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Ditch the high street for top savings rates

Joanna Faith
Written By:
Joanna Faith
Posted:
Updated:
12/12/2016

Struggling savers should not dismiss challenger and foreign banks if they want to get the best returns on their cash, analysis suggests.

With the Financial Conduct Authority recently naming and shaming the banks which pay the lowest interest rates on savings products, research from MoneySuperMarket found the highest rates across a range of savings products are offered by non-traditional banks.

The market leading one-year fixed rate product currently comes from app-based Atom Bank and Swedish-owned IKANO, both at 1.40%.

The best three-year fixed deal is 1.65% from Hanley Economic Building Society, with IKANO Bank offering a similar rate of 1.63%. Santander offers the leading rates among more established banks, but these are miserly in comparison, at 0.70% for a one-year fixed bond and 1.00% for a three-year fixed deal.

For those who are prepared to tie their money up for longer, the best five-year fixed rate product comes from challenger bank IKANO at 2.05%, followed by new digital bank Masthaven at 2.01%, while Hampshire Trust Bank, Paragon Bank and Vanquis Bank all offer 1.95%.

For anyone that needs to dip into their savings regularly, the best easy access savings accounts come from RCI and Tesco Bank offering 1.00%, double that of TSB’s 0.50%.

While some savers may be deterred from products offered by challengers or foreign banks, they should not be put off by lesser known names, the comparison site said.

Nearly all of these banks are part of the UK Financial Services Compensation Scheme, which currently protects savings up to £75,000. Foreign banks such as RCI and IKANO are covered up to the same amount by the French and Swedish equivalent scheme.

For more, read: ‘Should I entrust foreign banks with my savings?’

Kevin Mountford, banking expert at MoneySuperMarket, said: “Savings rates are currently at rock bottom, therefore it’s extra important to make sure you’re getting the best deal possible.

“You shouldn’t shy away from lesser known brands, as they are still secure and trustworthy, especially as it seems the traditional banks aren’t interested in giving savers better rates at the moment. The FCA has recently introduced rules forcing firms to provide clear information on their savings products so comparisons can be made more easily than before.”