Best savings accounts when inflation is low

Lale Akoner, global market analyst at eToro, said: “Overall, the print strengthens the case for a potential Bank of England rate cut at the March meeting, especially after recent data showed soft wage growth and rising unemployment. However, policymakers are divided, and sticky services inflation could well put the debate on hold and cut into the Bank’s fundamental impact. Cautious rather than aggressive.”

“For retail investors, the implications are significant. Rate cut expectations support equities, particularly rate-sensitive sectors such as housebuilders and consumer discretionary. Low yields could also weigh on sterling, which could benefit UK multinationals that earn overseas revenues. On the other hand, savers could face a return to declining costs.”

In her Autumn Budget in November, Chancellor Rachel Reeves announced changes to the tax paid on savings income. From 2027-28, the basic rate of savings has been increased by two percentage points to 22 percent, the higher rate has been increased by two percentage points to 42 percent and the additional rate has been increased by two percentage points to 47 percent. It will come into effect from 6 April 2027.

Until recently, savers could earn a market-leading 5% for three months, but the best offer now is 4.40% from OakNorth via the Prosper platform. Interest is paid on maturity, and a minimum investment of £10,000 is required to open an account.

Alrayan Bank pays 4.35% for six months through the same Prosper platform. Interest is paid on maturity and £10,000 is required to open an account.

DF Capital has a 4.25% deal for 12 months that requires £1,000 to open and you can invest up to £250,000.

Online banks typically offer higher rates than traditional brick-and-mortar branches, which translates into better returns, giving you a more efficient way to save and reach financial goals.

If you want to go with a familiar name, high-street lenders have slightly lower offers, but are still above inflation.

Tesco ( TSCO.L ) Bank offers a one-year fixed-rate savings account that pays 4% per annum, with a minimum balance of £2,000. However, you can invest up to £5m.

NatWest ( NWG.L ) has a fixed-term savings account offering 3.4% for one year. The minimum deposit is just £1 and interest will be paid on the first business day of each month and on the maturity date.

Unlike easy-access products, where interest rates can vary, fixed-rate accounts earn a set rate of interest for the period you choose, whether it’s six months or several years. Those are the most common contracts, but some offers go for 10 years or more.

You must leave your initial deposit without withdrawal for a certain period. If you touch your money, you lose any interest.

Easy access savings accounts let you withdraw your money without notice. With that ease of access comes lower interest rates, but they’re a good option for those who think they need their money in a hurry.

Note that the rates on these accounts are variable, which means they can go up or down. You will be notified of any changes ahead of time.

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Chase (JPM) has a 4.5% offer for 12 months that you can access with £1.

Mansfield BS has a 4.25% offer that you can open from £1 and save up to £400,000. If you had put £1,000 into this account, after 12 months your balance would be £1,042.50.

Manchester BS has a 4.15% deal that you can access for just £1 and invest up to £1,000,000. Interest is paid annually.

There are also higher paying Easy Access accounts, but they are not for new customers. Santander’s ( BNC.L ) Edge Saver, for example, offers 6%, but is only available to current account holders.

Can’t decide if you want to put your money away and not touch it for long or keep it accessible all the time? Perhaps you should consider an information savings account.

Notification savings accounts require you to notify your savings provider before withdrawing your funds.

These are perfect for people who know when they will need cash but don’t want to face the temptation of dipping into it anytime soon.

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You need to give the bank or building society a set advance warning before withdrawing your money. This is usually between 30 and 120 days, although it can be longer.

OakNorth Bank has a 4.5% deal through Prosper which requires £10,000 to access. The notice period is 120 days and it is only available for new customers.

The same platform has a deal with GB Bank offering 4.4% on 35 days notice account.

GB Bank also offers a standalone 4.33% deal at 120-day notice, with minimum deposits set at £10,000.

Interest rates with notice accounts are variable, meaning they can go up or down over time.

For those looking to make the most of their cash savings, regular savings accounts can offer returns of up to 7.5%.

Most regular savings accounts require you to deposit money each month with interest paid annually. It is not unusual for this offer to be available only to existing customers.

Principality offers 7.5% on a six-month regular savings account. You open an account and pay up to £200 each month. Interest is calculated daily on the money in the account and is paid six months after opening.

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Zopa pays 7.1% on monthly deposits up to £300. Account holders also get 2% AER interest on all balances and 2% cashback on bill payments and there is no minimum monthly deposit.

The Co-op offers 7% on its regular savings account, allowing deposits of up to £250 per month.

First Direct pays the same 7% but you can save £300 every month.

Each of the deals mentioned here is covered by the Financial Services Compensation Scheme, so you’re protected up to £120,000 or double if it’s a joint account.

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