Best savings rates as banks still short-changing customers by £100s each year

30 May 2023 , 13:55

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Savings rates have been on the up following 12 interest rate hikes (Image: Getty Images/Image Source)

Savers are being short-changed by hundreds of pounds each year thanks to "unjustifiably low" saving rates being offered by high street banks.

Consumer group Which? found some people have been languishing on deals as low as 0.1% in recent months.

The best-paying accounts from challenger banks and building societies offer 4.25% easy access, or you can get up to 5.16% fixed.

It comes after UK interest rates were hiked for the twelfth time in a row by the Bank of England, with the base rate now sitting at 4.5%.

The warning from Which? comes after the Financial Conduct Authority (FCA) wrote to high street banks to ask them to justify their lower savings rates ahead of the new Consumer Duty.

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Consumer Duty is due to be introduced in July, giving the FCA stronger powers to make sure companies act in the best interest of customers.

Jenny Ross, Editor of Which? Money, said: “With millions of consumers still feeling the impact of an unrelenting cost of living crisis, it’s become even more important to get better returns on savings accounts.

“Yet, our research shows that established high street banks are shortchanging customers by potentially hundreds of pounds a year.”

When picking a savings account, make sure you are covered by the Financial Service Compensation Scheme (FSCS) which protects up to £85,000 of your money if a provider goes bust.

There is an allowance you can earn in interest each year year tax-free.

The personal savings allowance is £1,000 for basic-rate taxpayers and £500 for higher-rate taxpayers.

This doesn’t include interest earned in ISA accounts, as these are tax-free savings products.

You can put away £20,000 each year into ISAs.

Savers should be warned that rates are changing rapidly - but here are the top rates at the time of writing.

Best easy-access savings accounts

Easy-access savings accounts allow you to withdraw your money without giving notice - although some providers do limit how many withdrawals you can make.

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This is good for those who may need to dip into their savings - although the rates aren’t as good as fixed accounts.

The top-paying account at the time of writing is Hanley Economic Building Society - but you can only make one withdrawal per month.

You can also only open and manage this account by post or in branch.

Hanley Economic Building Society - 4.25% (deposit between £1,000 and £50,000 - one withdrawal a month)
Chip - 3.82% (deposit between £1 and £250,000)
Principality Building Society - 3.8% (deposit between £1 and £1million - two withdrawals a year)
Shawbrook Bank - 3.75% (deposit between £1,000 and £85,000)
Cynergy Bank - 3.71% (deposit between £1,000 and £85,000)

Best regular savings accounts

Regular savings accounts normally require you to deposit money each month, typically a small amount - in return, the rates are better.

However, these accounts aren't for everyone and you'll need to read the terms and conditions carefully.

For example, some need you to have a current account with the bank already, others limit how many withdrawals you can make, or they cap how much you can save.

In most cases, the rates are fixed for 12 months - although some are variable.

Here, we've listed top-paying accounts at the time of writing:

First Direct - 7% fixed for one year (need to save between £25 and £300 each month, no skipping months allowed, and you can only withdraw money after one year unless you close your account, in which case your rate drops to 1.30%)
Lloyds Bank - 6.25% fixed for one year (save up to £400 each month, can skip months and withdrawals allowed)
NatWest/RBS - 6.17% variable on up to £5,000 (save up to £150 each month, can skip months and withdrawals allowed)
Bank of Scotland - 5.5% fixed for one year (save up to £250 each month, can skip months and withdrawals allowed)
Halifax - 5.5% fixed for one year (save up to £250 each month, can skip months - can only withdraw money after one year, unless you close your account)

It is worth checking with your bank to see what rate they offer with their regular saver - and if you're not happy, consider switching elsewhere.

Best notice savings accounts

Like the name suggests, these accounts require you to give notice when you want to withdraw your money.

The top-paying notice accounts right now are:

Cynergy Bank - 4.31% (120 day notice - deposit between £500 and £1million) or 4.26% (95 day notice - deposit between £500 and £1millio
United Trust Bank - 4.30% (200 day notice - deposit between £5,000 and £1million)
Investec - 4.25% (90 day notice - deposit between £5,000 and £250,000)
FirstSave - 4.25% (90 day notice - deposit between £100 and £2million)
Hampshire Trust Bank - 4.20% (95 day notice - deposit between £1 and £250,000)

Best fixed-rate savings accounts

Fixed-rate accounts don't normally allow you to withdraw your money until the end of the term - not ideal for households who may need to access their funds.

You do get a return compared to easy-access accounts, but as rates are expected to keep rising, it might be a good idea not to fix for too long.

The top-paying fixed accounts right now are:

Isbank via Raisin - 4.5% (six months fixed - deposit between £1,000 and £85,000)
Hampshire Trust Bank - 4.83% (nine months fixed - deposit between £1 and £250,000)
SmartSave - 5.07% (one year fixed - deposit between £10,000 and £85,000)
DF Capital - 5.16% (two year fixed - deposit between £1,000 and £250,000)
Hampshire Trust Bank - 5.1% (three year fixed - deposit between £1 and £250,000)
Zopa - 5.05% (five year fixed - deposit between £1,000 and £250,000)