Savings accounts differ from standard bank accounts, so it’s a good idea to add one to your arsenal to take advantage of their comparatively higher interest rates.
While current accounts are designed for day-to-day use and equipped with features like debit card access, savings accounts are designed for long-term saving.
Most savings accounts aren’t as flexible as current accounts – they aren’t designed for day-to-day use. That said, there are instant access savings accounts that provide quick and easy access to funds. However, these typically don’t have as high interest rates as fixed bond savings accounts.
While interest rates can fluctuate, there are many ways to earn substantial interest on your money.
You can use savings accounts to protect your cash against inflation or organise and save your money for long term financial goals.
What are savings accounts?
Savings accounts are specifically designed for saving money and often come with special caveats and terms and conditions.
The interest offered on savings accounts can be considerably higher than most current accounts. However, you’ll sometimes have less control over your money.
Where a savings account is regulated by the FCA, your money will be safe and protected up to a certain value.
Savings accounts also provide additional security benefits compared to current accounts. For example, savings accounts won’t usually come equipped with debit card access, so the chance of card-related fraud is practically zero.
Why get a savings account?
There are several advantages to using savings accounts, but the main one is the higher interest paid on your money.
Interest earned on your savings is also tax-free up to a certain value.
- Basic Rate taxpayers can earn at least £1,000 of interest from savings accounts before paying tax.
- Higher rate taxpayers can earn at least £500 of interest from savings accounts before paying tax.
- Additional rate taxpayers don’t qualify for a personal savings allowance.
After that, your interest will be taxed at the rate appropriate to your tax band:
|
Basic rate |
Higher rate | Additional rate |
| 20% | 40% |
45% |
Savings Accounts vs ISAs
Savings accounts and ISAs are not the same things, though they do exist for similar purposes (saving money for the long term).
ISAs are more tax-efficient than savings accounts, but you can only pay a certain amount into them (currently £20,000 in 2021/2022 for standard Cash ISAs). Savings accounts may allow savers to save higher amounts than ISAs.
It’s often worth weighing up ISAs vs savings accounts. Each has its benefits, and many choose to combine savings accounts with ISAs.
Types of savings account
There are four main types of savings accounts that we’ll look at in this article:
Instant/easy access savings accounts
Instant access savings accounts allow savers to add and remove cash at any time. They’re very similar to standard current accounts.
The maximum amount of money you can deposit into an easy access savings account is usually relatively high. Therefore, if you’re looking to put a large sum into one of these accounts, they can outperform ISAs. However, it’s worth considering that FSCS compensation won’t cover very high-value balances in most cases. As such, if you’re looking to save a greater amount, you might consider spreading this across multiple savings accounts.
Since instant access accounts are more flexible than other types of savings accounts, they come with lower interest rates (as you’re essentially paying for flexibility).
Pros of instant/easy access savings accounts
- Easy to set up
- Work the same as most current accounts
- Small/zero initial deposits
- Lots of big-name providers
Cons of instant/easy access savings accounts
- Low-interest rates
- Limited advantages over most normal current accounts
Notice account
Notice accounts are flexible to a point, as they enforce a notice period that you must give the provider before withdrawing your money. A typical notice period is 90 to 120 days. In return, you’ll secure a better interest rate than a more flexible savings account.
Notice accounts are worthy of consideration when you know you’ll need the money soon but aren’t exactly sure when. An example would be if you’re planning to buy a house in the next year or so.
Pros of notice savings accounts
- Higher interest rates with some flexibility too
- Good for keeping money separate until you need it
- Can pay in regular amounts if you want (but don’t have to)
Cons of notice savings accounts
- Not too many options available
- Higher minimum initial deposits than other options
Regular savings account
Regular savings accounts require you to pay a fixed minimum quantity each month, which can be as low as £1. There is also a maximum deposit limit that keeps the interest you can earn from them relatively low. The average max deposit limit is probably around £500 a month.
Once committed, you may face strict penalties if you fail to pay the amount on time, but some providers allow you to skip months.
Notice accounts are a good option if you don’t have a significant lump sum to save but can still commit to saving regularly. Interest rates will generally exceed instant access savings accounts. However, the total amount of interest you can earn is relatively low, depending on the size of your deposits.
Pros of regular savings account
- Good interest rates
- Solid option for getting started with savings
- Can open multiple with different brands
Cons of regular savings accounts
- Total earning capacity is low given the max monthly deposit
- Not too many options available
Fixed bonds
Fixed bonds differ from other options as they require you to ‘lock away’ your money for the duration of the chosen bond, which typically varies between 1 and 5 years.
In return, you’ll receive a fixed interest rate that is paid monthly or at the end of the bond term (at maturity). Bonds offer the highest interest rates of the four standard savings account options.
Bonds can also be used strategically to help protect from falling interest rates. They provide higher interest rates than other savings products for the cost of locking your cash away until the maturity date.
Pros of fixed bonds savings accounts
- Better interest rates than other products
- Predictable returns
- Can be used to protect against falling interest rates
Cons of fixed bonds savings accounts
- Keeps your money inaccessible for a period
- You might lose out if interest rates increase and better products become available on the market
Best savings accounts for 2021/2022
The following is a compilation of savings accounts for 2021/2022. These savings accounts are listed on reputable sites such as Money Saving Expert and Which?
Not all features or terms and conditions are covered in these tables. Many savings accounts have unique T&Cs that you should review in detail before making any decisions. The following information is given for guidance purposes only, and all data is subject to change.
