Investment ISAs are tax-efficient wrappers for long term investments. You may get back less than you pay in because your capital isn't guaranteed and charges may apply. Your personal circumstances will determine how much tax you pay on your investments and returns; tax laws may change.

United Bank UK Five Year Fixed Rate Deposit Account
Account TypeOpen WithInterest Rate (AER)Protection SchemeOpen Account
Fixed Bond£2,000.003.20% fixed
for 5 years
on £2,000+
FSCSOnline, Branch & Post
Vanquis 5 Year High Yield Bond
Account TypeOpen WithInterest Rate (AER)Protection SchemeOpen Account
Fixed Bond£1,000.003.16% fixed
for 5 years
on £1,000+
FSCSOnline
Aldermore Customised Fixed Rate Business Savings Account
Account TypeOpen WithInterest Rate (AER)Protection SchemeOpen Account
Business Term Account£1,0001.2% to 3% fixed
for 60 days to 5 years
FSCSOnline
The longer the term you select, the higher the interest rate. The interest rate will remain fixed for the duration of the term.
Vanquis 4 Year High Yield Bond
Account TypeOpen WithInterest Rate (AER)Protection SchemeOpen Account
Fixed Bond£1,000.002.96% fixed
for 4 years
on £1,000+
FSCSOnline
State Bank of India Online 5 Year Fixed Term Deposit
Account TypeOpen WithInterest Rate (AER)Protection SchemeOpen Account
Fixed Bond£25,000.002.9% fixed
for 5 years
on £25,000+
FSCSOnline
Investec Bank 5 Year Step Up Bond
Account TypeOpen WithInterest Rate (AER)Protection SchemeOpen Account
Fixed Bond£25,000.002.85% fixed
for 5 years
on £25,000+
then 3.85%
FSCSOnline
United Bank UK Three Year Fixed Rate Deposit Account
Account TypeOpen WithInterest Rate (AER)Protection SchemeOpen Account
Fixed Bond£2,000.002.70% fixed
for 3 years
on £2,000+
FSCSOnline, Branch & Post
Investec Bank 3 Year Fixed Term Deposit
Account TypeOpen WithInterest Rate (AER)Protection SchemeOpen Account
Fixed Bond£25,000.002.65% fixed
for 3 years
on £25,000+
FSCSOnline & Post
Investec Bank 3 Year Base Rate Plus
Account TypeOpen WithInterest Rate (AER)Protection SchemeOpen Account
Tracker Bond£25,000.002.6% variable
for 3 years
on £25,000+
FSCSOnline
Bank of Cyprus UK 3 Year Bond
Account TypeOpen WithInterest Rate (AER)Protection SchemeOpen Account
Fixed Bond£1,000.002.5% fixed
for 3 years
on £1,000+
FSCSOnline, Branch, Phone & Post
Vanquis 3 Year High Yield Bond
Account TypeOpen WithInterest Rate (AER)Protection SchemeOpen Account
Fixed Bond£1,000.002.5% fixed
for 3 years
on £1,000+
FSCSOnline
Investec Bank 2 Year Fixed Term Deposit
Account TypeOpen WithInterest Rate (AER)Protection SchemeOpen Account
Fixed Bond£25,000.002.35% fixed
for 2 years
on £25,000+
FSCSOnline & Post
Aldermore 3 Year Fixed Rate Cash ISA
Account TypeOpen WithInterest Rate (AER)Protection SchemeOpen Account
Cash ISA£1,000.002.25% fixed
for 3 years
on £1,000+
FSCSOnline, Phone & Post
Halifax 5 Year ISA Saver Fixed
Account TypeOpen WithInterest Rate (AER)Protection SchemeOpen Account
Cash ISA£500.002.20% fixed
for 5 years
on £500+
FSCSOnline, Branch & Phone
No withdrawals allowed except on early closure subject to the loss of 365 days tax-free interest.
United Bank UK Two Year Fixed Rate Deposit Account
Account TypeOpen WithInterest Rate (AER)Protection SchemeOpen Account
Fixed Bond£2,000.002.20% fixed
for 2 years
on £2,000+
FSCSOnline, Branch & Post
Halifax 4 Year ISA Saver Fixed
Account TypeOpen WithInterest Rate (AER)Protection SchemeOpen Account
Cash ISA£500.002.10% fixed
for 4 years
on £500+
FSCSOnline, Branch & Phone
No withdrawals allowed except on early closure subject to the loss of 320 days tax-free interest.
Aldermore 2 Year Fixed Rate Bond
Account TypeOpen WithInterest Rate (AER)Protection SchemeOpen Account
Fixed Bond£1,000.002% fixed
for 2 years
on £1,000+
FSCSOnline, Phone & Post
Halifax 3 Year ISA Saver Fixed
Account TypeOpen WithInterest Rate (AER)Protection SchemeOpen Account
Cash ISA£500.002.00% fixed
for 3 years
on £500+
FSCSOnline, Branch & Phone
No withdrawals allowed except on early closure subject to the loss of 270 days tax-free interest.
Halifax Fixed Online Saver - 5 Year Term
Account TypeOpen WithInterest Rate (AER)Protection SchemeOpen Account
Fixed Bond£500.002.00% fixed
for 5 years
on £500+
FSCSOnline
No withdrawals allowed except on early closure subject to the loss of 365 days gross interest.
Aldermore 2 Year Fixed Rate Cash ISA
Account TypeOpen WithInterest Rate (AER)Protection SchemeOpen Account
Cash ISA£1,000.002% fixed
for 2 years
on £1,000+
FSCSOnline, Phone & Post

