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Despite being aware of falling interest rates, 15 per cent of UK savers think it’s ‘too much hassle’ to move savings to a different account.
This is according to new research from the savings platform Marcus by Goldman Sachs, which also reveals that 46 per cent hold savings in current accounts – overlooking easy-access savings accounts that pay up to 5 per cent interest.
Many of the 2,000 UK adults surveyed cited ‘easy access’, ‘convenience’ and the need for an ’emergency fund’ as reasons for keeping the money in a regular bank account.
But with 21 per cent admitting they don’t feel knowledgeable about the pros and cons of easy access savings accounts, the research suggests it’s likely this stems from limited awareness rather than deliberate planning.
Rob Basinger, head of product and marketing at Marcus, said: ‘Too many people are missing out on valuable returns because they believe keeping money in a current account is the best way to ensure it’s available in an emergency.
‘But savers don’t have to choose between access and returns. With easy-access savings accounts, they can enjoy the best of both worlds – earning more on their money while keeping it within reach when they need it most.’
We examine what to look for when opening an account and the best-buy options you can open in minutes.
Easy access: You can open many savings accounts within minutes
The top savings accounts: Cash Isas, easy access and fixed rates
You can make the most of your money by having a range of different accounts designed to suit different purposes, says Rob Basinger of Marcus.
In our view, the top options for your savings include:
Cash Isas
Because it’s tax-free, using your £20,000 Isa allowance is a good first port-of-call for your savings. The best news is that the top options give you very easy access to your money when you need it most. Keep in mind the interest rate is variable, meaning the provider can change it whenever it likes.
Check for flexible cash Isas, which let you withdraw money without and replace it in the same tax year without reducing your Isa allowance. If your Isa isn’t flexible, adding money back after withdrawing eats into your £20,000 allowance.
There are also fixed-rate cash Isas. You’ll get a guaranteed rate on your savings for a set time, but access to your money is very restricted.
Within Isas there’s no tax to pay on interest earned or investment growth in the case of stocks and shares Isas.
What are the top cash Isas?
Trading 212* has a cash Isa that pays 4.53 per cent for 12 months, including a fixed 0.68 per cent bonus. It’s a flexible Isa, and you can open an account with just £1 and withdraw money whenever you like. It’s possible to do this instantly by linking your bank account.
Vida Bank has a one-year fixed cash Isa that pays 4.28 per cent – the minimum balance is £1,000 and the maximum is £500,000.
> Read more: Five of our favourite cash Isas
Easy access accounts
These are no-frills savings accounts that allow you to deposit and withdraw money with no restrictions. The interest rate is variable.
The interest you earn above your personal savings allowance is taxed as income. Basic rate taxpayers can earn £1,000 in interest each tax year before paying tax, while higher rate taxpayers and additional rate taxpayers can earn £500 and £0 respectively.
What are the top easy access accounts?
Cahoot’s Sunny Day saver pays 5 per cent for 12 months on balances up to £3,000 – but above that, it pays no interest at all.
Zopa has an easy access account linked to its Biscuit current account that pays 4.75 per cent for up to 12 months, which includes a 1.5 per cent fixed bonus. To get the higher rate, you must pay £500 into your Biscuit account every month – so you need to be willing to shift money around if you don’t use Biscuit as your main account.
> Read more: The best easy-access savings accounts
Fixed rate savings accounts
These give you a guaranteed interest rate for a set time, with restricted access to your money – in many cases, you’ll get no access at all. Again, you’ll need to pay tax on the interest earned.
Both short-term and long-term fixes are available, ranging from six months to five years.
What are the top fixed rate options?
LHV has a one-year fixed rate account that pays 4.46 per cent on balances up to £1million.
JN Bank has a two-year fixed rate account that pays 4.39 per cent on balances up to £500,000.
> Read more: Top fixed rate options to consider
What about investing?
If you’re thinking about fixing for several years and your goals are long-term – experts suggest more than five years away – you could consider investing your money rather than saving it in a cash account.
There’s risk involved and returns aren’t guaranteed, but over the long-term investing can net you more than interest earned on cash.
> Read more: Investing for beginners
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