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The best savings rates on cash have recovered from dreadful to tolerable in recent years, though generic accounts continue to sport rates as low as 1% AER.
(An AER of 1% is equivalent to £1 per year for every £100 saved. Don’t spend it all at once!)
Higher rates will have been welcomed by many Monevator readers. The low-interest era was especially tough on cautious savers who kept a lot of their wealth in a cash savings account – although clearly higher rates have had impacts elsewhere, too, from the bond market to mortgages.
Today the situation for savers is more nuanced. While accounts paying pitiful rates still abound, the market is much more competitive.
Indeed, account switchers – and of course enthusiasts like myself, who keep a keen eye on interest rates – can out-earn more complacent savers five times over.
Moreover, anyone with a large pot of cash to stash has had something of an unexpected reprieve in recent months. Albeit for unfortunate reasons.
Isn’t it Iranic?
The Bank of England’s Bank Rate had fallen steadily since late 2024.
But with the war in Iran, Bank Rate steadied at 3.75% and further rate cuts are at the least postponed. Interest rates could even rise.
This leaves our savings at the mercy of geopolitics. But whether this leads to more competition in the savings market or to banks nervously edging their rates downwards is hard to call.
Best savings accounts
Perhaps, then, you’re left wondering where you should stash your cash today – or you’d just like a lower-hassle solution to this issue of fluctuating rates?
Let’s look at the different types of accounts available, which ones pay the highest rates of interest, and consider some tricks to make things simpler.
Easy access savings
- Highest easy access rate if you open a current account: LHV @ 4.25% AER. Open its app-based current account and then open a savings account
- Highest easy access rate including a temporary bonus: Tembo Money Homesaver @ 4.75% AER, including a 1.75% bonus for 12 months
- Highest straightforward easy access rate: Charter Savings Bank Easy Access (Issue 73) @ 4.01% AER, open from £1
Easy access is the most popular type of savings account. Such accounts give you instant access to your cash, which means you can add or withdraw money as often as you like. But they also pay far higher interest rates than a typical current account.
Easy access is the best type of account to go for if you know you’ll need access to your cash within a year or so. They’re also the best option if you just don’t want to lock away your cash for some reason.
However there are generally higher-paying options than easy access. So if you apply a mindset of “I must have all my savings available when I want them”, it will cost you.
It’s generally better to divvy up your savings. If you want, say, £20,000 for emergencies and £15,000 is stored for a house move in two years’ time, then you don’t need all £35,000 in an easy-access account.
Note that interest rates on easy access accounts are usually variable, meaning they can change in future. However some do pay a temporary fixed bonus.
Not so easy…
Picking the ‘best’ easy access account is tricky. That’s because there are many accounts out there, all pitched slightly differently.
What’s more, the highest rates are usually only available with strings attached.
LHV is a strong contender at 4.25% AER, but having to open a current account is extra hassle.
The Charter Savings Bank offers a much simpler product at 4.01%. For every £10,000 saved, the difference with LVH’s best offering would only be £24 per year, pre-tax.
Charter Savings Bank tends to release a new issue every time the interest rate wobbles. (If you’ve wondered how it had reached 73 separate issues of the same account, that’s why!) You can get a competitive rate to start with, but your earnings might not increase if rates increase. You’re free to move to the latest issue though, with some minor hassle.
Tembo is an intriguing option. You might want to leave after 12 months when its 1.75% bonus expires, but getting 4.75% AER for a year is decent by today’s standards.
Tembo is actually advertising a 5.75% AER, since it’ll boost your rate by 1% if you use its mortgage service. The service comes with its own fees though, and you could be worse-off than if you’d used a fee-free mortgage broker.
Regular savings
- Highest regular saver rate if you open an app-based current account: Zopa @ 7.1% AER, open Zopa’s ‘Biscuit’ account and then open a regular saver
- Highest regular saver rate if you open a traditional current account: First Direct or Co-operative @ 7% AER
- Highest regular saver rate open to all: Monmouthshire Building Society @ 6% AER, open via its app
Regular savings accounts enable you to put money into them on a monthly basis. Usually their headline rates beat easy access deals, but there are limits as to how much you can save each month. These limits are often quite stingy!
Some regular savers only allow you to hold them for a year. Others restrict your ability to withdraw cash. And the highest-paying accounts are often tied to you also running an associated current account.
Personally, I wouldn’t open a regular savings account on its own unless it was trivially easy – for instance, if it could be opened via the app of a current account I’m already using.
