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This article is for general guidance only and is not financial or professional advice. Any links are for your own information, and do not constitute any form of recommendation by Saga. You should not solely rely on this information to make any decisions, and consider seeking independent professional advice. All figures and information in this article are correct at the time of publishing, but laws, entitlements, tax treatments and allowances may change in the future.
It’s been a puzzling few months for savings account customers. Cast your mind back to December 2025 when, at its last meeting of the year, the Bank of England’s influential Monetary Policy Committee cut the bank (or base) rate to 3.75%.
The talk amongst City forecasters at the time was for further rate cuts going forward during 2026. What they hadn’t anticipated for the year ahead was the emergence of a lengthy and ongoing conflict in the Middle East.
Since then, and aside from the human cost, the US/Iran stand-off has forced energy prices to rise. In turn, this has produced an inflationary knock-on putting a squeeze on consumer finances. Far from a downwards trajectory, UK interest rates have not in fact budged in more than six months
This unforeseen set of circumstances has had ramifications for savings account customers. Instead of heading lower as originally expected, savings rates have held firm and, if anything, have started to climb in recent weeks.
Here’s a reminder of why saving makes good financial sense, the best way to organise your accounts, and why, if you haven’t done so for a while, it could pay to review your arrangement to enjoy the best returns on your cash.
What’s on this page?
Saving makes good financial sense even if you don’t have much disposable income to build on. It not only helps you to become financially secure, but it also allows you to provide for you and your loved ones.
For example, having money set aside can help you deal with unexpected costs and emergencies. It also enables you to reach short, medium, and long-term financial goals such as putting a deposit down on a house, buying a car, or enjoying a luxury holiday in retirement.
Nearly two-thirds of people (64%) have some form of savings goal according to research from Tesco Bank. A slightly smaller proportion (60%) also admit to using their savings for reasons other than their main goal.
For example, more than half make use of their savings to cover emergencies or regular outgoings. About one-in-five say their savings are used to pay for items such as buying a new outfit, meals out, or other luxuries.
Automating your payments - using direct debit, for example - can make it easier to keep up the savings habit over the long-term. If you have savings set aside, it’s worth keeping a record of withdrawals such as these and, if possible, top them up to make good any shortfalls.
It’s possible to save in various ways. For the purposes of this feature, we are focusing on savings accounts, but other options exist, such as making use of ISAs.
Having made the decision to set money aside, one of the main hurdles faced by savers is to make sure that the returns they earn on their cash stay ahead of inflation. If they don’t, the ‘real’ value of their savings will be eroded over time because of the effect of rising prices.
It’s also worth bearing in mind that the interest paid on savings often varies from one provider to another. Savings rates offered by providers will also depend on prevailing economic conditions (such as market uncertainty thanks to wider events in the Middle East), as well as the latest bank rate announcement from the Bank of England as described above. The bank rate is crucial as it dictates both borrowing costs, as passed on to homeowners, as well as the interest rates paid on variable rate saving accounts.
As we’ve seen, interest rates have not moved for more than six months. As a rule of thumb, when they edge lower that’s bad news for savers with money linked to a variable savings rate. But the reverse is true when rates move higher.
The requirements for what we want to do with our money change over time. So, to ensure your money’s working as hard for you as possible, it’s worth reviewing your savings regularly.
This means at least once a year, especially when the wider economic picture is as febrile as it’s been during 2026. As we’ve seen, even the forecasters get things wrong. So being proactive reminds you to scour for the best rates and helps you plan to fit in with your ongoing financial needs.
When reviewing your savings, jot down your accounts, the amounts contained in each, along with the interest rate they’re paying. Note whether this is on a fixed or variable rate basis as the offer could soon be becoming to an end, requiring action on your part.
Where you have several accounts, it might be worth consolidating them into one pot to benefit from a higher return.
Once you have a picture of your overall savings profile, it’s a case of prioritising what to do with that cash. For example, you might begin by setting aside a certain amount for emergencies.
Conventional financial planning wisdom suggests this could be between three and six times your monthly income.
Ideally, this part of your finances should be held in either an instant, or an easy-access, savings account. Should the need arise, there would then be no delay in withdrawing the cash as required.
Because of the role they perform, instant access savings accounts do not tend to offer the best returns to savers.
But it still pays to shop around using online comparison sites and aggregators to find the best rates. To aid comparison, rates are usually expressed as the AER, or Annual Equivalent Rate.
Analysis from Hargreaves Lansdown shows why it pays to be selective with easy-access accounts. On 19 June 2026, the lowest-paying easy-access accounts offered a return of just 0.75% AER.
After a year, £1,000 held in one of these accounts would only have been worth £1,007.50. After five years, the total interest accrued would total barely £50.
In contrast, HL said that on the same date the top easy-access rate stood at 4.24%. After five years, £1,000 held in this account would be worth £1236, according to HL. A difference of nearly £200 compared with the poorest performer.
The bigger the cash pot, the more it costs you to have your savings sitting idle and/or in an underperforming account.
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Once you’ve set aside money for emergencies in an easy-access account, it’s then a case of considering a home for remaining savings that pay a better rate of return.
This includes fixed-rate savings accounts, where the returns tend to be greater than easy-access as well as being locked in for an agreed period, for example, one to five years.
The benefit of fixed-rate accounts is that the customer knows in advance the amount of interest that their savings will earn. But note that there’s often a trade-off for receiving an enhanced return.
For example, savers might need to give notice before being allowed to make a withdrawal. Or that the number of withdrawals is limited to a certain number each year.
Alternatively, for those looking to save little and often, a regular saver account could be the answer. Some regular saver accounts are easy-access, while others have conditions attached preventing withdrawals from being made until the end of an agreed term.
Before signing up to a particular account, bear in mind any restrictions and choose the product that best works for your finances.
When choosing a savings account, bear in mind that loyalty – especially to the big high street banks – is unlikely to pay.
Large institutions rely on the fact that more than one-in-four people admit to never switching for a better savings interest rate, while nearly one-in-three have not switched in the past five years.
Also, when shopping around for an account make sure to look beyond the headline interest rate that’s on offer. Around half of the top-paying easy-access savings accounts feature a ‘bonus rate’.
Make sure you read the small print that comes with this feature to ensure you don’t end up with less than you expected.
If you accept an account’s terms and conditions, fine. If not, look elsewhere as there are signs the savings market is starting to get competitive.
It’s worth remembering that interest on conventional savings accounts is taxable. Fortunately, we each have an annual Personal Savings Allowance (PSA) which means savers can receive a certain amount of interest each tax year, before being taxed on their savings. The tax year runs from 6 April in one year, to 5 April the next.
For basic rate (20%) taxpayers, the tax-free PSA currently stands at £1,000 each tax year. This drops to £500 for higher-rate (40%) taxpayers, while there is no allowance for those in the additional (45%) tax bracket.
To put this in context, a basic rate taxpayer would need just over £23,000 of savings in a top-performing, easy-access account paying 4.24% before becoming liable for tax in the 2026/27 tax year. In contrast, a higher-rate saver would only need £11,500 in the same account before tax was due on the interest.
Note that the tax rate on savings interest is rising by two percentage points from next year. This means basic and higher-rate taxpayers will end up paying 22% and 42% respectively on the interest earned above their allowances from April 2027.
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