With many big names offering interest as low as 0.05%, it's time to look at some attractive alternatives
Interest rates are expected to continue to remain flat until next year or even 2013, but there was some good news for savers this week. Increasing competition among banks and building societies is pushing up the rates on offer, with the launch of several market-leading new deals aimed at those who want easy access to their cash.
New bank Aldermore has relaunched its Easy Access account, which now pays 2.85% gross interest and offers a guarantee of a decent rate until at least early 2013.
Meanwhile, Derbyshire Building Society, now a division of the Nationwide, has upped the headline rate on its online NetSaver (issue 1) account to 3.25%, though this rate is boosted by an interest bonus which falls away late next year.
And Newcastle Building Society has relaunched its Online Easy Saver account, which pays 3% and allows people to stash between �1 and �50,000. All three were this week sitting at the top of their respective Moneyfacts best-buy tables.
When interest rates are this low and inflation is eating into the real value of your cash, it is more important than ever to ensure your money is working hard for you.
So if you have cash languishing in an instant access account paying next to nothing, such as HSBC's Flexible Saver, which offers just 0.05% gross interest, or Barclays e-savings, which pays 0.1%, you should think about moving some or all of it to an account paying perhaps 50 or 60 times as much.
"Considering that the base rate is so low, there's still an awful lot of competition in the savings market, particularly in the no-notice and internet accounts markets," says Rachel Thrussell at Moneyfacts. She adds that online savings accounts don't cost the banks so much to administer and run, so they can offer higher rates on these.
When it comes to instant access accounts, none of the "big four" banks ? Barclays, HSBC, Lloyds and Royal Bank of Scotland/NatWest ? is paying particularly good rates at the moment, says Thrussell.
It is true that, for some people, the interest rate is not the be-all and end-all; they like having their money with a long-established name they know and trust and think that if they switch to one of the online or phone-based banks they will be "just another number".
However, Aldermore, which launched in May 2009 and recently hit �1bn in deposits, would doubtless argue that new entrants can provide good rates and good customer service, too. It beat the Halifax and Nationwide to be named best Isa provider at this year's Consumer Moneyfacts Awards, which were partly based on customer feedback.
One of the best things about Aldermore's Easy Access account is that the rate is guaranteed to stay at least 1.8% above the Bank of England base rate until 1 March 2013. This rate is not artificially inflated by bonuses or introductory offers, and you can have interest applied to the account monthly or annually. However, the minimum initial deposit is �1,000, which will exclude some people, and the interest rate plummets to 0.5% if the balance falls below that. The account can be operated online, by phone or by post, and there is no limit to the number of deposits and withdrawals you can make.
"It's basically 'what you see is what you get', a straightforward no-notice account at a good rate," says Thrussell.
The Derbyshire NetSaver (issue 1) account has had its interest bonus nudged up by 0.07% to 2.25%, lifting the overall rate paid to 3.25% gross. However, the bonus runs out on 30 November 2012, so you would need to put a note in your diary to check what the rate is at that time, and move your money to a better-paying account if necessary. NetSaver is available via the Derbyshire's website. The minimum balance is just �1, and you can make as many withdrawals as you like via a nominated account.
At the time of writing, the Newcastle's Online Easy Saver is at the top of the internet accounts best-buy table. Many will like the fact that it allows unlimited deposits and penalty-free, no-notice withdrawals ? you move money to and from your nominated bank account.
Close behind the Newcastle is Saffron Building Society, which has just upped the rate on its e-saver (issue 3) by a chunky 0.6% to 2.85%. "The account allows you easy access to your money, with no penalties should you need it, and requires a minimum balance of only �10," said a spokesman. You can transfer money to another Saffron account or electronically to your bank. However, the latter three deals are for people who are happy to run their finances online.
Other good-paying instant/easy access accounts include ING Direct's Savings Account, paying 3% AER (2.96% gross) to new customers and operated online and over the phone. However, that good rate is substantially boosted by a 2.46% interest bonus that only lasts for 12 months. Meanwhile, West Bromwich Building Society's Branch Easy Access Saver 3 pays 2.51%, with a minimum investment of �1,000.
This week also saw the Co-operative Bank launch a Select Access Saver account paying 2.25% gross, provided you can put away at least �500. It has no introductory bonuses or penalties, though this isn't an account for people who continually need to take out cash.
It allows you to take out money occasionally, and as long as you make no more than four withdrawals a year, the interest rate will not be affected.
If you make five or more, the rate shrivels to 0.1% until the end of the calendar year. The account can be opened by phone or in a Co-op Bank or Britannia branch.
Source: http://www.guardian.co.uk/money/2011/sep/30/easy-access-savings
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