If you need to find the best home for £20,000, then putting £250 away each month doesn’t achieve much. However I’ve previously written a guide explaining how to build a ladder and stash thousands into regular savers if you want to maximise your savings interest.
Notice savings
- Highest notice savings rate (180 days): The Stafford Building Society @ 4.26% AER
- Highest notice savings rate (90 days): OakNorth @ 4.15% AER, rate includes a 1% bonus for new customers only
Notice savings accounts are just like easy access accounts, but with an added rule that you must give your provider notice before making a withdrawal. In this way they can beat easy access rates without requiring you to lock away your cash for an excessively long period.
Generally, the longer the notice period, the higher the rate. It does depend on long-term projections in the money markets though.
Personally, I don’t use notice accounts, as I can usually beat their rates with easy access and regular saver alternatives. I’m more than happy to pop a few doors down the (figurative) high street if someone will pay me a fraction more interest. As customers go, I’m as disloyal as they come.
However the big advantage of notice accounts is they can be set-and-forget.
If you know you won’t get around to changing your bank when the market moves, then notice accounts can at least deliver a slightly higher rate than the easy access alternatives.
Again though, if you’re ready to look for the best deals, notice accounts aren’t likely to deliver.
Remember too that they’re variable accounts, so they’re not guaranteed to stay at high rates. When the Bank of England Bank Rate drops, most providers will soon issue their own rate cuts.
Fixed savings
- Highest fixed savings rate (one year): Close Brothers @ 4.65% AER, minimum £10,000 deposit
- Highest fixed savings rate (5 years): Close Brothers @ 4.67% AER, minimum £10,000 deposit
- Highest fixed savings rate (5 years, low minimum): ThisBank @ 4.57% AER, minimum £100 deposit
To secure the highest currently prevailing interest rates, fixed savings accounts are usually the way to go.
With these accounts you must lock away cash for a set period of time. In return, you typically earn a higher interest rate than most easy access alternatives – at the time you put your money away.
Fixed rates can vary significantly depending on long-term interest rate predictions. Right now, there’s little difference between a one-year and a five-year term. But things can change quickly.
Although I think fixed savings accounts have a place, I tend to steer clear. That’s because if I can manage without access to the cash for five years, then I can invest it in potentially more lucrative assets like shares.
However some people do like to keep several years of cash at the ready. And if you most value certainty then you will find it here.
With fixed rates it’s important to appreciate the ‘interest rate risk’ of opting for an account with a long fixed period: if rates rise in future, you won’t be able to benefit until your current term expires.
Reducing the hassle
Some of you will be reading this and thinking it sounds like a nightmare. Opening new accounts with different banks, posting copies of your ID, and remembering yet another app login.
All for only marginally higher rates here and there!
This is where intermediary platforms can provide an interesting alternative.
Hargreaves Lansdown is one such option. Alternatives include Prosper and Flagstone. I don’t have experience of the latter, but I have investments with the UK’s investment behemoth. Hence it was no extra hassle for me to open Hargreaves’ Active Savings Account product.
With Active Savings I can open, for instance, a Close Brothers one-year fixed account at 4.47% AER with just the push of a button.
Admittedly, that rate is 0.18% less than going to Close Brothers direct. But if the hassle factor has you languishing on a lowly rate at your bank, then an intermediary is a better alternative.
In this example, with £10,000 of savings I would earn £18 less (pre-tax) per year with Active Savings versus going direct. No big deal.
But if my money was sitting in a Barclays Everyday Saver paying just 1% AER, and I was planning to move it into a Barclays’ one-year fixed rate account at 3.7% AER – just because I wanted to avoid the hassle of switching provider – then you can see why an intermediary can be a more profitable option.
These services probably won’t get you the best rate. But they can get you a better than average one, and with only a few clicks.
Is a savings account a good idea with high inflation?
After the enormous price rises of recent years, the latest Government inflation figures tell us that Consumer Price Index inflation is running at 3%.
This is the first and biggest problem with cash. Even if you bagged some of the highest rates we’ve listed above, you’d be lucky to see more than a 1% return in real terms. 1
So compared to other asset classes, you probably won’t win with cash in the long run.
However even the most aggressive investors should usually have some of their wealth in cash, whether for diversification or for maintaining an emergency fund. And it’s clearly worth getting the best rate you can on your money, for whatever level of hassle you can deal with.
The second problem with cash is taxes.
