What is the best savings account?

Four types of savings accounts to consider

Current accounts

For cash you may want to access regularly to support your day-to-day outgoings, the most straightforward option is a current account.

However, if you have extra cash in these accounts, it is important you consider the potential fraud risk in leaving large sums of money in an easy-to-access account. If you are prepared to lock away some of the extra cash you have, you will get better rates with a savings account.

Notice or call accounts

These accounts allow you to withdraw money within a specific timeframe (such as 30 to 120 days). These accounts have slightly higher interest rates than instant access savings accounts.

Fixed-term deposit accounts

You could also choose fixed-term deposit accounts. These offer a range of terms from a few months to several years. With fixed-term savings you can't usually withdraw your money until the end of the term. But in return, you typically get a better rate than instant access savings and notice accounts.

Fixed-term deposit accounts can be a sensible option if you know in advance that you may need to access money at a particular time (for example, if there is a wedding or big holiday ahead).

You might also consider tax term deposits accounts where you can lock away funds for when your next tax bill is due - these accounts tend to pay the highest rates of interest.

A strategy that some people adopt with their term accounts is ‘laddering.’ This involves opening multiple fixed term deposit accounts with different maturities and interest rates.

This gives you greater control over access to your cash because you can either take your money upon expiration or open another fixed term account if the interest rate is favourable to you.

ISAs

There are also individual savings accounts – or ISAs – for money you do not want to spend in the immediate future. The main difference between an ISA and another savings account is that it offers tax-free interest payments and in the 2023/24 tax year, you can put up to £20,000 into one if you're 16 or over.

Predictability is important

An important part of picking the right account is consistency and knowing that your provider sets rates at predictable levels over time.

If your bank is constantly changing their rates, you might find yourself spending precious time switching accounts every few months to get the best rates.

Arbuthnot Latham attempts to align its rate changes with Bank of England base rate changes, so clients have a greater degree of certainty when managing their personal finances.