The best homes for your savings

Savers now have more protection than ever before, giving greater peace of mind during these turbulent times.

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New rules mean that the Financial Services Compensation Scheme (FSCS) now protects the first £85,000 held with any one banking licence. Read our article ‘Q&A: Changes to the Financial Services Compensation Scheme’ for the details.

If you’re saving more than that, you need to split the cash up and not just between different banks but between different bank licences. With so many banks owning more than one brand, that can be hard to keep track of, so read our article ‘Who owns who’ to see where it’s safe to save.

Now that you can keep more of your money in the top savings accounts, it’s vital to review your savings to ensure they are earning as much interest as possible.

Here, we take a look at the best savings accounts for your cash.

The best easy access accounts

It makes sense for everyone to keep a rainy day fund they can get at in a hurry, in case of emergencies, so an easy access account is a good place to start.

The market-leading deal is the Post Office’s Online Saver, paying 2.90%. As the name suggests, this is an internet-only account, so you can’t go into a branch to manage it.

You also need to consider moving your money after the first 12 months as the rate is boosted by a 1.23% bonus, so the amount of interest you’ll earn will fall quite sharply after that.

There are a few other accounts paying similarly competitive easy access rates, although the best deals are all web-based accounts.

The Nationwide MySave Online Plus pays 2.78% on a minimum investment of £1,000.

Meanwhile, the Santander eSaver Issue 2 pays 2.75%, but you only need a minimum investment of £1. This account can be managed either online or through a cash machine, so it’s also more flexible for savers.

Both those deals have 12 month bonuses, so watch the rate and be ready to switch.

The best regular savers

If you want to take a disciplined approach to your saving and want to save every month, then you may want to consider a regular savings account. This type of account pays a higher rate of interest in return for you making a guaranteed deposit each month, usually of between £10 and £250.

For example, HSBC pays an unbelievable 10.00% for 12 months on its Regular Saver Account (Preferential Rate), while First Direct offers 8.00% on its Regular Saver. You must agree to not touch the money during that time. You have to have a First Direct current account to apply for its top account and you must be an HSBC Premier, Advance, Graduate Advance or Passport customer to get access to the 10.00% rate. Otherwise you'll only qualify for the, still competitive, Regular Saver Account paying 5.00%.

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The First Direct account requires you to pay in between £25 and £300 a month, while the HSBC offering needs a monthly deposit of between £25 and £250.

Meanwhile, the Chorley Building Society’s Summertime Saver account pays a healthy 4.04% until the end of May 2011, but you can’t withdraw any money until then. To qualify for this account, you’ll need to make monthly deposits of between £1 and £150.

Principality Building Society, HSBC, Norwich & Peterborough and Saffron Building Society all pay 4.00%, far above the average easy access account rate.

The Principality deal is especially good if you want more flexibility over the amount you deposit each month, as you can pay in anything between £20 and £500.

The best fixed rate bonds

Not everyone is comfortable saving into a long-term fixed rate bond, as there’s a risk interest rates will rise and they will be left trapped in an uncompetitive account.

But some people will be attracted by the high rates available on the longer deals, like Coventry Building Society’s 5 year fixed rate bond, paying a market-leading 4.75% on a minimum balance of £1.

Then there’s the AA’s 5 Year Fixed Rate Savings account or the State Bank of India’s Hi Return Fixed Deposit.

These both pay an impressive 4.50% but if you pick one of these accounts, you cannot access your money for a full five years without sacrificing a hefty chunk of the interest.

If you’d rather fix for a shorter period, then the Post Office’s Growth Bond Issue 13A pays 3.65% for two years on a minimum investment of £500.

The best cash ISAs

If you haven’t used your ISA allowance for the year then you can save £5,100 into a cash account and the returns are tax-free.

The best easy access ISA is Halifax’s Cash ISA Direct Reward, paying 3.00%, although you have to have a Halifax current account to qualify. This account accepts transfers and has a minimum balance of £1. The rate falls dramatically after 12 months, though, so be ready to move.

Santander’s Flexible ISA Issue 3 is an easy access account paying 2.85%. You can only save this year’s ISA funds, though; there’s no transferring in cash from previous years.

Be aware, however, that this account’s market-leading rate is boosted by a 2.35% bonus, so you’ll need to switch your savings when this ends.

Top of the charts for a four-year fixed rate ISA is the Fixed Rate ISA Saver account, available from Halifax or Bank of Scotland, paying 4.25%. You can’t touch your money during the term and there’s a minimum investment of £500, but it does accept transfers from previous ISA savings.

Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.

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