12 February 2012
This information applies to England, Wales, Scotland and Northern Ireland
If you've got savings, you'll want to make sure that they're earning as much as possible. You'll need to check what is happening to your savings regularly. Your life will change over the years, as will your financial needs, so it's important that you make time to review your savings plans and make changes too.
Your savings can also be affected by events outside your control, like changes in the rate of income tax, increases in the cost of living or rises and falls in Bank of England interest rates (the bank rate).
If you ignore these events, your savings could lose value and you will end up with less money than you were hoping for.
This page looks at some of the things you can do to make sure that once you have chosen where to save your money, it continues to earn the best rate possible. This includes:
If you're thinking about saving and haven't decided where to put your money yet, see What's the best way to save.
When you open a savings account, you might be offered a higher introductory rate of interest to start with. The rate of interest is the amount of money you earn on your savings. The introductory rate may only last for a few months. When it ends, the interest rate on offer may be lower than you could get with other savings accounts.
To make sure you get a good deal, check how long the introductory interest rate will last for and if there are any restrictions on you moving your money after the introductory rate ends. Some banks and building societies charge you if you move your money which means you may lose some of the interest you've earned.
You should aim to check the interest rate on any account you have at least once a year, and more often if you can, to make sure it is paying a rate higher than the rate of inflation. If you're unsure, ask your savings provider to check for you.
It’s also worth checking your account if there's a change in the bank rate of interest. This is the main interest rate set by the Bank of England. A change in the bank rate can also affect the value of your savings.
If your interest is paid at a variable rate it can move up and down. This means that if the bank rate increases, you might get more money, but if the bank rate goes down, your rate of interest might go down too.
If your interest is paid at a fixed rate and the bank rate increases, it might be worth checking to see if another account is offering a better rate. For more information about what can happen to your savings and investments if the bank rate changes, go to the Money Advice Service website at: www.moneyadviceservice.org.uk. If you want to check what the bank rate is at the moment and when the next decision is going to be made about whether it should go up or down, go to the Bank of England website at: www.bankofengland.co.uk.
If you've put a large, lump sum of money into a savings account, make sure you've put it somewhere which pays the best rate.
There are building society accounts especially designed for investing lump sums but it's also worth checking whether you can get a better interest rate in a regular savings account.
If you can get a better rate in a regular savings account, you could move your money gradually from a lump sum savings account into a regular savings account with a higher interest rate. This means that you won’t lose out on any interest.
Some savings accounts will also let you start with a lump sum and then add regular amounts. Often, the highest rates only last for a limited time, so you may need to keep moving your money to get the best deal. But watch out for any restrictions on the account that mean you will lose interest if you take out your money early.
For more information about lump sum savings accounts and regular savings accounts, see What's the best way to save.
You can also find more about this on the Moneysavingexpert website at: www.moneysavingexpert.com and use the Money Advice Service comparison tables at: www.moneyadviceservice.org.uk to compare savings accounts from different providers.
You may get a good interest rate on your account but if it doesn't meet your savings needs, you could lose interest. For example, some accounts charge a penalty for taking out your money more than a certain number of times a year. If you need to take out money several times a year, you may not end up with as much interest as you thought.
Check that the terms and conditions of your account really meet your needs. If they don't, you should start shopping around to find an account which is right for you.
If you do decide to change your account to get a better interest rate, read the agreement carefully before you sign anything to make sure you understand what you are signing up to.
Sometimes, account providers can change the terms and conditions of your account after you've opened it. Make sure that you read any information your account provider sends you saying that the terms and conditions of your account have changed. If it looks like this means the account no longer meets your needs or you're going to lose interest, you might want to start looking for another account.
If your savings account pays a low rate of interest, there's a danger that the value of your savings will go down over time. This can happen if the interest you receive is less than the rise in the cost of living (inflation).
You need to check regularly that the interest rate you are getting is at least better than the Bank of England’s bank rate. If you don’t know, ask your savings provider. They may be able to suggest other accounts you can switch your money to. But check what's on offer from other savings providers too, to make sure you're getting the best rates.
If you don't want to check rates regularly, you can choose an account that guarantees to pay at least the value of the bank rate, or slightly above. This means your savings won't lose their value. But it's better to check what other savings accounts are offering on a regular basis as you could get a better rate of interest elsewhere.
Be careful of locking your money into savings accounts with a fixed rate of interest for too long. With some high interest savings accounts, you need to keep your money in the account for between one and five years. Nobody knows what will happen to interest rates over this length of time, so although the rate may be tempting now, it may not be so good a few years down the line.
If you are a taxpayer, you'll pay tax on the money you earn from savings.
You can avoid paying tax on some of your savings if you use your cash ISA allowance. This tax year (2011/12), you can put up to £5,340 into a cash ISA. If you haven't already got money in a cash ISA, look out for one offering the best interest rates.
If you haven't already got money in a cash ISA, look out for one offering the best interest rates.
You may get better rates in an ISA around the start and end of the tax year, at the beginning of April. This is because banks and building societies are keen to get you to use up your allowance before the end of the old tax year, and to attract savers at the start of the new one.
You can put money in at end of the tax year, if you haven't already done so, and then put a further amount in at start of the next tax year. This will maximise the amount of tax-free savings you've got.
You should check that the ISA meets your savings needs and watch out for high introductory rates that may disappear after a few months.
If you already have an ISA, check around the start and end of the tax year to make sure you are still getting a good deal.
For more information about tax free savings, see ISAs.
National Savings and Investments also offer some tax free savings. However, it's worth comparing the rates they pay with high interest savings accounts such as fixed notice regular savings accounts to see which option offers the best financial advantage.
For more information about fixed notice regular savings accounts, see Bank and building society savings accounts.
If you don’t pay tax, you will have to make sure that you reclaim any tax that has already been taken from your savings through your annual tax return or Tax Office. You can also make sure you are not charged tax in the first place. When you open your account, ask to fill in form R85 – ‘Getting your interest without tax taken off’. Your savings provider should give you a copy.
You can find more information about the tax you have to pay on your savings and investments from the Directgov website at: www.direct.gov.uk.
Each April the government announces its spending plans for the coming year, in the Budget. This includes announcements about tax changes, as well as changes to the amounts you are allowed to save or invest.
A Pre-Budget report comes out in the Autumn. This sets out the planned changes ahead of the actual Budget in April. This gives you time to think about any changes you might want to make to your savings plans.
All the newspapers carry a Budget round-up when it happens and you can find out more on the Treasury website where there are special Budget and Pre-Budget pages.
The Money Advice Service is a free, independent service. Their website has lots of useful information about financial products, including comparison tables. Go to: www.moneyadviceservice.org.uk.
National Savings and Investments offer a number of financial products w
hich are guaranteed by the Government. They are available through the Post Office, online and by phone. For more information, go to: www.nsandi.com.
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