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How To Compare Interest Rates on Savings Accounts

by Sally_Darby, 16 Apr 2009

We discuss what you need to consider when comparing interest rates for your savings.

Hand Dropping Coins In Piggy Bank

When choosing a savings account for your money it is often tempting to base your decision on headline interest rates alone. These are the main figures advertised in order to get your attention and reel you in, but in reality they only offer a snapshot of what the account will do for your savings.

In the long run you will get a better return on your savings by being aware of the bigger picture behind the best interest rates on savings accounts advertised. Therefore it is important to consider several other factors when finding the right home for your money. We explain what you need to know.

Fixed vs. Variable rate

One of the first things to look at is whether or not the savings account operates on a fixed or variable interest rate.

Fixed rate

A fixed rate means that the rate of interest on your money will stay the same for a specific amount of time. Therefore, regardless of the fluctuations in the base rate or other changes in the market, your money will benefit from the same saving accounts interest rates.

It may be worthwhile keeping your money in a fixed rate account because it won’t be affected by any external changes in the market. However, most fixed rate savings accounts do not allow withdrawals during the fixed rate term, and so you will have to be prepared to lock your money away without access for a period of several months or more.

Variable rate

A variable rate means that the interest paid on your money can go up and down during the account term. It may be affected by factors such as a change in the base rate; or, it can be changed at your account provider’s discretion.

These types of accounts can be suitable for both lump sums and regular savings, although you should make sure to check the account’s terms and conditions to ascertain whether or not a set amount has to be paid in each month.

You will usually have better access to your money with variable rate accounts, as they are less likely to have withdrawal penalties, but always check the terms and conditions.

Rate guarantees

Some savings accounts will offer a guaranteed rate of interest on your money for a specified period of time. Generally these rate guarantees will be linked to the Bank of England base rate, and can be worthwhile looking into as it will give you some peace of mind that your high interest saving accounts will stay as such for a while, especially in a particularly volatile market.

For example, a bank may promise that the rate of interest paid on your savings account will not dip below the base rate for at least a year, or that the interest paid will remain a certain percentage above the base rate for a specified period of time.

This can be very beneficial because you can rest assured that even in the worst economic circumstances, your rate of interest will keep its head above a plummeting base rate - for a few years at least (after which you can always move your money to a new home).

