myron Jobson, senior personal finance analyst at interactive investor, said: “Higher rates mean savings will earn more – although some banks and building societies have been fiendishly slow in passing on recent hikes to the base rate.

“With the rate of inflation now higher than the best savings deal in the market, any money in savings loses purchasing power over time – but it still pays to pick the most competitive account.”

Les Cameron, financial expert at M&G Wealth, said: “While today’s announcement is no surprise, what remains to be seen is whether this rise will translate to higher rates available to savers or to increased borrowing costs.

“Reviewing your finances to make sure you’re prepared for the future has never been more important and, for many, that will involve seeking some form of professional financial advice.”

15 June: UK Savers Rely On Savings In Summer

UK consumers are more likely to dip into their savings in August than in any other month of the year, according to Atom Bank.

The research, which analysed customer savings habits between May 2020 and April 2022, also found that the 1st is the most popular day of each month to make a savings withdrawal.

Since going on holiday was the ‘top savings goal’ among Atom customers, it is likely that many August savings withdrawals are being put towards topping up travel expenses.

Aileen Robertson, head of savings at the bank, said: “A common mistake people make when saving for a holiday is not accounting for enough spending money, which may result in unexpected additional expenses while you’re away.

“It’s useful to plan ahead — research which excursions you might want to take and how much on average they cost, factor in transport costs for the whole trip and consider what you’re likely to spend on food and drink.”

However, in the midst of the ongoing cost-of-living crisis, many others are likely to be using savings to make ends meet.

Ms Robertson said: “Many people with good intentions to save are likely feeling worse off right now, and tapping into savings may be seen as the only way to beat the current cost of living squeeze.”

The bank also found that savers tended to withdraw relatively small amounts, with 25% of customers taking out £80 or less.

8 June: 50,000 Lifetime ISA Holders Use Funds To Buy First Home

Sales of stocks and shares individual savings accounts (ISAs) surged during the pandemic, in stark contrast to cash ISAs, which saw their popularity plummet over the same period, according to the latest figures from HM Revenue & Customs (HMRC).

ISAs are tax-efficient wrappers that enable holders to shelter a certain amount of money each year – currently £20,000 – from income tax, dividend tax and capital gains tax.

HMRC says investors opened nearly 3.6 million stocks and shares ISAs during the 2020/21 tax year, a period that coincided with the most disruptive period of the Covid-19 pandemic.

This is an increase of around 860,000 accounts compared with the previous tax year, representing an extra £10 billion in investments year-on-year.

HMRC says the number of cash ISAs opened during 2020/21 fell by 1.6 million to just over 8 million. This meant that the share of cash ISAs as a proportion of the overall number of ISAs sold fell from 75% in the tax year 2019/20 to 66% in 2020/21.

Overall, around 12 million ISAs were taken out during the tax year 2020/21 equating to around £72 billion in cash terms. This compares with the 13 million accounts taken out in the previous tax year.

HMRC figures also reveal that 50,800 people made withdrawals from their Lifetime ISA (LISA) to buy a home in 2020/21, an increase of 15,000 on the previous tax year.

LISAs allow people over 18 and under 40 to save, tax-free, for their first home or to supplement their retirement earnings. HMRC says that the average LISA withdrawal was £13,192 in 2020/21, a £700 increase on the previous year.

Bestinvest’s Adrian Lowery says the figures show how households channelled lockdown savings towards investing: “During the pandemic savings boom many households looked towards investments, rather than cash savings, with the Bank of England having slashed interest rates to an all-time low of 0.10% in March 2020.”

24 May: NS&I Adds £40 Million To Premium Bonds Prize Fund

National Savings and Investment (NS&I), the Government-backed bank responsible for Premium Bonds, has announced an increase to its prize fund rate from 1.00% to 1.40%, with effect from next month.

It will mean an additional 1.4 million prizes will be issued in June’s monthly draw out of an increased prize pot worth £40 million.

The majority of these extra prizes will be valued at £25 or £50, but the number of higher value prizes is also increasing. For example, there will be 98 prizes of £10,000 in each monthly draw from June, compared with the current 58, and 40 prizes of £25,000 compared to the current 24.

The odds of each £1 Premium Bond number winning a Premium Bonds prize will also change from 34,500 to 1 to 24,500 to 1.

Ian Ackerley, chief executive of NS&I said: “The new prize fund rate ensures that Premium Bonds are priced appropriately when compared to the interest rates offered by our competitors.

“It also ensures that we continue to balance the interests of savers, taxpayers and the broader financial services sector.

Premium Bonds, which are held by over 21 million people in the UK, were first introduced in 1956 as an alternative way to invest money. Rather than earning interest every month like regular savings accounts, purchasing a Premium Bond means being entered into a monthly prize draw for cash sums.