Best instant access savings accounts
In 2021/2022, the best two easy access savings accounts appear to be Cynergy Bank and Charter Saving Bank. These rank highly in both Which? and Money Saving Expert.
As far as big brand accounts go, Nationwide is next-best with a 0.45% interest rate. However, they charge withdrawal penalties if you make more than three withdrawals.
| Provider | Rate (AER variable) | Unlimited withdrawals? | Min/max deposit |
| Cynergy Bank | 0.5% | Yes | £1/ £1m |
| Skipton eSaver | 0.1% to 0.46% | Yes | £1/£1m |
| Paragon Triple Access | 0.41% (up to 3 withdrawals) | Over 3 withdrawals reduce interest | £1/£500,000 |
| Charter Savings Bank | 0.5% | Yes | £5,000/£1m |
| Nationwide | 0.45% | Over 3 withdrawals reduce interest | No min/£5m |
| Chip autosave | 1.25% (not compounded) | Yes | £1/ £10,000 |
Best regular savings accounts
The following are regular savings accounts with the highest interest. Most have low minimum monthly deposits, but you won’t receive much interest if you don’t deposit towards the maximum amount. Note that the top 3 accounts here are only available to their existing customers.
| Provider | Rate (AER) | Max monthly deposit | Can you skip months? | Penalty-free withdrawals allowed? |
| Yorkshire BS | 3.5%
variable |
£500 | No | Yes |
| NatWest | 3.04%
variable (2) |
£50 | Yes | Yes |
| RBS | 3.04%
variable (2) |
£50 | Yes | Yes |
| Principality BS | 1% fixed for one year | £250 | Yes | No |
| Nationwide | 1% variable | £100 | Yes | Yes |
Best notice savings accounts
The following are 4 savings accounts that top the charts of various reputable websites like Money Saving Expert and Which? They all offer improved rates compared to flexible easy access savings accounts.
| Provider | Rate (AER variable) | Notice period | Min/max deposit |
| Secure Trust Bank | 0.75% | 120 days | £1,000/ £1m |
| Allica Bank | 0.7% | 95 days | £1,000/ £250,000 |
| Charter Savings Bank | 0.6% | 60 days | £5,000/ £1m |
| Shawbrook Bank | 0.55% | 45 days | £1,000/ £500,000 |
Best 1-year fixed bond savings accounts
The following are short-term fixed bond accounts. You put aside your savings for the bond period and receive interest either monthly or at maturity.
These savings accounts offer better returns than most options mentioned above, with the obvious downside that you won’t be able to access your money (unless in extreme circumstances). Therefore, they should only be considered if the risk of needing the money is practically zero.
Fixed-rate bonds are subject to interest rate sensitivity, so if interest rates increase over your bond period, it’s best to opt for shorter bonds to enable you to switch to better interest rate products after the term expires.
Conversely, if you opt for a long-duration bond and interest rates drop on the market, you’ve made a good choice.
| Provider | Rate (AER) | Interest paid | Min/max deposit |
| UBL UK | 1.06% | Monthly or at maturity | £2,000/ £1m |
| OakNorth Bank | 1% | At maturity | £1/ £500,000 |
| Shawbrook Bank | 1% | Monthly or at maturity | £1,000/ £2m |
| Zopa* (2) | 0.95% | Monthly | £1,000/ £250,000 |
Best 2-year fixed rate bond savings accounts
The following are 2-year long bond savings accounts. They offer marginally better interest rates than the aforementioned 1-year bond savings accounts.
| Provider | Rate (AER) | Interest paid | Min/max deposit |
| Wesleyan Bank | 1.15% | Annually | £1,000/ £250,000 |
| Kent Reliance | 1.12% | Monthly or annually | £1,000/ £1m |
| Zopa | 1.12% | Monthly | £1,000/ £250,000 |
| Close Brothers | 1.12% | Annually | £10,000/ £2m |
Best 3-year fixed bond savings accounts
These are some of the best 3-year fixed bond savings accounts available in 2021/2022. Interest rates increase once again by some 0.1% to 0.2% compared to 2-year products.
| Provider | Rate (AER) | Interest paid | Min/max deposit |
| Wesleyan Bank | 1.3% | Annually | £1,000/ £250,000 |
| Zopa | 1.25% | Monthly | £1,000/ £250,000 |
| Cynergy Bank | 1.25% | Annually (2) | £10,000/ £1m |
| Close Brothers | 1.22% | Annually (2) | £10,000/ £2m |
Best 5-year fixed bond savings accounts
From many of the same providers, here are some of the best 5-year fixed bond savings accounts available in 2021/2022.
| Provider | Rate (AER) | Interest paid | Min/max deposit |
| Wesleyan Bank | 1.6% | Annually | £1,000/ £250,000 |
| Shawbrook Bank | 1.55% | Monthly or annually | £1,000/ £2m |
| UBL UK | 1.55% | Monthly, annually or at maturity | £2,000/ £1m |
| JN Bank | 1.5% | Annually | £1,000/ £100,000 |
Data in all tables correct at 30th June 2021. Interestrate.co.uk is not responsible for changes to these rates or content on external websites.
Summary: which banks have the best savings interest rates 2021?
This guide gives an overview of what banks and other providers currently offer the best savings interest rates in 2021.
The interest you can get is very competitive between different providers, but there’s plenty of choice on offer. However, interest rates do change year on year, so what appears to be the best deal this year may not be next year.
Generally speaking, the more flexibility over access you want, the lower the interest rate will be. Consider bonds if you want to put a quantity of money away for a more extended period. The longer the bond, the greater the interest rate will be, but bear in mind that this leaves you liable to interest rate fluctuations.