Marcus hikes one-year fixed rate savings deal to 4.55% – is it worth locking in?

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Savings provider Marcus has increased the rate on its one-year fixed rate saver to 4.55 per cent, making it a market leader according to rates scrutineer Moneyfacts.

The rate means it’s a best buy alongside similar options from challenger bank LHV and an account from Al Rayan Bank available through the savings platform Prosper*.

LHV is offering a 4.46 per cent rate on its one-year fixed bond. The account from Al Rayan Bank has a lower underlying rate of 4.25 per cent, which Prosper is boosting to 4.56 per cent.

We like the fixed saver from Marcus because there’s a low minimum deposit of £1. The minimum deposit with LHV is £1,000 and the minimum deposit with Al Rayan Bank is £10,000. However, Marcus has a lower maximum deposit than the other two accounts, at £250,000.

Before considering a one-year fixed saver, you should make sure you already have an emergency fund in an account which you can access at ay time. 

Taking money from a fixed bond before the term is up is not allowed. If you do it, you will incur a penalty which may be more than the interest earned. 

Locked away: A one-year fix guarantees your interest rate, but you can’t access your money

Commenting on the Marcus deal, Adam French, head of news at Moneyfacts, said: ‘Savers looking for a guaranteed return in the short term may find this an appealing option. 

‘Earlier access is permitted on account closure and is subject to the loss of 90 days interest. Any additional deposits must be made within 14 days of opening the account.’

The deal scores an excellent Moneyfacts product rating. Keep in mind that these aren’t Isas, so your returns aren’t tax-free. Find out how the accounts compare below.

How do the accounts compare?

The rates on these accounts comfortably beat the base rate of 4 per cent.

Many experts predict the next rate cut won’t be until the new year – but whatever happens, locking in a 12-month fix means your rate won’t budge in line with the Bank of England’s decision.

Here are the top one-year fixed accounts to consider.

• Minimum deposit: £1
• Maximum deposit: £250,000
• Interest paid: On maturity
• Access to your money: By closing the account, subject to early closure fee

• Minimum deposit: £10,000
• Maximum deposit: £1million
• Interest paid: On maturity (Prosper boost paid the week after maturity)
• Access to your money: None 

• Minimum deposit: £1,000
• Maximum deposit: £1million
• Interest paid: On maturity
• Access to your money: None 

You need to open an LHV current account before you can open a savings account with the bank.

Why choose one of these accounts?

You could choose a top fixed-rate savings account when you’ve exhausted your tax-free Isa allowance.

> Read more: The best cash Isa rates  

Although the accounts above aren’t tax free, you do get a personal savings allowance that allows you to earn up to £1,000 of interest with no tax to pay:

When it comes to tax, the Prosper boost is unusual. According to the platform, HMRC regards it as a cashback discount when opening the account and not interest for tax purposes.

This means that if you deposited the minimum £10,000 with Al Rayan Bank through Prosper, only £425 would be counted as taxable interest, with the rest treated as tax-free cashback. You’ll have more of your personal savings allowance to play with elsewhere.

If you have a large amount to deposit, you should consider whether it would be better off invested. Investing isn’t without risk, but over the long-term investments have the potential to beat the returns you’d get in a cash account. Read more in our guide to investing for beginners.

And if you have some experience with investing already, have a look at our roundup of the best investment platforms.