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Savings tricks: How to earn 5pc
Savers who prefer to keep money in cash accounts face the worst drought ever seen in Britain. The average one-year fixed rate bond now pays just 1.56pc, according to Bank of England figures published at the end of September.
However, if you are considering using a current account for your savings, beware many conditions will apply. For example, Nationwide will only pay its generous interest on up to £2,500. You also need to fund the account with at least £1,000 a month. Other accounts will require a number of direct debits linked to the account - effectively asking customers to treat it as their main bank account.
Switching accounts is now simpler. On September 16, banks and building societies launched a current account switching service that considerably reduces the time and hassle it takes to move providers.
However, savvy savers may be able to get the interest without up-rooting their entire financial life. For example, you could set up a web of income and outgoing direct debits and standing orders so that your salary or income is bounced into and out of the new current account. This should enable you to meet the minimum requirements.
Anna Bowes, director of SavingsChampion.co.uk said: “It’s always important to take out a savings account which meets your needs, rather than making your needs fit your savings. However, if you are looking to get some of the best rates on the market and are willing to switch your current account, one of these may be appropriate and offer a boost to your savings to boot.
"Although this isn’t always the simplest way to increase the amount of interest you can earn, it’s certainly a savvy way, and in the current climate with most savings accounts paying less than inflation, it could be worth the hassle.
“Savvy savers will utilise all the weapons in their armoury from cash Isa's to high interest current accounts and regular savings accounts, in order to cream as much extra interest as possible. Saving in the current environment isn’t easy and being complacent can cost you dearly so it’s worth juggling your money and considering the best paying accounts you can find.”
High-interest paying current accounts
| Provider || Account || Rate || Min deposit || Max deposit || Notes |
| Nationwide || FlexDirect Current Account || 5% || £1 || £2,500 || Rate reverts to 1% after 12 months. Min £1,000 per month paid in. |
| Santander || 123 Current Account ||3% 2% 1%||£3,000 £2,000 £1,000||£20,000 £2,999 £1,999|| Interest paid on the first £20,000 only. Min £1,000 deposit. £2 monthly fee. Min of £500 a month to fund the account and min of two direct debits. |
| TSB || Enhance Current Account ||3% 2% 1%||£3,000 £2,000 £1,000||£5,000 £2,999 £999|| Interest paid on the first £5,000. Can be added to an existing/new TSB Classic or Added Value account. Min £1,000 per month in, and must stay in credit. |
| Lloyds || Vantage Current Account ||3% 2% 1%||£3,000 £2,000 £1,000||£5,000 £2,999 £999|| Interest paid on the first £5,000. Vantage can be added to a existing account. Min £1,000 per month in, and must stay in credit. |
High-interest savings accounts
| Provider || Minimum deposit || Interest rate || Term || Allows transfers in? || Notes |
| Skipton - Online Limited Edition 7 yr Fixed Rate Bond || £500 || 3.5% (before tax) || 7 yrs || Yes || Apply online, no access, branch version available at same rate |
| Leeds BS - 5 yr No Access Isa || £1 || 3.05% || 5 || Yes || Withdrawals/closure allowed with 180 days loss of interest. Apply online/post/branch |
| Skipton - 5 yr Fixed Rate Isa || £500 || 3.00% || 5 || Yes || Closure only with 240 days loss. Apply branch/post, online version at same rate |
| Leeds - 5 yr Access Isa || £1 || 2.90% || 5 || Yes || Withdrawals up to 25% of balance penalty free, further = 180 days loss. Apply online/post/branch |
| Punjab National Bank - Fixed Rate Cash Isa 5 years || £1,000 || 2.70% || 5 || Yes || Open Branch, closure only with 30 days’ notice |
Category: Savings account