Martin: 'Savings in crisis. Rate-after-rate cut - Marcus, NS&I, Saga, Santander & more. Take action NOW or savings'll become losings'

It's been the week of 1,000 rate cuts. It seems no one wants to be the best buy. Top deals have toppled like dominoes. I warned here, at the start of the year, that I suspected 2020 would be a savus horribilis, and so it's proving.

The prime cause is the interest-rate environment - we recently narrowly avoided a UK base rate cut, but savings rates focus more on the overall outlook, both in the UK and the world, and that remains depressed. On top of that the big banks need to raise less cash from savers (as they're no longer allowed to pump extra money into their investment arms) which has reduced competitive pressures.

All this paints a gloomy picture, with MOST PEOPLE'S SAVINGS EARNING JUST 0.4% on average. As inflation is at 1.8%, that means most savings are losings - as in real terms your nest egg is shrinking. And while it's not always possible to beat inflation, the more you earn, the less is eaten away.

The days of money happily languishing in one account for years are long gone. You need to become an active, aggressive (but polite) saver, monitoring accounts and ditching and switching when rates become pants. My Ask Martin BBC Radio 5 Live podcast has the big picture, and product details are below... 

• YOU SHOULDN'T HAVE A PENNY PAYING UNDER 1.3%. Check now. If you're earning less, take action. I've benchmarked this rate, as it's what the top easy-access accounts pay - which let you add and withdraw money whenever you want. In fact you should store cash here, even while you work out if you can earn more elsewhere.
  
  - Top easy-access accounts - 1.3% (min £1). Marcus* & Saga* pay 1.3% AER variable. I'd hedge for Marcus, as since it launched in Sep 2018 it's always been or been close to the best buy for new & existing customers. Saga includes a year-long bonus (0.2%) meaning while you get a touch of rate certainty for a year, it's certain to drop after that.
  
  - 1.31% but withdrawals limited to two per calendar year. Virgin Money pays 1.31% AER variable but caps withdrawals. Still, if you just want an account to store untouched cash it wins.
  
  - 1.65% if you can wait for your cash. Moneybox pays 1.65% AER variable, but you need to give 95 days' notice to withdraw.
   
  Now read on to see if you can earn even more. You can have lots of different accounts, so put every penny where it earns most...
   
• Can you lock cash away? Earn 1.8% fixed for two years. For money you're willing to lock away without access, open a fix (also known as a savings bond). And unlike easy-access accounts, here the rates are locked in. Full options in top fixes, but in brief:
  
  - Top 1yr fixes: App-based Atom Bank, min £50, pays 1.65% AER.  Ford Money (yes, the carmaker's bank), min £500, 1.55%.
  
  - Top 2yr fixes: Atom Bank pays 1.8% AER (min £50) and Access Bank UK 1.7% (min £5,000).
  
  - Ends Sat. Save £5,000+ and get £10-£200 cashback. The Raisin  online platform lets you open accounts from a range of providers within it, making switches between them easy. Until Sat, newbies saving £5,000+ can get boosted cashback - add that in and it can beat the best buys, especially for fixes. Full info and analysis in Raisin cashback.
  
  - Is this a good time to fix? It's a tough call. Fixed rates keep dropping. So it seems perverse to suggest locking in at lower rates. Yet we don't live in a boomerang world - there's no 'rates must rise after dropping' rule.
  
  For larger sums, fixes pay higher rates and give certainty. So the more you value certainty and the easy life of being able to put money away and leave it, the more you should fix. Then, and if rates do move after, as Oasis wisely said (I believe inspired by interest rates) don't look back in anger. Though in such uncertain times, I'd hedge towards shorter 1-2yr fixes.

• Do you pay tax on savings interest? Top 1.3% cash ISAs. Most people (95%) don't pay tax on savings, as the personal savings allowance lets all basic 20% rate taxpayers earn up to £1,000 interest a year tax-free (higher 40% taxpayers, £500/yr).
  
  If you do pay tax on savings interest, cash ISAs come into their own. These are just tax-free savings accounts you can put up to £20,000/yr in. The interest earned doesn't count towards your personal savings allowance.
  
  Unusually, at the moment the top easy-access ISAs pay similar to normal savings - usually they're less. So anyone can consider 'em.
  
  - Top easy-access cash ISAs. Leeds BS (min £1,000) pays 1.3% AER variable. Virgin Money pays 1.31% (min £1) but only lets you take money out twice per calendar year.
  
  - Top fixed-rate cash ISAs. The rates here are much worse than normal fixes, so these are only worth it for savings you pay tax on. OakNorth Bank is the top fixed cash ISA at 1.41% AER for 1yr, and 1.51% for two. Full info in Top Cash ISAs.
   
• Already got cash ISAs? Transfer them to up the rate. If you earn less than the rates above, at the least, open one of these new accounts and ask it to transfer your money in. See ISA transfer help.

• Save monthly? Earn 2.5%+ on £800+/mth. Regular saver accounts are designed for you to put money aside each month, rather than lump sums. They pay higher interest, as the amounts are smaller, and the time is limited. Yet there's nowt stopping you combining two or three, then you can easily save £800/mth or more.
  
  - Earn 2.5% in the top 'open-to-all' regular saver. Coventry BS pays 2.5% AER variable for 12mths and lets you save up to £500/mth. You can miss monthly payments, but you lose some interest if you withdraw early. If you want to save more, Principality BS pays 2%.
  
  - Bank with First Direct, M&S or HSBC? All have linked regular savers paying 2.75% fixed for a year, allowing most to pay in roughly £25 to £250 each month. A couple of these banks also pay free cash to switchers, so it can be lucrative. See Best Bank Accounts.
   
• Low income? Get a 50% savings boost. For those who qualify, Help to Save is unbeatable - it can add 50% on top of savings.
   
• Saving for a first home? Get free £1,000s from the state. If you're aged 18 to 39, open a top Lifetime ISA, which gives a 25% boost on up to £4,000 saved a year (so a max £1,000/yr boost).
   
• NatWest/RBS current account customer? Earn 1.5% 'easy-access'. The Savings Builder account allows unlimited withdrawals and pays 1.5% AER variable up to £10,000, but if you don't increase the balance by £50/mth you don't get interest that month. If worked right it can be lucrative.
   
• Peer-to-peer advertises up to 6.5%, but it ISN'T saving. Lending firms such as Ratesetter, Funding Circle and Zopa advertise eye-catching returns of up to 6.5%. Yet you could lose your money as there's no protection. Make sure you understand peer-to-peer risks.
   
• See savings paying 4% or more? Barring those mentioned above, there's almost certainly something off - it may be they're disguised investments (ie, there's risk), just plain dodgy, or they don't have the savings safety protection - so be very careful.
   
• Should you invest instead? With savings your cash is protected; with investing you hope that it grows quicker, but at the risk of losing some or all of your money. Many wrongly draw the conclusion that as I don't talk about investing, I'm against it.  
  
  That's not true, investing can be great, I do it myself - yet it's not my or MSE's expertise, and it's a regulated subject. So it's a case of 'we don't cover it', not 'we're against it'. See Is investing right for me?