In March, the Bank of England cut its Base rate to 0.1% (yes, you read that correctly, 0.1%). In response, interest rates at many banks and building societies are coming down.

If you’re searching for a competitive rate on a deposit account, where should you be looking?

High Street Banks

The first places you’ll want to rule out are the High Street banks. They haven’t paid competitive rates of interest since the global financial crisis back in 2008.

NatWest, for example, is currently paying 0.01% on an instant access savings account or cash ISA. You can, however, earn 1.0% by committing to save at least £50 per month.

This is a common device used by banks, with many offering better rates if you save a larger sum. The Halifax, for example, offers 1.5% per annum if you save £250 per month, but of course, the amount that you can put into such an account is very limited.

Some specialist banks are still offering respectable rates of interest. The little-known Family Building Society offers 1.0% for an online 35 day notice account.

Ensure that you’re protected

Whenever you’re thinking about saving money with an institution, it’s important to check that Financial Services Compensation Scheme (FSCS) protection applies.

The FSCS exists to protect customers and their funds if a financial services firm fails. If a company has failed and can’t pay claims against it, the FSCS will pay compensation.

The scheme covers deposits up to £85,000 per individual or £170,000 for a joint account.

You may think FSCS protection isn’t necessary now that the financial crisis is way behind us, but a medium-sized UK institution called Metro Bank got into financial difficulties just last year and almost collapsed.

Other ways to save

You can earn a better rate of interest by agreeing to invest for a fixed term.

Many institutions offer fixed rate bonds for periods ranging from one to five years. As an example, you can earn 1.0% on a one-year fixed-rate bond with ICICI Bank.

An easy option if you’re looking to obtain something approaching the best available rates is to turn to National Savings.

On the same day that the Bank of England reduced rates to nearly zero, the Government announced that National Savings would not cut rates. As an arm of the Government, National Savings has the benefit of full protection as it has the backing of HM Treasury.

National Savings also reversed a previously announced cut affecting the prize rate on National Savings Premiums Bonds. These ‘pay’ an average rate of 1.40%, although the actual rate received isn’t guaranteed. You could look at Premium Bonds as ‘the thinking person’s gamble’ as not only is the prize rate attractive but the prizes themselves are free of tax too.

National Savings also offer other competitive products. Income Bonds, paying 1.15%, a cash ISA paying 0.90%, and a simple savings account (Direct Saver) paying 1.0%.

Sadly, National Savings products are no longer available at the Post Office. You can, however, find them on the web, here, or call them on 08085 007 007.

At HA&W we can advise on the best savings option for you. We can also review these for you, if you wish us to, during your annual financial review.

Get in touch

Please contact us if you’d like to discuss any aspect of your savings options.