Best savings accounts with above-inflation rates

With the cost of living crisis, British households are looking for any way to stretch their pennies a little, and savings accounts could help.

After years of low interest rates, high-yield savings accounts are enjoying a new lease of life as the Bank of England has kept rates at a 16-year high of 5.25%. While homeowners face higher mortgages, there is also a silver lining to the higher cost of borrowing as consumers can now find UK savings accounts that offer more than inflation.

According to figures from the Office for National Statistics (ONS), inflation in the UK fell to 3.4% in January, the lowest level since September 2021.

Savers should definitely shop around to find the best deals and check what interest rate applies – as they could still be stuck with a product that is not keeping inflation under control.

Read more: How to get the most out of your bank and savings accounts

The most important factor to consider when choosing a savings account is the difference between an always-available savings account and a fixed-term savings account.

In short, easy-to-access accounts give you access to your money when you need it. Fixed deposits, as the name suggests, are accounts where you cannot access your money during the term of the contract. They usually offer better interest rates, but you have to cope with the idea of ​​not touching your savings for a long period of time, usually between one and five years.

What are the best high interest fixed rate accounts?

The best fixed rate account currently offers 5.18% and is available from HTB. The six-month fixed rate offer requires a minimum of £1 and you can invest up to £250,000. Withdrawals are not permitted during the term of the offer.

At maturity, at the end of the fixed interest period, customers receive 5.18% on balances. For example, if you invest £10,000 with them today, you will get your money back plus £518 in interest in 12 months.

Allica Bank also offers 5.18% but has higher entry requirements. The six-month fixed-term personal savings account requires a minimum of £10,000, which is locked for six months.

HTB offers a one-year offer with 5.17% interest. The minimum deposit is again £1 and you can deposit up to £250,000. No withdrawals are allowed during these 12 months.

Online banks typically offer higher interest rates than traditional branches, which translates into better returns and provides you with a more efficient way to save and reach your financial goals.

However, if you prefer a well-known name, the major lenders will offer you slightly lower deals, but still above the rate of inflation.

Barclays (BARC.L) offers the highest interest rate among branch banks. Its one-year fixed-rate savings account pays 4.65%. The requirements are also affordable, with a minimum of £500.

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Metro Bank is not far behind with an interest rate of 4.61% and similar terms. One year fixed term and a minimum of £500.

Lloyds (LLOY.L) offers a fixed rate savings product at 4.35% for one year. However, the minimum deposit is £3,000 and you must have or open a current account with Lloyds or another savings account to be eligible. For new customers, the interest rate is 4.15%.

How does a fixed-interest savings account work?

Unlike free-standing savings accounts, whose interest rates can vary, fixed-rate accounts do what their name suggests. You get a fixed interest rate for the period you choose, whether it's six months or one, two, three or even five years. These are the most common offers, but some run for up to 10 years or more.

Read more: What a two pence cut to National Insurance means for your finances

However, your original deposit must be available for a set period of time and cannot be withdrawn. If you touch your money, you will lose all interest.

What are the best easily accessible savings accounts?

Easy access savings accounts are simple types of savings accounts that allow you to withdraw your money without notice.

However, with this easy access comes lower interest rates compared to fixed rate accounts. They are a good option for those who think they may need their money quickly.

Note that the interest rates on these accounts are variable, meaning they can rise or fall. You will be notified in advance of any change.

The Post Office currently offers the highest interest, always-accessible savings account on the market. It offers 5.06%, paid out monthly.

This account can be opened with £1, but you can deposit up to £2 million. It offers unlimited, free withdrawals.

Close behind is Paragon Bank, with an easy-to-access account that pays 5.05% annually or monthly. You can open it online with just £1,000.

Monument Bank pays 5.01% at maturity and charges a little more money. A minimum of £25,000 is required to open the account, which you can do via mobile banking.

There are easily accessible accounts with even higher interest rates, but these are not for new customers. Santander (BNC.L) Edge Saver, for example, offers 7%, but is only for current account holders.

Skipton Building Society is paying 5.5%, but the offer is only available to mortgage holders or people who had a savings account with the lender before January.

What are the best termination savings accounts?

If you can't decide whether you would rather put your money aside and not touch it for a long time or access it at any time, then you might want to consider a termination savings account.

With cancellation savings accounts, you must cancel your account with your savings provider before you can withdraw your money.

It is ideal for those who know when they might need their cash, but you don't want to be tempted to access it beforehand

You must give the bank or building society a certain amount of time before you can withdraw your money – usually between 30 and 120 days.

Monument offers 5.27% with 60 days' notice, meaning that as long as you give the lender around two months' notice, you can access your money without penalty. You'll need £25,000 to open this account, and interest is paid monthly.

Read more: Inflation: What is it and what does it mean for you?

Investec (INVP.L) offers a 90-day notice account that pays 5.25% after the three months. To apply, you'll need between £5,000 and £250,000.

Hinckley and Rugby Building Society pays 5.25% on a 180-day notice account. The minimum investment is £2,500 and interest is paid monthly or annually.

The interest rate on termination accounts is variable, which means it can rise or fall over time.

What are the best savings accounts?

Those who want to make the most of their cash savings can earn returns of up to 7% with traditional savings accounts.

With most conventional savings accounts, you have to put money aside every month and receive interest annually. It is also not uncommon for the offer to be reserved only for existing customers.

For existing customers, First Direct offers 7% for a year but allows a maximum monthly deposit of £300. You cannot miss any months, and a minimum of £25 must be deposited into the account each month.

Withdrawals are not possible without penalty and if you close the account before the 12 months are up, the interest rate drops to 2%.

The Co-Op Bank is offering a 7% deal, but only for existing customers. With a one-year fixed rate, you can save up to £250 a month and skip months without penalty fees.

Nationwide used to have a market-leading offer of 8%, but this has now dropped to 6.5%. Nationwide's offer is a standard savings account, available exclusively to current account customers.

All trades mentioned here are covered by the Financial Services Compensation Scheme (FSCS), so you are protected up to £85,000.

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