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Savings rates are at a record low – how to get better returns

Following the recent base rate cut by the Bank of England, savers are suffering more than ever. We take a look at an easy way to get better returns on your cash in this difficult savings environment.

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 coronavirus pandemic is having a big impact on stock markets and economies across the globe. In an effort to support their economies, central banks around the world have cut their base interest rates – this normally boosts growth for an economy as it means borrowing money is cheaper. In the UK, the Bank of England announced two emergency cuts in March, leaving the rate at 0.1% – the lowest in history.

The effects of this are already being felt in the savings market. Not only are average interest rates falling, but so are the number of savings products on offer. The average instant access rate we receive is down to just 0.39%.

Instant access rates from high street banks were already too low before that they haven’t been able to pass on the full 0.65% cut from the Bank of England. But some providers have now slashed the rate on some of their accounts to just 0.01%, and others are following suit. This will mean that if you’ve got £10,000 in one of those accounts for a whole year you’ll get a meagre £1 in interest.

See what difference a new rate could make to your savings with our savings calculator.

Fix to beat the cuts

If you don’t need immediate access to your money and are able to tie up the money, now could be the time to consider fixed term savings products. You won’t usually be able to access your money until the product matures, but they typically pay better rates than instant or easy access products. For example, the average 1 year fixed rate we receive is 0.96%. That’s £57 more interest on a £10,000 pot after one year than the average instant access account.

Because the rate is fixed, it won’t change during the term. This means you won’t be affected by any falls in rates over the product’s term however if rates were to rise during the term you wouldn’t benefit. You can fix for as long as you like, with products usually ranging from just three months up to five years.

Of course, there are still good savings rates out there but you need to shop around as most aren’t from the main high street providers. This usually involves scouring best-buy tables, applying to different providers, proving who you are and setting up security information for each. Sound’s exhausting, doesn’t it?

Thankfully there’s an easier way.

Active Savings lets you pick and mix easy access and fixed term savings products from a range of banks and building societies, all through one online account. It cuts out the hassle involved when opening and managing savings products with multiple providers.

There’s great rates on offer up to 1.15% (AER/Gross)* on easy access and 1.65% (EPR*) on a 1 year fix. We have a selection of market-leading rates from our banking partners on a range of fixed term products.

Once you’re set up with Active Savings you don’t have to fill in any further application forms when you want to select new products. And it’s easy to manage, allowing you to see all your savings alongside your other Hargreaves Lansdown investments within your online account.

Discover Active Savings

This article isn't personal advice, but could help you make your own decisions so you can make more of your money. Remember inflation reduces the future spending power of money.

Products available through Active Savings can be added or withdrawn at any time. Minimum deposit requirements apply to individual products. Instant access products allow immediate cash withdrawals, Active Savings offer easy access products where withdrawals usually take one working day.

*AER (Annual Equivalent Rate) shows what the interest rate would be if interest was paid and compounded once each year. It helps you compare the interest rates on different savings products.

Gross means the interest rate without any tax deducted. Interest is paid gross. You’re responsible for paying any tax due on interest that exceeds your Personal Savings Allowance to HM Revenue & Customs. Tax treatment can change.

Islamic banks offer an expected profit rate, rather than interest on their savings products, in order to comply with Sharia banking principles.

What did you think of this article?

The Active Savings service is provided by Hargreaves Lansdown Savings Limited (company number 8355960). Hargreaves Lansdown Savings Limited is authorised by the Financial Conduct Authority under the Payment Services Regulations 2017 with firm reference 751996 for the provision of payment services. Hargreaves Lansdown Asset Management Limited and Hargreaves Lansdown Savings Limited are subsidiaries of Hargreaves Lansdown plc (company number 2122142).

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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