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Bank of England increases interest rates to 0.75% – how to make more of your savings

As the Bank of England announces an interest rate rise to 0.75%, we look at what this means for savers and how savers can make more of their savings.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

The Bank of England (BoE) has raised rates once again to 0.75%.

This should be good news for savers. It’s understandable to expect high street banks to pass on interest rate rises to savers. But that’s not always the case. Despite two rate changes in December and February, many high street banks are reluctant to follow suit. And some are still paying just 0.01%.

Lots of savers are facing more time stuck earning almost nothing on money held in easy access bank accounts.

So, what can you do to make more of your savings?

This article isn’t personal advice. If you’re not sure what’s right for your circumstances, seek advice.

1. Look further than your high street bank

Well-known banks usually pay the lowest rates.

Some of the large high street banks still only offer 0.01% on their easy access accounts. That’s just £1 interest on a £10,000 savings pot after a whole year.

Truth is, the big names don’t need to work as hard for your money. But smaller banks do, and they’ll offer an attractive rate to get it. You can currently get up to 50 times more from your savings across our Active Savings service compared to some high street banks.

Saving with your high street bank is often the first port of call as they’re familiar and you trust them. But all UK banks, regardless of how big they are, are covered by the Financial Services Compensation Scheme (FSCS) if they’re authorised by the Prudential Regulation Authority (PRA) and regulated by the Financial Conduct Authority (FCA) and PRA. Your eligible deposits will be protected up to £85,000 per person.

This limit applies to all money you have under each banking licence. So, if you have more than £85,000 in cash with different banks under the same licence, it could be sensible to move your savings elsewhere, to maximise your protection under the FSCS.

Are your savings safe?

2. Use fixed terms

There’s a preference to hold savings in instant or easy access accounts*. Given how uncertain things are at the moment, that’s no surprise. But you might not need all your money in the same pot and it could be holding back your returns.

You should keep at least three to six months’ worth of essential expenses in an easy access account for any emergencies. If you’re retired, that should be around one to three years’ worth. But anything over this could be put to work in a fixed-term savings account.

Fixed-term accounts pay a guaranteed rate of interest which is usually higher than instant or easy access accounts. The trade-off is that you usually can’t access your money until the term ends.

You don’t need to lock your money away for years if you don’t want to. You can usually fix from just a few months or up to five years. Generally, the longer you fix for, the better the rate.

Locking in rates can be useful when rates are falling or staying flat. But the opposite is also true – you could lose out if rates rise further in the future.

You could also think about blending fixed terms of different lengths, or open new fixed terms every month. That way you’ll always have some money coming back regularly, while boosting your overall rate.

It's worth pointing out, currently, fixed term rates don't beat inflation, so the purchasing power of your money will still be eroded over time.

*HL survey conducted by Opinium of 1,396 respondents, September 2021.

HOW TO BUILD A MIX OF SAVINGS

3. Make a change today

Doing nothing and leaving your cash savings earning little or no interest costs you money.

You might think that it’s best to keep your money where it is and wait in the hope that rates rise further. But with a wave of inflation hitting the market, it’s important to try to limit the damage it can have on your cash savings. You could miss out on better returns over the next year by not taking action now.

Active Savings gives you access to a range of easy access and fixed-term savings products across lots of banks and building societies.

You’ll have a choice of competitive rates (often far higher than high street banks) and opening new products is easy and takes just a few clicks.

You’ll see everything together in one place when you log in, alongside any other HL accounts you hold with us – making things easier for you.

The best rates on Active Savings

Easy access

Up to
0.95% | 0.95%
(AER | Gross)

Avg. market rate
0.15%

1 year

Up to
2.25% | 2.25%
(AER | Gross)

Avg. market rate
0.58%

2 years

Up to
2.55% | 2.55%
(AER | Gross)

Avg. market rate
1.23%

3 years

Up to
2.60% | 2.60%
(AER | Gross)

Avg. market rate
1.24%

Easy access

Up to
0.95% | 0.95%
(AER | Gross)

Avg. market rate
0.15%

1 year

Up to
2.25% | 2.25%
(AER | Gross)

Avg. market rate
0.58%

3 years

Up to
2.60% | 2.60%
(AER | Gross)

Avg. market rate
1.24%

Find out more

Please note the products above are some of our most popular, but more are available. Click the link above to see our full range. Products can be added or withdrawn at any time. Minimum deposit requirements apply to individual products. Easy access products pay a variable rate and fixed term products pay a fixed rate.

Source: Bank of England 31 March 2022. Comparisons with average market rates for easy access products are based on instant access products, which allow immediate withdrawals. Active Savings offers easy access products and withdrawals usually take one working day.

AER (Annual Equivalent Rate) shows what the interest rate/expected profit rate would be if it was paid and compounded once each year. It helps you compare the rates on different savings products. Once you have opened a fixed term product the rate won't change, but rates on easy access products can vary.

Gross means the rate without any tax removed. Interest/profits are paid gross. You are responsible for paying any tax due on interest/profits that exceed your Personal Savings Allowance to HM Revenue & Customs. Tax treatment can change.

The savings of private individuals held with authorised banks and building societies are covered under FSCS. All of our partner banks are authorised by the Prudential Regulation Authority (PRA) and covered under FSCS.

This website is issued by Hargreaves Lansdown Asset Management Limited (company number 1896481), which is authorised and regulated by the Financial Conduct Authority with firm reference 115248.

The Active Savings service is provided by Hargreaves Lansdown Savings Limited (company number 8355960). Hargreaves Lansdown Savings Limited is authorised and regulated by the Financial Conduct Authority (firm reference number 915119). Hargreaves Lansdown Savings Limited is authorised by the Financial Conduct Authority under the Electronic Money Regulations 2011 with firm reference 901007 for the issuing of electronic money.

Hargreaves Lansdown Asset Management Limited and Hargreaves Lansdown Savings Limited are subsidiaries of Hargreaves Lansdown plc (company number 2122142).

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Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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