Savings accounts

Are your savings safe?

You can save up to £85,000 and it’ll be fully protected under the Financial Services Compensation Scheme, provided it’s in a UK regulated bank or building society account. However, it’s important to remember that this limit is per institution, and often several banks can come under the same umbrella, so the amount that’s protected can vary.

For example, if you hold cash in an HSBC and a Santander account, your total protection will be £85,000 per account because they are two separate banks. However, if you hold money in separate accounts at HSBC and First Direct (an HSBC subsidiary), your overall protection will still be £85,000 because the two accounts come under the same banking licence.

Joint savings accounts get twice the protection, so they are covered up to £170,000.

If you are unclear about whether any of your account providers share a banking licence, you can check on the FSA website. If you have more than the protection limit in any account or banking group, think about spreading your cash among more institutions.

Savings tools

Getting into the savings habit can often be the hardest part, as it can often mean you have to tighten your belt or stick to a stricter budget. To help you work out where you can make some changes to your spending we have developed a handy cost calculator so you can work out quickly and easily just where your money goes each month to help you decide where you could spend less to help you save more.

Cost Calculator Tool

If you have got a savings goal in mind, or would like to know just how long it will take you to reach your target, we have a savings calculator that can help. You can see just how much you need to save each month and how much interest you will earn.

Savings Calculator

Deciding on exactly which savings account to use can be tricky, there are fixed accounts, ISAs, easy access accounts - basically lots to choose from! To try and help you determine just where to put your money we have come up with a handy savings tree that shows you some of the places you can put your cash. This isn't financial advice, but rather a starting point for you to start thinking about which savings accounts are right for you.

Savings Accounts Decision Tree

Glossary

Base Rate

The base rate is the benchmark interest rate set by the Bank of England. A lender's rate will almost always follow the Bank of England base rate- if it goes up or down, the lender's standard variable rate will also go up or down. Fixed rate accounts mean you don't need to worry about earning less interest if the base rate goes down as you've locked in your money at a higher rate, but if the base rate goes up you won't earn the higher rate of interest either. The base rate is an important thing to consider when you're deciding whether to fix your savings or not.

Basic Rate Tax

Basic rate tax is charged at 20% on the first £35,000 of income above your annual personal allowance. The personal allowance is £9,205 for the under 65s, £10,500 for those aged 65-74 and £10,660 for the over 75s.

Fixed Rate Bond

A fixed rate bond allows you to earn a higher rate of interest by locking your money away for a set period of time, usually between 1 and 6 years. You usually won't be able to access your money during this time, but you could earn more interest than with an instant access account.

Fixed Term

If an account has a fixed term, this is the length of time for which you'll need to lock your money away to get the advertised rate. Some providers will allow you to withdraw some or all of your money before this term ends, but you'll usually be penalised with fees or a loss of interest.

Instant Access

This type of account allows you to deposit or withdraw your money at any time, with no notice or penalties.

Interest

This is the amount the financial institution that holds your account will pay you in return for saving with them. To find out how much your savings will earn, you can look at the AER- the Annual Equivalent Rate. Shown as a percentage, this tells you the rate of interest you will earn over the period of 1 year. The interest rate may be fixed, which means it will not change throughout the life of the account, regardless of whether the Bank of England base rate goes up or down. Alternatively, the rate may be variable and fluctuate along with the base rate.

Introductory Bonus

An introductory bonus is a fixed amount of extra interest which will be paid on any money you have saved in a variable interest account for a certain amount of time after you open the account. Once the introductory period is over the rate will revert to the normal variable rate, so you may wish to consider moving your money to make sure you're always getting the best rate.

ISA

An ISA is a type of account which allows you to save without paying tax on the interest you earn. There are several different types of ISA- the most common is a cash ISA, in which every adult over the age of 18 can save up to £5,760 each year. There are also investment ISAs- commonly known as stocks and shares ISAs- where you can save another £5,760 on top of your cash ISA allowance, or any amount up to the full total of £11,520 if you decide not to use your full cash ISA allowance. Finally, there are Junior ISAs which can be opened for children under the age of 18.

Lump Sum

A one off amount of money an individual wants to pay into an account. Most accounts with a fixed term will require you to pay in a lump sum and will not allow you to make any more deposits, whereas instant access accounts may allow you to make regular payments into the account.

Notice Accounts

A savings account where the account holder is required to give a notice of withdrawal a specified number of days before their money can be released.

Standard Variable Rate

This is the basic rate at which financial institutions pay interest to their savers. It's usually a certain percentage amount above the Bank of England base rate. Many savings accounts have an introductory bonus rate which allows you to earn more interest on your savings for a fixed length of time before the amount you earn reverts to the standard variable rate.

Tax-Free Allowance

The amount allowed to be invested in an ISA account which is free of income tax. This is currently £5,760 in a cash ISA or £11,520 in an investment ISA.