Savers can now receive 6 per cent interest if they lock away their money for one year – a rate not seen since 2008.
Charter Savings Bank has launched a one-year, fixed-rate deal that means those with £10,000 in the account will earn £600 in interest over a year. The savings provider also launched a two-year deal paying 6.1 per cent.
Savings rates have been rising at a relentless pace in recent weeks, with providers clambering over one another to seize the top spot on best-buy lists and entice savers.
Boost: Savings rates have been rising at a relentless pace in recent weeks
Challenger bank SmartSave upped its one-year, fixed rate 14 times last month alone as it bid to be the market leader. However, Anna Bowes, co-founder of rates scrutineer Savings Champion, believes rates on fixed-rate deals may be nearing their peak.
‘Savers could consider locking up some of their cash for a bit longer at the rates that are currently available, as in a year’s time they could be lower,’ she says.
However, as rates rise, savers are at an increasing risk of being hit with a tax bill on their interest.
That is because the personal savings allowance allows basic rate taxpayers to earn only £1,000 interest tax-free each year, while higher rate taxpayers only get a £500 allowance, and additional rate taxpayers get no allowance at all.
A basic rate taxpayer would breach their allowance with more than £16,667 in the best-buy Charter Savings Bank account. An additional rate taxpayer would breach it with more than £8,333.
Big savers can opt for a cash Individual Savings Account (Isa) in which all interest earned is tax-free. The most competitive one-year fixed-rate Isa is again offered by Charter Savings Bank. It pays 5.2 per cent.
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