These sums range in value from £25 to £1 million, which winners receive tax-free. Every £1 invested in Premium Bonds is equivalent to one entry into the prize draw, but the minimum investment level is £25. Savers can cash out a portion or all of their bonds at any time.

Although investors do not earn monthly interest, the total value of the prize fund increases at a fixed rate, which is occasionally adjusted in line with inflation and interest rates, both of which have been climbing.

11 May: More Than Half Of UK Adults Open Bank Accounts Without Checking Interest Rates

More than half (52%) of adults in the UK have opened a bank account without checking the rate of interest it pays, according to a survey by the savings platform, Raisin.

Little interest in rates

It found that while almost half of all adults do not have a savings account, of those who do, more than a third have never checked interest rates elsewhere to see if they could be getting a better deal.

The survey, which asked 2,000 adults about their banking habits, revealed that ease of access to their cash was more important to savers than interest rates.

Of the respondents with a current account, savings account, or ISA, just 25% said they opened it because of the interest rate.

By comparison, 37% opened their account because it was offered by their current provider through online banking. And with 23% of women and 25% of men using online banking daily according to the survey, savings offers are viewed by a significant number of customers.

Branch versus digital banking

Despite the popularity of online banking, Raisin’s survey found traditional banks and building societies — with physical branches — remain more popular than their digital counterparts.

Nationwide was the most popular, with 57% of customers responding that they liked the provider. It was followed by Halifax which was liked by 51% of customers.

The Raisin survey also revealed that, once UK savers have decided on a bank, they regularly stick with it for years. More than a third (35%) of respondents said they have the same bank account they opened with their parents as a child. People aged under 35 and under are even less likely to have changed banks, with 50% of them retaining the account opened with their parents.

Since banks and building societies often entice new customers with high initial interest rates and even cash bonuses, sticking with the same bank for years is unlikely to net you the best deal.

With the UK in the grips of record inflation and the cost-of-living crisis, finding the most competitive savings accounts is particularly pressing.

Commenting on the research Kevin Mountford, Raisin’s co-founder, said: “The market is incredibly competitive thanks to online and challenger banks vying for your money, [so] do your research to find the best deals and rates — making smarter moves with your money now could help you save a lot more in the long run.”

29 April: Coventry BS Launches Fixed Rate ISA Range

Coventry Building Society has today launched four fixed rate ISAs. The UK’s second largest building society is offering:

ISA paying 1.50% until 30 September 2023
ISA paying 1.75% until 20 September 2024
ISA paying 1.85% until 30 September 2025
ISA paying 2.00% until 30 September 2026

The four new products join Coventry’s existing Children’s, Additional Allowance, and Easy Access ISAs.

Tom Riley, director of banking and savings at Nationwide Building Society, said: “Many people will be searching for the best rates they can find, suiting their individual saving needs with the peace of mind that a fixed rate provides, so we expect these new ISA products will be very popular.

“ISAs are still an attractive option for those savers wanting to earn interest tax-free that doesn’t count towards their personal savings allowances.”

The Coventry rates stand up well against other providers, including Aldermore, which offers a one year fixed rate ISA paying 1.46% AER, and Skipton Building Society, which offers 2.00% AER on its three year Online Fixed Rate Cash ISA.

Nationwide Building Society is also increasing some of its ISA interest rates, including its Single Access ISA, by up to 0.25% from 1 May 2022.

14 April: Mistaken Savers Think Inflation Leaves Them Better Off

Nearly one-in-nine (13%) cash ISA savers believe that inflation will leave them better off, according to research from Legal & General (L&G). More than half (52%) do not know what impact inflation will have on the real value of their savings over time.

ISA stands for ‘individual savings account’, a tax-efficient financial product supported by the UK government.

UK inflation climbed to 7% earlier this week, its highest level for 30 years. Inflation has risen sharply in recent months due to a number of reasons, including, the worldwide economy waking up after the pandemic, a spike in global energy prices and the Russian invasion of Ukraine.

Despite this, and with inflation predicted to soar even higher later this year, L&G’s research suggested that a large number of Britons could be in for a financial shock.

L&G said that there was £136 billion sitting in cash ISA accounts paying an average interest rate of 0.26%. But it added that two-thirds (64%) of cash ISA savers have taken no action on their savings, even though the return on cash was being far outstripped by the rate of inflation.

The company calculated that a £1,000 deposit with an interest rate of 0.26% would effectively reduce in value by £243 over five years assuming inflation stayed at 6% over that period.

Emma Byron, managing director at L&G Retirement Solutions, said: “Inflation is at its highest rate for three decades and it’s worrying that savers don’t realise that it’s eating away at millions of pounds sitting in low-interest paying accounts. Understanding the impact of inflation is crucial to understand how much money you have in real terms.

“While it is essential to keep some cash in the bank for an emergency fund, savers might want to consider other options to make their money work harder.”

