Glossary
- AER and APR
Annual Equivalent Rate measures the interest you receive – if you earn £40 interest in a year from a £1,000 deposit, the AER is 4%. It differs from APR (Annual Percentage Rate) in that it takes account of compound interest (see below). AER and APR do not take account of any fees that may apply.
- Compound interest
This describes the effect of interest 'rolling up' – interest earned in year 1 will itself earn interest in year 2, and so on. If interest is paid more often than annually, compounding will happen during the year, so AER may differ from APR (see above). AER allows you to compare accounts regardless of how frequently interest is paid.
- Fixed/variable rate
A fixed rate account pays the same level of interest, for a set period, regardless of the 'base rate' of interest set by the Bank of England. Variable rate accounts respond to changes in the base rate.
- ISA
An individual savings account is a tax shelter – it allows you save without being taxed on the interest, unlike conventional savings accounts. The limit for tax-free saving in a Cash ISA (not to be confused with a stocks and shares ISA – see our ISA guide for more info) in 2011-12 is £5340.
- Notice term
Some accounts prevent you from accessing your money during an initial period, known as the notice term. This allows the provider to offer a better rate of interest.
- Provider
The company offering the account – typically this will be a bank or a building society, but could also be the financial services arm of an organisation like SAGA or the AA.
Best savings accounts
We're different
How can I pick the best savings account?
Savings accounts come in all shapes and sizes, but they all do basically the same thing – pay you interest in exchange for letting the bank or building society use your money.
The longer you let them use it for, the more they'll pay, so if you don't need the money for a while then consider a fixed rate account. These pay a guaranteed level of interest in exchange for the money being locked up (hence why they are often called 'fixed rate bonds'). See our guide to fixed rate savings accounts for more information.
If on the other hand you think you'll need to withdraw your cash, an easy access account is probably more suitable. ('Instant access' and 'no notice' accounts fall into this category – see our guide to easy access savings accounts for more information.)
In between are notice accounts which have no fixed term but require you to give a period of notice before taking your money out. Other accounts are designed with specific people in mind, such as internet accounts for people who think branches are oh-so-twentieth-century to over 50s accounts for silver savers.
Tax-free saving with ISAs
Individual savings accounts are brilliant. Whereas basic rate taxpayers normally have 20% of their interest siphoned off by the taxman, and higher rate taxpayers have to cough up even more, if you save into a cash ISA (as distinct from a stocks and shares ISA) the gains are protected. See our ISA guide for more information.
Offshore banking – modest tax benefits but less protection
Many banks operate offshore accounts, which are useful for expats (who sometimes struggle to open or keep a UK bank account) or people who frequently use currencies other than sterling. Because tax is not initially deducted from interest payments (though it must be declared on your self-assessment if you're a UK resident), the overall return is slightly greater. Be warned however that offshore accounts are not covered by the Financial Services Compensation Scheme, which normally protects the first £85,000 of a bank account if the unthinkable happens.
Our data comes from Moneyfacts and is completely independent and free from bias. In other words, the products listed in the table above are the best currently available on the market.
Latest articles on savings
- Jubilee bank holiday: how much is it worth?
- NS&I: how much are my index-linked bonds worth?
- Retail bonds: a good deal or too risky?
- A million more households sink into debt
- Beware the lure of the 9.5% boutique bond
- The 'easy access' accounts that charge for access
- Q&A: is my money safe?
- How to show children the value of their pocket money
- How to make your child a pension millionaire
We're not like other comparison websites
Unlike most websites that claim to help you find the best financial products, we don't make a penny by recommending these best buys, or from any transaction that takes place as a result.
You won't find any 'sponsored products' nestled in among the best buys like cuckoos in a nest.
These best buys are chosen by our friends at Moneyfacts, who know a thing or two about picking the best products. You can read about their best buy selection criteria here – the short version is that they are compiled and constantly reviewed by their in-house researchers, and exclude products that are only available to certain people or have strings attached.
We download the latest data from Moneyfacts every night and display it here, so you can be sure the list is up to date.