The best ways to gain without the pain

The top-paying easy-access savings all come from by far the safest place – www.nsandi.com (formerly National Savings) (Picture: Dominic Lipinski/PA Wire)

Millions of people, across the nation have money sitting in high street savings accounts earning diddly-squat, often at 0.1 per cent or less. Many of you are scared to move your money as you want safety. Yet there’s currently a way you can earn over ten times that amount and it’s 100 per cent safe.

This is the worst time for savers I can remember. UK interest rates are 0.1 per cent– the lowest in the Bank of England’s 325-year history. The only way to get a half-decent return, is to become an active, disloyal, aggressive saver, shifting from best rate to best rate.  So, everyone check now what your savings pay, owt less than 1 per enbt likely needs sorting. Below are the top ways to save, at the time of writing, but for more detail, and daily updated best buys see www.moneysavingexpert.com/topsavings. The three top easy access savings accounts are all totally safe

If you want an easy-access account where you can put money in and withdraw when you like, then currently and unprecedentedly, the top-paying easy-access savings all come from by far the safest place – www.nsandi.com (used to be called National Savings), the Government-backed savings institution. So, there’s really no excuses to be earning anything less than these…

1. NS&I Income Bonds: 1.16 per cent AER (min £500). It’s the highest payer and can be operated online. Deposits and withdrawals must be in chunks of at least £500, and interest is paid monthly into a separate account (so you don’t earn compounded interest – unless you then put it back in).

2. NS&I Direct Saver: 1 per cent AER (min £1). It’s simple and can be operated online. You have full flexibility on withdrawals and deposits, and interest is paid into the account annually and compounds.

3. NS&I Investment Account: 0.8 per cent AER (min £20). This is similar to the Direct Saver, but is postal only.

An added boon with NS&I is that it’s 100 per cent safe. All UK-regulated savings accounts are protected up to £85,000 per person per institution under the UK safe savings scheme, but for those with more, as NS&I is Government-backed it’s all protected – even if you’re lucky enough to have millions – which many of these accounts allow you to put in.  These accounts also smash the pants of the next top rates. www.ybs.co.uk is 0.8 per cent AER, but minimum deposit is £10,000, for less www.saga.co.uk is 0.75 per cent. And while fixed rates normally smash easy-access, as you have to lock your money away, right now NS&I beats the top one-year and two-year fixes.  NS&I’s rates are variable, but I’d be surprised if they dropped. NS&I’s rules say it must give you two months’ notice. Yet crucially the Government’s just told NS&I to increase its fundraising from £6bn in March to £35bn now (when you save you’re lending the Government your cash – and it needs it), so its rates are likely to stay strong to ensure that happens. I suspect it will very much fight to be the best buy and possibly even launch new products.

Have debts? For most it’s better to pay these off first

For most it’s better to pay these off first. If you’re paying interest on credit cards or overdrafts and loans (barring student loans), it’s usually far better to pay those off with any savings, just double check for early repayment penalties on loans as the interest they charge is much higher than the amount you earn in savings.  For example, saving £1,000 at 1 per cent means you earn £10 per year. But have £1,000 debt at 20 per cent interest means you’re paying £200 per year. So, pay of your debt with savings and you’re £190 per year better off.

With mortgages, if your rate is higher than you earn saving – as it will be for most – then you’re usually best to overpay it. Yet check you’re allowed to overpay penalty-free, and always keep a cash emergency fund in savings of three-six months’ worth of bills in savings first.

Surprised I’ve not mentioned ISAs?

Those three NS&I accounts are all taxable, whereas a cash ISA is just a tax-free savings account. Yet all basic rate taxpayers now have a personal savings allowance meaning you can earn £1,000 annual interest without it being taxed (higher rate taxpayers can earn £500 per year). So as a basic rate taxpayer you’d need nearly £100,000 saved before paying any tax.

As cash ISA rates are far lower than normal savings, only those with large savings who do pay tax should look at them. The joint top easy access cash ISA is also with NS&I at 0.9 per cent and www.cynergybank.co.uk also 0.9 per cent.  Niche ways to boost savings

1. Claiming universal credit or working tax credits – get a 50 per cent boost. The www.helptobuy.gov.uk scheme lets those on low incomes save up to £50 per month, and pays a 50 per cent bonus on up to £1,200 after two years – best of all this is paid on the highest amount you’ve had in, so if you saved £500 in, then had to withdraw, you’d still get £250 at the end of two years.  And if you’re claiming universal credit temporarily due to the pandemic, then you can still open this, and keep using it even once that stops.

2. Saving for your first home – Lifetime ISAs (LISA) are no-brainers. First-time buyers aged 18-39 saving in LISAs get a 25 per cent bonus added on what you’ve saved (max £4,000 per year) to use towards your first home as long as it’s under £450,000. The top payer is Nottingham BS at 1.25 per cent. For full info see www.moneysavingexpert.com/lisas

3. High interest for regular saving or via current account. Some regular savings accounts where you save a small amount each month can pay more, like Coventry BS 1.85 per cent on up to £500 per month. As can current account incentives like Virgin Money that pays 2.02 per cent on the first £1,000 and as you don’t need to pay into it each month like most current accounts, can just be used for saving.

Martin Lewis is the Founder and Chair of MoneySavingExpert.com. To join the 13 million people who get his free Money Tips weekly email, go to www.moneysavingexpert.com/latesttip

The best ways to gain without the pain – Martin Lewis

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