That said, with the Base Rate particularly low, you'll need to make sure that your savings are equalling if not beating the rate of inflation so that your money doesn't de-value over time.

Bonuses

Savings account providers often offer bonuses as an incentive for opening an account with them. These bonuses typically come in the form of extremely competitive rates, but are temporary.

They will benefit your money for a pre-specified amount of time, perhaps the first six months to a year upon opening the account, after which the interest rate will return to a normal (often below average) rate.

Some good introductory bonuses can be tempting, but read the terms and conditions of the account closely to find out what your interest rate will be like after the bonus period has ended. If you are prepared to switch your money to a new account after the bonus period, they can offer a good (if short-term) return on your money.

However if you would rather find a more permanent home for your money, it is definitely worth looking at what the account offers beyond the bonus rate when you carry out your savings account comparison.

Rate tiers

The amount of interest your money will generate can sometimes depend on how much money you have in your savings account. This is usually shown in the form of tiers – for example, if you deposit between £1 and £9,999 you might get a 0.25% interest rate, and if you put away more than £10,000 you’d benefit from a 1% interest rate.

Some accounts only pay the best saving account rates on savings above or below a certain amount, and if your balance drops below this, so will your interest rate, potentially turning a top 10 savings accounts to one that is near worthless.

Therefore it is worthwhile taking into account how much you intend to save, what tier that amount will fall into, and consequently how much interest you will be paid. Check the account’s terms and conditions when you compare saving account features to see if rate tiers are applied and get a detailed picture of this before you decide on a place for your savings.

Withdrawal penalties

It’s worth being aware that some of the best rate savings accounts will have penalties in place if you withdraw money during the specified account term. These penalties can be in the form of a drop in your interest rate, or even halting interest altogether.

If you don’t require access to your savings, withdrawal penalties won’t affect you – or they can act as a deterrent to remind you not to touch your savings for the agreed period. Either way this can be beneficial as you can often get the best savings account interest rates on accounts where withdrawals are limited.

However, if you anticipate that you will need access to your money, make sure to look around for an account that allows penalty-free withdrawals or you could lose out.

Taxed interest

Interest rates on savings accounts are often quoted without tax, but if you are a taxpayer, any interest paid will be automatically taxed.

  • Basic rate taxpayers: 20% of interest earned is taxed.
  • Higher rate taxpayers: 40% of interest earned is taxed.

If you are not a taxpayer, you can claim for your interest to be paid tax-free by filling in an R85 form. Note that unless you make a claim for tax-free interest, it will continue to be deducted automatically.

Remember that by opening a cash ISA you can save up to the current year's Cash ISA allowance tax-free, however much tax you usually pay. Therefore it is always prudent to take advantage of this tax-free allowance before opening taxed savings accounts in order to secure the best savings accounts interest rates.

AER, Gross, and Net rates

The rate of interest advertised for a savings account will either be the AER (Annual Equivalent Rate), a gross rate, or a net rate. You will usually see an AER percentage advertised as the headline rate of interest on your savings.

The AER is a notional rate, which illustrates what the return on your money would be if interest was paid, and added to the account annually. The gross rate simply shows how much interest would be earned before deducting tax, whereas the net rate shows how much you would be getting after tax.

AERs will give you a general idea of what interest rate your savings would be getting over the year, and the net rate will be a good indicator of how much you can expect to earn after tax. It’s important to be aware of which of these three different interest rates you are being quoted when looking at the best rates for savings accounts.

As ever, it’s vital to do your research when comparing the different savings accounts out there. When you compare savings accounts in UK make sure to take all of the above factors into account, not just the headline rate. That way you will be able to choose the account that offers the best return for your individual circumstances.

Remember to keep an eye on the interest rate you are getting and move your money if necessary when rates drop. By doing so you’ll be able to make your savings work as hard as possible by ensuring they are always housed in the best interest savings accounts available.

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