29 March: JP Morgan’s Chase Offers 1.5% Savings Account

Chase, JP Morgan’s new digital bank, has unveiled a savings account for UK customers paying interest at twice the level of the Bank of England (BoE) Bank rate.

The Chase saver account is linked to the provider’s own current account and offers a competitive interest rate of 1.5% AER.

AER, or Annual Equivalent Rate, is the official method of calculating and showing the interest rate for savings accounts and is designed to allow easy comparisons across similar products.

Earlier this month, in a bid to stave off steepling UK inflation, the BoE raised its Bank rate from 0.5% to 0.75%, the third rise in four months.

The JP Morgan saver account is available to new and existing Chase current account holders and can be opened via the company’s app.

Chase said savers can deposit up to £250,000 in total at any time and can access their savings whenever they want, penalty-free and without loss of interest. There is no minimum opening balance.

Research from Chase found that UK consumers are looking for ways to segment their cash in order to better save for specific goals. Customers can open multiple Chase saver accounts to achieve this, each with a personalised name and featuring a unique account number.

The UK’s personal savings allowance (PSA), introduced in 2016, allows basic-rate (20%) taxpayers to earn £1,000 in savings interest tax-free, while higher-rate (40%) taxpayers are allowed to earn up to £500 before tax. Additional-rate (45%) payers receive no allowance.

A basic-rate taxpayer would be able to deposit just under £70,000 in the new Chase saver account without any tax liability at the product’s present rate. A higher-rate taxpayer could have around £34,000 on deposit with the account and not bust the £500 tax-free interest limit.

Shaun Port, Chase’s UK managing director for savings and investments, said: “With the cost of living increasing, we know that consumers want to maximise the interest they can earn with the reassurance of being able to access their savings instantly. We have designed the Chase saver account to provide our customers with maximum flexibility alongside a competitive rate.”

The UK’s Financial Services Compensation Scheme is a financial lifeboat arrangement that protects customers holding up to £85,000 across all accounts held within the umbrella of one banking group.

24 March: Monument Launches Trio Of Savings Accounts

New digital bank Monument has launched a trio of fixed-term savings products which, it claims, pay competitive rates of interest.

Accessible via its app, Monument’s 12-month, fixed-term savings account pays an annual equivalent rate (AER) of 1.80%. AER is the official rate for savings accounts and is designed to allow easy comparisons across similar products.

A two-year version of the account pays 2.05% AER, while Monument’s five-year, fixed-term product features an AER of 2.40%.

Depositors must be 18 over and resident in the UK. Customers are required to hold a minimum balance of £25,000 at any time across Monument savings accounts to qualify for the published rates.

Should they change their mind, customers can cancel an account within 14 days of opening one. Once up and running, however, withdrawals are not permitted.

Monument, which describes itself as the “first neo-bank launched in the UK specifically to meet the unmet demands of mass affluent clients”, received its banking licence last year.

John Saunders, Monument’s chief commercial officer said: “We’re pleased to be offering a range of savings choices to consider, all at competitive rates. Inflation is a real and growing feature of personal finance, so leaving savings in low, or no, interest-bearing accounts makes less sense than ever.”

1 March: Study reveals regional differences in UK saving habits

One in four people in the UK do not have enough cash for emergencies, according to investment platform Hargreaves Lansdown (HL).

The firm defines emergency cash as savings equivalent to at least three months’ worth of essential expenses.

Figures from its Savings & Resilience Barometer, a financial measure put together with consultants Oxford Economics, showed a wide regional disparity in UK savings habits at the start of 2022.

HL identified the North of England, Midlands, Devon and Wales as among 10 so-called ‘notspots’, or regions that featured large shortfalls for cash savings.

According to HL, more than a third (36%) of those in the West Midlands and Tees Valley and Durham reported that they don’t have enough cash set aside in savings.

The same scenario was also reported by a third of people (33%) in Northumberland, Tyne and Wear, Derbyshire, Nottinghamshire, Devon and West Wales.

This contrasted with parts of London and the Home Counties, including Hertfordshire and Bedfordshire, that HL dubbed as savings ‘hotspots’, where more than four in five people claimed they have sufficient amounts of emergency cash.

HL’s Sarah Coles said: “There’s a mountain to climb to level up financial resilience across the UK. The report shows a gulf between areas with plenty of savings and those with huge shortfalls. It’s not simply a North/South divide.”

Separately, financial coaching app Claro Money says more than a quarter (28%) of Brits are relying on nest-eggs to make good shortfalls when outgoings exceed their income, rather than using their savings for aspirational goals such as buying a car or taking a luxury holiday.

