COMMENT
Top-Paying Savings Accounts!

By Alison Hunt (TMFAlly)
August 26, 2005

The Bank of England's decision to drop the base rate by a quarter of a percentage point may have been good news for borrowers, but the same can hardly be said for savers. Savings account interest rates were hardly massive to begin with and many providers have slashed their savings rates by even more than the amount of the base rate cut. For this reason we need to ensure we stay on our toes and be ready to move our cash to a provider paying a decent rate of interest, should our savings rate fall too far.

Interest rates are important to savers, simply because so many of us have relatively large amounts of cash in the bank. An emergency fund alone for a couple should be made up between three and twelve months' income; this means many of us will have thousands of pounds sitting in instant access accounts and a dwindling interest rate means that cash isn't working as hard as it should.

Savings of £10,000 in a savings account paying 3%, for example, will earn a basic rate taxpayer £240 each year, and a higher rate taxpayer just £180, after tax. Move that cash to an account paying 5%, however, and the basic rate taxpayer will earn an extra £160 (a total of £400) with the higher rate taxpayer earning an extra £120 (£300 in total). Not to be sniffed at!

Of course, the best place for a taxpayer to stash their cash is in a mini-cash ISA as we benefit from not paying any tax on our savings - and the rates can be a little higher too. However, there are many reasons why you may not be able to follow this route. You may, for example, already have used up your £3,000, 2005/6 allowance and have more money to be saved. Or you may have chosen to invest into a maxi shares ISA and so be unable to open a mini ISA too. Whatever your reason, it's often useful to have an instant access savings account allowing easy access to your money.

So if you're in need of an account paying a better rate of interest, here are some of the best savings accounts on the market at the moment:

Best Instant Access Savings Accounts

Provider	Account	Min. deposit	Rate/AER	Conditions
ICICI Bank Apply via the Fool	HiSAVE	£1+	5.40%	Rate guaranteed to be 0.25% above Base rate until 31/12/07
AA	Internet Savings 2	£1-£5m	5.11%	Includes 0.5% bonus for 12 months
AA	Telephone Savings 3	£1-£5m	5.06%	Includes 0.5% bonus for 12 months
First Direct Apply via the Fool	e-Savings	£1-£500k	5.00%	No interest paid in any month a withdrawal is made
Yorkshire BS	Internet Saver	£1-£1m	5.00%	Rate guaranteed to be no less than Base rate until 28/2/07

As you can see, all of the accounts in the table pay 5%+ AER, with the top account paying a whopping 5.4%. Compare these to the rate you're currently being paid; if it's too much lower you should consider moving your cash. After all, we should all ensure that every hard earned pound is working as hard as possible. Letting apathy rule means that we could lose a whole load of interest, each year.

So go on, check out the rate you're being paid and if it's too measly, move your cash to one of these best buys!

You can apply for a number of top paying savings accounts in our Savings Centre.