Savings rates are steadily improving, but you'll still need to be savvy if you want to make sure your cash earns a decent rate.
According to data from financial website Moneyfacts, the average rate on easy-access savings accounts increased by 0.34% over the last month, while one-year fixed rate bonds edged up 0.18%.
Unfortunately, as welcome as these rate rises are, none can match the current rate of inflation, which stands at 2.9%.
So, where should you put your cash? Before we reveal the top deals, it's worth flagging up two vital developments that should change the way you think about earning interest on your money.
A new savings landscape
The first is the Personal Savings Allowance (PSA).
Launched in April 2016, the PSA allows basic rate taxpayers to earn up to £1,000 and higher rate taxpayers to earn up to £500 in savings interest tax-free. Additional rate taxpayers do not have a PSA.
This means instant access, notice and fixed-rate bonds are now far more lucrative as providers will stop taxing savings interest at source.
The second change is the dramatic rise of current accounts as a viable home for your savings.
While banks have traditionally offered terrible rates of interest on in-credit current account balances (and many still do!), some are luring new customers by offering rates that comfortably beat the best buy savings accounts.
And, as they’re also included in the PSA, you get the same tax benefits to boot.
Let's look at all of these and more to see what rates you can get and where the best place to put your cash is.
As we’ve already mentioned, some current accounts offer inflation-beating rates. The downside is they have pretty miserly deposit limits, and increasingly require you to jump through a few hoops to qualify for the headline rate.
So, let's take a look at the best.
Nationwide’s FlexDirect account pays 5% interest on balances up to £2,500 for the first 12 months. The only condition is you need to pay in at least £1,000 a month.
TSB's Classic Plus account pays 3% on balances of up to £1,500, provided you credit the account with £500 a month.
The Tesco Bank Current Account also pays 3%, but this applies to balances of up to £3,000. To qualify, you'll need to pay in at least £750 a month and have at least three direct debits (not including Tesco Bank savings accounts).
Bank of Scotland's Classic Account with Vantage pays 2% on balances between £1 and £5,000 if you pay in £1,000 a month and have two direct debits set up.
Lloyds Bank is offering the Club Lloyds account, which pays 2% on balances between £1 and £5,000, as long as you credit the account with £1,500 a month and set up two direct debits from it.
If you don't want to spread your money around, Santander's 123 account pays 1.5% on balances of up to £20,000. You need to pay in £500 a month and set up at least two direct debits.
There's also a £5 a month fee on the account but you can earn cashback on some of your direct debits for household bills, which can help cover that.
Now let's look at how traditional savings accounts fare. As we noted at the top, none of these can currently beat inflation, but they do allow you to deposit far larger sums than current accounts.
Instant access savings accounts
The top rate of interest on an easy access account is currently 1.3% which you can get from RCI Bank. You only need £100 to open an account.
If you give up access to your cash for 95 days you can get a rate of 1.52% from Milestone Savings, but you’ll need a sizeable £1,000 to open it.
While the PSA has effectively made all savings accounts tax-free, you should still consider using your tax-free ISA allowance (currently £20,000 for 2017/18).
That’s because any money you put into an ISA will stay tax-free long term, even if the interest you earn grows. With the PSA, any interest you earn beyond the £1,000/£500 limit is taxed at your marginal rate.
The best rate on an easy access ISA is available with Post Office Money It’s paying 1.07% on deposits from £100. You’ll need to keep an eye on this account though, as the rate is boosted by a 0.82% bonus which will fall away after 12 months.
Savers are normally only allowed to open one Cash ISA account per tax year, which means having to choose between the flexibility of an easy access deal and a better rate by locking into a fixed-rate deal.
If you don’t mind waiting for a little while before withdrawing your cash, you can opt for a 95-Day notice account from Charter Savings Bank which pays 1.3%. There’s a minimum deposit of £1,000 to open the account.
Over one year the best deal can be found with Yorkshire or Clydesdale Bank which both offer a rate of 1.5% until 31 January 2019. However, you’ll need a substantial £2,000 to open an account.
The best Cash ISA over two years is from Al Rayan, offering an expected profit rate of 1.70% on balances from £1,000.
If you fancy fixing for three years, Yorkshire Bank and Clydesdale Bank have a bond fixed until 29 January 2021 that pays a top rate of 2.2% on balances from £2,000.
Coventry Building Society has stormed to the top of the five-year best buy tables, paying a rate of 2.15% until 30 November 2022. You'll need to put in at least £1.
The Bank of London and the Middle East (BLME) is the best option for savers looking to lock their money away for one year, paying 2.00%, but it has a high minimum deposit of £25,000.
The best two-year rate of 2.22% on deposits starting at £1,000 from Al Rayan Bank. It dominates the three-year tables as well, with a rate of 2.32%. Again, you'll need a £1,000 deposit.
As for over five years, if you’re prepared to lock away at least £25,000 look to Bank of London and the Middle East (BLME) which gives you a rate of 2.50%. Alternatively, for smaller deposits, Paragon offers a rate of 2.45% on investments from £1,000.
Bank of London and the Middle East (BLME) rules the roost for seven-year deals as well, with a 2.55% rate again with a mighty minimum deposit of £25,000. It's a heck of a long time to lock your money away, so make sure you can live without it for that long!
If you want to deposit a more reasonable sum of cash, you can plump for PCF Bank which has a 2.40% rate on its seven-year bond, but you’ll need to put in at least £1,000.