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Martin's Savings Masterclass
STOP THE SAVINGS RIP-OFF
Many still get less than a paltry 1% interest, yet top rates near 5%. Check today, then ditch & switch

The UK base rate has been rising since last December. And while big banks push variable mortgage rates up quicker than Bradley Wiggins in the Tour de France, their savings rates are more like gym bikes - going nowhere no matter what you do.

On Thursday the Bank of England is predicted to put UK rates up again, from the current 2.25% to 3%. So the huge numbers with savings (£190bn extra was built up during the pandemic) should take stock now, check what you're being paid, and ensure you get the top savings rates.

Yet as the graph shows, with inflation now over a stomach-churning 10%, bluntly, in real terms all savings are losings, as your money's purchasing power is eroding. But that makes it even more pressing to maximise every penny of savings interest, to mitigate the impact.

As William emailed us: "Our savings were earning 0.75%, we changed them to an annual fixed rate of 3.2%, which will earn us an extra £1,028 when the 12 months expire. Thank you."

All savings listed below have the full £85,000 UK savings safety protection.

Easy-access savings are the simplest form of savings, where you can put money in and take it out when you want. The rates here are all AER variable, which means they can change, so do monitor them.

- Pros: Flexibility. You've access to your cash whenever it's needed, and can ditch at speed if the rate's no longer competitive. Plus with UK rates likely to rise further, some top accounts increase their rates soon after the announcement.

- Cons: They pay less than top fixes. And as the chart above shows, the gap is currently large. So they'd need to rise a lot to catch up.

Is it worth fixing when UK rates are likely to rise? Like with fixed mortgages, fixed savings rates tend to move more with government gilt rates than the UK base rate (oversimplifying, gilt rates sort-of factor in future rate rises), so some, though not all, of the immediate future rises may be baked in.
Though with a rate rise coming, you may want to wait a week or so to see if things tweak up. Yet be aware this is a moving feast and constant delay just means the lost opportunity of earning far more in a fix now compared to easy access.
And certainly if you've got money languishing in very poorly paying accounts, and don't normally focus on this, action is definitely the best course.
I've mainly listed shorter fixes, as while top three- and five-year fixes pay up to 5.05%, for me that doesn't feel enough of a premium to lock in for longer in a rising rate environment. You may disagree though.

The top cash ISA rates are up. Good news for the millions with money in these tax-free savings accounts, who should therefore transfer their often poorly paying cash ISAs to higher payers. Yet is an ISA right for you?
The big question - do you pay tax on your savings interest? The personal savings allowance (PSA) launched in 2016, meaning you get a tax-free amount of interest you can earn in ANY savings...
- Basic (20%) taxpayers can get £1,000/year of interest tax-free
- Higher (40%) taxpayers, £500/year of interest tax-free
- Top (45%) taxpayers don't get a PSA
Remember, that's the amount of INTEREST you can earn - so you need a lot of savings to generate it. For years, with low savings rates, few have paid tax on savings interest. At one point, you needed over £200,000 in top easy-access savings to generate it. But now rates are rising...

Already have cash ISAs? Transfer to a top payer. If your existing cash ISA earns less, most of the above allow you to transfer them in. To do this, just apply for a new cash ISA and as part of the application, you'll be asked if you want to transfer your existing cash ISA over (don't just withdraw cash to move it, then it loses its 'cash ISA' status).

Got a cash ISA but don't pay tax on savings? Many should ditch 'em. If you don't and won't pay tax on savings interest, just move to the highest interest rate possible, which is in normal savings (you can just withdraw your money from the cash ISA, unless it's a fix). There are a couple of exceptions...

- If you're close to paying tax on savings. If you're near the PSA limit, as interest rates are likely to keep rising, keeping money in cash ISAs now can protect you from future tax.
- If you want a fix that you can withdraw money from early. Cash ISA rules mean you must be allowed to withdraw money, though they can charge big interest penalties for doing so (90 to 180 days' interest).

Premium Bonds are savings, where the interest each person earns is decided by a lottery. The October prize rate went up to 2.2%, meaning for every £100 in there, £2.20 is paid out.

This is a tenth less than the top easy-access rates, and is far below fixed rates (and as most put money in Premium Bonds for the longer term, arguably that can be a fair comparison).

But in practice it's more complex. Our Premium Bond Prize Predictor shows what you're likely to earn for each amount, but for a rough picture, as this small chart shows, unless you've a decent whack in Premium Bonds, with typical luck you're likely to win far less than the prize rate.

Even with the full £50,000 you're likely to win £1,000/year (which is 2%).

3. Are you a wannabe first-time buyer aged 18 to 39? There's a whopping 25% bonus possible via top Lifetime ISAs. It worked for Bradley, who emailed: "Your insightful information on Lifetime ISAs really helped me to afford my deposit. Within 3 tax years, I've maxed out the deposit limit of £4,000/year and received the £1,000 bonuses, in total saving £15,000."
4. Save regularly each month? Earn 5% in top regular savings.
5. With inflation high and savings relatively low, should you invest? With investing, you aim for higher returns, but accept the risk you could lose some or all of your initial investment. I don't talk about it, not because I'm against it, just because it's not my expertise.
For many, over the longer run, investing is the right call. For an introduction, see Stocks & shares ISAs, but you'll need more specialised websites for help on what to invest in.