Sarah Brill at Claro Money said: “Savings are being called upon to meet the daily cost of living with inflation increases at a 30-year high. Previously, spending habits might have seen Brits save to spend on rewarding big ticket items, but it’s now the mounting cost of living that is nibbling away at Brits’ hard-earned savings.”

15 February: NS&I Doubles Green Savings Bond Rate

Government-backed National Savings & Investments has issued a second tranche of its green savings bond paying 1.3% over a three-year fixed term – twice the amount paid on the first issue of the bond at launch last October.

Someone buying £1,000 of the new bonds, which enable savers to put their money behind initiatives such as renewable energy and cleaner transport, will receive £1,039 at maturity.

Leading three-year bonds on offer from financial institutions are paying around 1.8%.

The latest issue has a minimum initial deposit of £100 and the maximum investment is £100,000 per person. As NS&I is backed by the UK Treasury, 100% of savers’ money is safe. Applicants need to be at least 16.

Savings with other providers are protected up to £85,000 per person under the Financial Services Compensation Scheme.

Once an initial deposit has been made, a 30-day cooling off period gives savers the opportunity to withdraw their cash. After that, savers are prevented from accessing their money until the bond reaches the end of its term.

Sarah Coles at Hargreaves Lansdown says NS&I’s decision to double the green bond’s interest rate is “a dramatic step that shows the old rate was a real disappointment”.

She says the higher rate “may be enough to see the bond flourish”.

Becky O’Connor at online platform interactive investor, says: “While this rate is not top of the best-buys for three-year bonds, which are currently around 1.8%, it is far more compelling than before for those wanting their money to be put to productive use in the UK’s growing low carbon economy, at no risk.”

10 February: NS&I Ups Rates On Direct Saver And Income Bond Accounts

NS&I, the government-backed savings provider, is raising the interest rates on its Direct Saver and Income Bond products to 0.5% gross Annual Equivalent Rate (AER) from today (10 February).

The increase in each case of 0.15 percentage points follows a rise from 0.15% to 0.35% last December. Last week, the Bank of England raised its official Bank rate to 0.5%, its second increase in three months.

The Direct Saver account can be opened with a minimum deposit of £1 with an upper limit of £2 million, while the Income Bond has a minimum investment of £500 and a maximum of £1 million.

Ian Ackerley, NS&I chief executive, said: “The new interest rates will ensure our products are priced in line with the broader savings sector.”

Helen Morrissey at financial advisor Hargreaves Lansdown said: “It is hugely positive to see NS&I boosting rates on these products, but they still remain some way off meeting the best rates available on the market.

“The best easy-access savings rate available is currently 0.71%, so savvy savers willing to shop around can still find better places to stash their cash.”

8 February: Easy-Access Products Dominate 2021 Savings Market

UK savers chose to squirrel away their money in easy-access accounts last year over fixed-rate products or Individual Savings Accounts (ISAs), according to Aldermore Bank.

Analysis by Aldermore of the latest Bank of England Money and Credit data showed that UK personal savings stood at £1.414 trillion in December 2021, a year-on-year increase of 6.5%, or £86 billion.

Aldermore attributed the rise to a continuation of the savings habits that Brits picked up during the 2020 lockdown when the pandemic was at its height. The figure excludes cash held in current accounts and NS&I products such as Premium Bonds.

The bank said the easy-access element of the savings market attracted an additional £99 billion in 2021, an increase of 11.3% year-on-year. The main advantage of easy-access accounts is that they allow savers to withdraw cash as and when they please.

In contrast, Aldermore said that the amount in fixed-rate savings products at the end of 2021 was £9 billion down on the previous year, a drop of 5.7%.

The research also showed that savers deposited £4 billion less in savings-based ISAs by the end of last year compared with 12 months earlier, with the attraction of tax-free benefits from these products failing to offset the depressed interest rates on offer.

Ewan Edwards, savings director at Aldermore Bank, said: “The value of savings cannot be underestimated. It’s very encouraging that the focus on savings we saw in 2020 has continued on and grown further in 2021 as people remain focused on building their financial wealth.”

Average Savings On The Rise

Separate research from Paragon Bank backed up the trend towards greater savings habits. According to the bank, the average non-ISA easy-access balance grew from £10,246 in March 2020 to £12,106 in October 2021.

But Paragon warned that most of these accounts continue to earn a very low interest rate, with 71% of easy-access balances offering an interest rate of 0.1% or less.

The bank added that the number of easy-access, non-ISA accounts with balances of £100,000 or more now makes up a record 2% of all accounts in this sector. This is up from 1.8% in October 2020 and 1.6% in October 2019.

Derek Sprawling, savings director at Paragon Bank, said: “The dominant trend we are noting in the easy-access space is that seven out of 10 savers continue to receive a really low return on their money.

“This is despite rates picking up across the board and best-buy deals offering people the opportunity to earn at least six times more interest than they currently are in a low-paying account.”

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