THE MONEY FILE: Top tips for savings deals

South Wales Argus: 42-16212590 (3754071) 42-16212590 (3754071)

Far too many people think “savings rates are so low, why bother doing anything?” Yet, while rates are indeed spitworthily low, don’t be complacent. Active, on-the-ball savers can grab up to six per cent interest. So I want to give you a rate-boosting masterclass.

The aim’s to put every penny where it earns the max interest. Many specialist higher-rate accounts only let you pay in limited amounts for short amounts of time. So if you’ve big savings, you need to fill them up, then snowball on to the next best, and so on.

Don’t overly worry about safety. All UK-regulated savings (which all the accounts below are) have the full £85,000 per person, per financial institution savings safety protection.

Yet that’s not a reason to just put money in and forget about it. Monitor rates every few months and if they drop, ditch and switch.

l First, clear expensive debts.

The highest guaranteed return for savings comes from clearing expensive debts, starting with the highest rates. If your debts cost more than your savings earn after tax, clear what you can and you’re onto a winner.

This applies to mortgages too, unless you’ve early repayment penalties. Though with a mortgage, always have a cash emergency fund in savings before clearing it.

l Earn six per cent AER in a regular saver, PLUS free £100.

The highest rate on the market is a regular savings account, but it’s only available to new or existing Firstdirect.com current account customers. Though as First Direct’s won every customer service poll I’ve ever done and currently offers £100 to switch to it, that’s still an attractive proposition.

Its six per cent regular saver lets you put up to £300 a month away for a year and the rate’s fixed. HSBC.co.uk customers get 4 per cent AER on a similar product, while anyone can get the leedsbuildingsociety.co.uk regular saver at 3.05 per cent AER. Full info and more best buys at mse.me/regularsaver

l Use current accounts to get five per cent AER easy access.

I always used to say “never store cash in current accounts, as you earn nothing”. While that still holds true in the main, bizarrely, these days a few bank accounts offer super-high interest rates to draw you in.

The highest is Nationwide’s FlexDirect (nationwide.co.uk/flexdirect) at five per cent AER, but you only get this rate for a year, and only on balances up to £2,500. The stand-out deal’s Santander 123’s (santander.com) three per cent AER on all savings if you’ve £3k-£20k. It has a £2/month fee, but pays up to three per cent cashback on bills. Weigh up if you’ll earn more than the fee before switching.

With both, you need to properly switch to them. Full info, pros and cons at mse.me/bankaccounts

l Is an Isa nicer? Up to 1.75 per cent AER tax-free.

A cash ISA’s just a savings account where the taxman doesn’t remove 20 per cent or 40 per cent of your interest. You can put £5,760 in each tax year, and it remains tax-free year after year until you withdraw it. It’s a no-brainer.

Don’t think you’re locking the cash away – the top easy access deal is from Postoffice.co.uk at 1.8 per cent AER on £100+, with two penalty-free withdrawals allowed each tax year. This allows you to transfer old Isas into it as well to boost their rates.

The rate includes a bonus for 18 months, so it’ll almost certainly plummet after. Make a note in your diary to ditch and transfer. Full best buys and ISA FAQs at mse.me/isas

l Lock in for up to 2.57 per cent AER.

If you’re prepared to lock cash away without access, you can earn more in a fix. Yet it’s worth noting many pundits predict UK rates will rise in 2015. So today’s best rates may not look so good if you lock in for too long.

These are the current top fixed deals for both normal savings and cash ISAs. They change daily – latest rates are at mse.me/fixedsavings

One-year fixed savings: United Bank 1.9 per cent (ubluk.com). One-year cash ISA fix: Britannia 1.85 per cent (britannia.co.uk)

Two-year fixed savings: United Bank 2.28 per cent (ubluk.com). Two-year cash ISA fix: Post Office 2.25 per cent (postoffice.co.uk)

Three-year fixed savings: Bank of Cyprus 2.57 per cent (bankofcyprus.co.uk). Three-year cash ISA fix: Virgin Money 2.4 per cent (virginmoney.com)

l Check your local credit union too.

Credit unions are local savings and loans co-ops. Some have deals that beat the market’s best buys, such as three per cent savings, 2.15 per cent AER one-year fixes and 2.5 per cent easy-access cash ISAs.

They’re very localised, so whether you can get these deals depends on where you live or work. Locate ones near you at findyourcreditunion.co.uk.

l 1.5 per cent AER standard easy access savings.

If you’ve any left, the final option’s a normal easy access savings account. The top payers are tescobank.com and icicibank.co.uk at 1.5 per cent AER, although Tesco’s account includes a bonus rate for the first year, so it’s likely to plummet afterwards.

If you’ve big cash, as you’re only protected up to £85,000 per institution, split the cash into different institutions.

If you’re prepared to up the risk a little, it’s worth looking at peer-to-peer savings, which can pay up to six per cent. Here your money’s lent to someone who wants to borrow it, via online financial matchmakers such as zopa.com, fundingcircle.com and ratesetter.com. This can be lucrative, but it has its risks, though the sites try to mitigate them. For full info, read mse.me/peertopeer

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