Savers can get interest rates as high as 6 per cent – but they will have to opt for a bank they have probably never heard of.
While high street banks are painfully slow to pass on Bank of England base rate rises to savers, a fleet of challenger banks and small building societies are dominating the best-buy tables.
Shawbrook Bank and Saffron Building Society offer the best easy-access accounts, at 4.63 and 4.60 per cent respectively. By comparison, Barclays, Halifax, Lloyds and Santander pay just 1 per cent on some accounts of this type.
Atom Bank, Ford Money and United Trust Bank have the best two-year fixed-rate deals, paying 6.05 per cent, while Atom Bank also offers 6.05 per cent to those who fix for one year.
Savvy saver: Little-known challenger banks can pay huge rewards, but it can be hard to knowif they are worthy of your trust
Little-known challenger banks can pay huge rewards, but it can be hard to know whether you can trust them. As a result, millions of wary savers accept poorer rates from banks they already know. So use our checklist to ensure your money will be in safe hands.
SEEK FSCS PROTECTION
Before moving your money, make sure it is covered by the Financial Services Compensation Scheme (FSCS). This protects savings up to £85,000 – or £170,000 in joint accounts – in the event a financial firm goes under.
So long as your bank has FSCS protection, it is as secure as any better-established bank. All of the savings providers listed below have FSCS protection.
The compensation limit covers savings with any one financial institution, so if you already have money with the same group, it counts towards the total.
If the FSCS has to step in, it promises to pay compensation within seven days. However, complex cases may take months. To check if a bank is FSCS-backed, look for its name on the register online.
Rest assured, savings providers have to pass lots of stringent checks to prove they are worthy of a banking licence and to be authorised by the Financial Conduct Authority and Prudential Regulation Authority.
TEST OUT SERVICE
Customer service varies among challenger banks – just as it does with high street ones.
If you prefer to contact your bank by telephone, give them a quick call before you sign up. That should give you an indication of how easy they are to get through to and how helpful they are. Check whether the number is free to call.
CHECK ACCESS RULES
If you might need to access money in a hurry, find out how fast it is paid into a nominated account. This can vary from bank to bank – some say it takes no more than two hours on an easy-access account, others say it’s a next-day service.
Remember that if you open a fixed-rate savings account, you will not be able to access it before the end of the term, except in very exceptional circumstances.
LOOK FOR ‘EXPECTED PROFIT’
Some of the top rates are offered by Islamic banks, such as Al Rayan and Gatehouse.
They pay ‘expected profit’ to savers rather than interest, in order to be Sharia compliant. The rates are not guaranteed, but no UK Islamic savings firm has ever failed to pay out an advertised savings rate. Both banks are FSCS protected.
READ THE ROOM
Reviews are a good way to get a sense of fellow customers’ experiences. Check reviews on ratings services Google, Trustpilot and Feefo.
Be aware that you may get a distorted picture of what a bank is like because people are far more likely to take the time to write a review if they have had a negative experience than a good one.
By the same token, remember that some sites allow firms to pay to remove bad reviews. Nonetheless it can be a handy gauge of whether there are recurring issues.
BEWARE SCAMMERS
Tricksters target savers by posing as a trustworthy bank or building society – and they are taking advantage of the interest in the latest, higher rates to catch out more people.
Look at trusted best-buy tables to become familiar with the types of rates on offer by FSCS-backed and regulated banks.
This will give a sense of when a rate is too good to be true. Never click through adverts for banks or building societies that you see on social media as these could send you through to fake copycat websites. You should not receive cold calls from legitimate banks so if you are contacted out of the blue, hang up.
Criminals sometimes use the names of legitimate firms to trick victims. The City regulator, the Financial Conduct Authority, has a register of firms that have had their identities used by fraudsters.
You can check this – and warnings of other firms the FCA believes are operating without permission – on the FCA website.
