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- Find a higher paying savings account
- Best accounts for long term savings
With the interest rate at just 0.5% and latest Bank of England figures revealing the average instant access account to be paying just 0.17% at the end of February, savers are taking action.
More than 8,000 of you responded to our poll last week in which we asked whether your savings habits have changed because of the low interest rate environment, and 45% said you had moved, or are looking to move, your money to a savings account paying a higher rate.
The good news is that even though we've had another interest rate cut this month, which means the rates on many accounts will fall further, the savings market remains highly competitive and a number of great new products have been launched paying rates significantly above the base rate.
So what's the best I can get?
Isas
If you haven't yet used your Isa allowance this year there's no time to lose. With only a few weeks left of the current tax year you don't have long left to take advantage of this valuable tax-break.
You can invest up to £3,600 each tax year in a cash Isa and interest is tax-free. For more information about Isas, read our article 'How to choose a cash Isa'.
In recent weeks we've already seen competition in this market heat up with a raft of new deals launched. Barclays has become the latest to join the battle for Isa money. Its new Golden Isa is paying a market leading rate of 3.61%.
This is a variable rate account and the rate includes a one percentage point bonus which lasts for 12-months. However, it is only available for new Isa money so you cannot transfer money invested in previous tax years.
If you are looking to make an Isa transfer as well as invest new money, Natwest's e-Isa is paying 3.25% (although you must have a Natwest current or savings account to qualify).
First Direct also has an attractive deal. Its e-Isa is paying a slightly lower rate of 3.1% but this is fixed until April 30 2010. This obviously gives protection from any further interest rate cuts, but what makes this deal even more appealing is that unlike most fixed rate deals which don't permit withdrawals during the fixed term, First Direct is allowing customers to make penalty-free withdrawals.
If you don't want to make an Isa transfer and are only looking to invest this year's allowance, other accounts worth considering are Natwest and Royal Bank of Scotland's Cash Plus Isas, which are both paying 3.51% and Abbey's Reward Isa which has a rate of 3.50%.
Fixed rate bonds
If you have more than £3,600 to invest or have already used your Isa allowance, the fixed rate bonds are paying the highest rates of interest. ICICI Bank is paying a leading rate of 4.10% on its two-year Fixed Rate Hi-Save account. It also has a one-year bond at 3.90%.
These products have been available for a few weeks but a number of new fixed rate bonds have also just been launched. Principality Building Society is offering the opportunity to lock into a rate of 4.0%. This rate is available on a two-year bond and a three-year bond, although both deals are for the over-50s only.
If you don't want to lock your money away for that long, Birmingham Midshires has just launched an 11-month fixed rate deal at 3.73%.
Variable rates
If you need to retain access to your savings, the leading easy access accounts are paying around 3%, although the highest paying products all include introductory bonuses so you should keep an eye on the rate as you will probably need to move your money once the bonus period ends.
Citibank's Flexible Saver Issue 4 has the highest rate at 3.26%, while Bradford & Bingley's eSavings Issue 7, Sainsbury's Bank Internet Saver, Abbey's Instant Access Saver Issue 3 and Alliance & Leicester's Online Saver Issue 4 are all paying 3.0%.
You need to act quickly if you want to apply for the Sainsbury's account though, as it is a linked offer and is only available until Tuesday March 17. However bear in mind that these rates could fall in the coming weeks following this month's interest rate reduction.
Don't forget safety
Awareness about the security of people's savings came to the fore last autumn with the collapse of the Icelandic banks. Following that crisis, we saw a change in attitude as many savers were prepared to sacrifice the rate in return for putting their money with institutions they perceived to be the safest.
However, with the Bank of England having slashed interest rates in recent months, there seems to have been a marked shift in attitude as savers seek to maximise returns once again. The important thing to remember is that you can put your savings in the highest paying accounts without having to worry about whether or not your money is at risk - just make sure you have no more than £50,000 invested with a single institution.
Under the terms of the Financial Services Compensation Scheme, the first £50,000 (£100,000 with joint accounts) is totally guaranteed if an institution goes bust - assuming it is registered with the Financial Services Authority. Therefore if you have more than £50,000 in cash savings, the key thing is to spread it around between different providers to ensure it is all protected.
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