August’s savings round-up & news

The latest news to help you get the most from your savings account.

Here’s my monthly update sharing changes at leading UK savings accounts, as well as some of the articles you might have missed on the blog.

August’s savings update video

August savings news

Inflation hits 2.5%

There’s been yet another big jump in the inflation rate. The latest figures (for June 2021) put it at 2.5% – up from 2.1% the previous month, and 1.5% before that.

This means that for the second month it’s impossible to beat inflation on any decent sums of money at the moment, and this could carry on for a while. But it doesn’t mean it’s any less important to get the highest rate you can.

More small rate increases

For the second month in a row there’s been a slight but noticeable improvement in rates available from easy-access accounts.

The new top rate from easy-access is at Cynergy offering 0.6%, which is 0.1% higher than last month’s top rate of 0.5%.

So should you move your money? Well, that 0.1% extra is worth 10p over a year for every £100 saved. That’s £1 for a grand or £5 for £5k. Not massive amounts.

Fixed rates vs Chip+1 and Premium Bonds

There are now more 1-year fixes offering above 1%, though the highest is still 1.1% from Gatehouse which is a Shaira compliant bank. So are these better options than Chip+1 and Premium Bonds?

The real rate with Chip is likely to be closer to 1% when you factor in the monthly fee – and of course you don’t get compound interest.

And the prize rate on Premium Bonds might be 1%, but depending on how much you save in the account, you will likely get closer to 0.9%, or less.

How much of a difference does this make? Well, there’s a £10k cap on Chip+1, which will earn £105.50 in interest or 1.06%. But the fix, with interest earned on interest, will net you £110.56 in interest. That’s a difference of £5.06

Say you have £20,000 locked away at 1.1%, that’ll earn you £221.11. In Premium Bonds you’d hope to win £175 in a year, which is £45 less.

But with the fix you’ll need to lock the money away, and if rates to continue to increase you could miss out on the opportunity to earn more elsewhere.

Where to put your savings in August 2021

Make sure you check for updates in my regularly updated savings best buy article, but right now I’d look at the following:

Best places to save £1,000

Amount savedAccountRateNotes
Up to £1,000Virgin Money M Plus current account2.02%Can only earn interest on the first £1,000 saved

Best places to save £3,000

Amount savedAccountRateNotes
£1,000Virgin Money M Plus current account2.02%Can only earn interest on the first £1,000 saved
Up to £2,000Chip +1 (ChipLite plan)1.25%To earn interest on savings above £2,000 there’s a fee

Best places to save £3,001 to £6,000

Amount savedAccountRateNotes
£1,000Virgin Money M Plus current account2.02%Can only earn interest on the first £1,000 saved
£2,000Chip +1 (ChipLite plan)1.25%To earn interest on savings above £2,000 there’s a fee
Up to £3,000Club Lloyds current account0.6%Two direct debits are required to get the interest on balances up to £5,000

You’ll also get a choice of free cinema tickets or movie rentals.

Best places to save £6,001 to £11,000

Amount savedAccountRateNotes
£1,000Virgin Money M Plus current account2.02%Can only earn interest on the first £1,000 saved
£5,000 to £10,000Chip +1 (ChipAI plan)1.25%You’ll pay a £1.50 fee every 28 days which reduced the real rate from the advertised 1.25% (full table here)

Best places to save £11,001 to £16,000

Amount savedAccountRateNotes
£1,000Virgin Money M Plus current account2.02%Can only earn interest on the first £1,000 saved
£10,000Chip +1 (ChipAI plan)1.25%You’ll pay a £1.50 fee every 28 days which reduced the real rate from the advertised 1.25% (full table here)
Up to £5,000Club Lloyds current account0.6% to 1.5%Two direct debits are required to get the interest on balances up to £5,000

You’ll also get a choice of free cinema tickets or movie rentals.

Best places to save more than £16,000

Amount savedAccountRateNotes
£1,000Virgin Money M Plus current account2.02%Can only earn interest on the first £1,000 saved
£10,000Chip +1 (ChipAI plan)1.25%You’ll pay a £1.50 fee every 28 days which reduced the real rate from the advertised 1.25% (full table here)
Between £5,000 and £50,000Premium bonds1%*Once you have £5,000 in Premium Bonds it should win more than the best easy-access account (currently 0.5%)

Once you’ve got at least £10,000 in Premium Bonds your average win rate will probably be better than the Club Lloyds account
* prize rate, not interest rate

Andy’s podcast

Listen to Cash Chats, Andy’s twice-weekly podcast. Episodes every Tuesday and Friday.

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