With savings rates so low where should you put your extra cash?

Millions of savers were dealt a blow this week when National Savings & Investments cut rates on many of its accounts. The government’s savings bank has also cut your chances of winning some money on the premium bonds.

The moves coincided with several providers trimming their rates, and with new research claiming that £173bn of savers’ cash is sitting in accounts that pay no interest at all. That’s up sharply from £18.5bn a decade ago, says investment platform easyMoney.

NS&I’s cuts – which affect many of its fixed and variable-rate savings products – prompted one national newspaper to splash with the headline “What is the point of saving?” Things could get worse for savers amid speculation that the next move in UK interest rates might be down – though equally the new chancellor, Rishi Sunak, might pull something positive out of his budget box on 11 March.

So what are the best options for Britain’s long-suffering savers? (All rates correct at the time of writing.)

Be – or have – a child

The interest rates on children’s savings accounts are often a hell of a lot better than those on standard adult accounts. For example, Nationwide, HSBC and Santander all have children’s accounts paying 3%.

The Nationwide one, Future Saver, is for parents looking to save for a child aged up to 15, and lets people deposit up to £5,000 a year, though there are restrictions attached to that rate. As the adult, you will be the account holder managing the money on behalf of the child, who is the legal owner of the money. HSBC’s MySavings account is open to anyone aged seven to 17, with that 3% rate applying to balances up to £3,000.

Junior cash Isas often pay good rates, too. Coventry building society has one paying a table-topping 3.6%, while NS&I, TSB and Santander all have accounts paying 3.25%. Junior cash Isas are for children under 18 and resident in the UK.

Put something away each month

There are still some good regular savings accounts on offer, where you put a small – or not-so-small – amount aside each month.

With a rate of 3%, Kent Reliance’s Regular Savings Account Issue 3 is one of the highest-paying, though this one-year account – which lets you deposit up to £500 per month – has to be opened and operated in-branch (Kent Reliance has nine branches).

Close behind are HSBC and its First Direct arm, which both have Regular Saver accounts for their current account customers paying 2.75%, fixed for 12 months. You can save up to a total of £3,000 and £3,600 per year respectively.

Coventry building society’s Regular Saver pays 2.5% – it lasts for 12 months and lets you pay in up to £500 per month. Kids can get in on the act with Yorkshire building society’s Child’s Regular Saver, paying 3.8%, which lets you save up to £100 per month for one year.

Fix your rate

Unfortunately fixed savings rates are continuing to tumble, says data provider Moneyfacts.co.uk. “A year ago, savers would have found a top one-year fixed-rate bond paying 2.15%, but today not even the top five-year fixed-rate bond will pay this return,” its finance expert Rachel Springall said on Wednesday.

Deals are tending to come and go at the moment: check out the likes of Moneyfacts to see what the latest position is. Those prepared to tie up their money for one year and five years respectively could still get 1.7% and 2%-plus from a few providers.

The best of the easy access deals

Marcus by Goldman Sachs was offering a rate of 1.35%, but this week trimmed it to 1.3%. This is an online account, though you can give some instructions by phone. It can be opened with as little as £1, and up to £250,000 can be paid in. You can pay money to and from your Marcus account from your linked UK current account.

It was the exact same story with over-50s specialist Saga’s Easy Access Savings Account, which also saw its rate cut from 1.35% to 1.3%. That rate is boosted by a fixed 0.2% interest bonus for the first 12 months only. You can pay in anything between £1 and the maximum balance of £100,000. Then there’s the “1 Year Limited Access Saver Issue 3” from Yorkshire building society, which pays 1.3%. It can be opened with a minimum of £100 and can be managed online. But you can’t fund the account from an existing Yorkshire account.