If you’re a higher-rate taxpayer, then only the first £500 of savings interest is tax-free. For everything above that, the 4% headline rate gets you just 2.4% after HMRC has had its cut.
Tax-free gilts may well be a better alternative for large sums of money, especially for higher earners.
How much of your portfolio do you currently keep in cash? Have you had any experience with savings intermediaries? We’d love to hear in the comments below. Note that we’ve updated this article with current rates and products, but kept the old comments for interest. Check the dates to be sure.
- That is, after inflation.[↩]
I’ve been reducing the amount of cash I hold over the last few months (DCAing into my stocks and shares ISA). I’ve made a loss on that decision, to date, but I still feel pretty good about it.
At the start of my FIRE journey (3ish years ago) I did the standard thing of building up 6 months of living expenses in cash. But after more reading and thinking, I’m increasingly of the opinion that in my position (a single person with no dependents, a very stable job and no car, property or similar that would be expensive to repair/replace) that’s unneccesarily conservative.
I would like to buy a house/flat at some point, which complicates matters, but as I live in London, that’s rather a long term aspiration, and depending on exactly what the housing market/my career end up doing, I might decide renting long-term makes more sense anyway. So it doesn’t seem to make sense to keep extra cash just because it might end up being needed for a deposit at some point in the future, when that’s guaranteed to lose out to inflation
Some of us can get the highest easy access rate without opening a new current account. My 50+ year old former Yorkshire Bank current account qualifies for me to get the Virgin M Plus Saver.
Banks/Bankers, particularly large ones, piss me off with their hypocrisy and contempt – paying themselves ridiculous and inappropriate bonuses, an enormous discredit to capitalism. I believe this “red tooth”attitude to performing an essential service, rather than act, as they should as privileged “honoured upholders” of financial standards, could well eventually discredit the whole system and collapse not just capitalism but democracy – remember BRIC’s, effectively if not in name, all are moving towards tyranny. They were identified as the future!
I really think banks’ advertising should be regulated and their behaviour severely audited and examined, their interest is solely themselves – not even shareholders in my experience! So I will not use them and moved to Starling a “challenger”, app only account. I particularly like the fact they only act as a current account and seek, it appears, to do just that – efficiently. Their service is v. good in my experience.
I felt I wanted some cover with an high st. operator since Starling limit transfers to £10,000 per day and there are “rules” to drawing cash through the Post Office ( and they , again, have proven to be entirely dishonourable and contemptuous of their historic past and reputation)!
This left me, as far as I could see Nationwide, as the sole remaining national mutual, so I opened a current account there as well. Remember those institutions who managed the mortgage market with standards!
To get back to the specifics of your article, Nationwide have a Triple Access Account, allowing one to save as much as one wishes/draw what one wishes but limited to withdrawals 3 times per annum or lose interest earned. Irritatingly one does have to reopen each year but it is the best place I have found for reserve cash I may need as the forces of tyranny descend! You may laugh, as 2 World Wars and now Ukraine show, the defence of liberty and democracy lies with the might of the USA alone, whatever opinions one may have of that society. In the last FT Weekend Arts Section, there were reviews of a number of books examining the widening divisions of this bastion of democracy – is this to be a new dark age, a new decline and fall?? I urge above all, whatever one’s politics, one should recall the fragility of democracy through history and not facilitate the forces of tyranny and repression again – last time it took over a millennium to recover something approaching “freedom”!
Whatever happened to “my word is my bond”, where are those who value honour and justice above all and especially short term gain! ESG – just pure and now proven hubris. What we need are people across all aspects of society to think and moderate before speaking or acting and it is the especial responsibility of those in positions of power – financial as well as political. We all need to support those who value and try to follow some basic decency. All are human and faulty but constant seeking short term gain and “end justifies the means” approaches, need to be hounded out of town rather than applauded and followed – IMHO!!
Reputation not presentation needs to be regarded, again, as paramount.
No love for Premium Bonds at 1.4%? Sure, it’s really only 1% if you assume you’re only ever going to win £25 chunks on £50K, but it’s still a solid option.
@Dan — Cash will usually lose out against inflation in the medium to long-term, clearly so in circumstances like today. But as I’ve said before, everything loses out to inflation if the return isn’t sufficient to compensate. For example, the US markets have been down 15-30% in 2022. They’re losing out to inflation, too. 😉 Even government bonds are well behind inflation this year, in nominal terms let alone real.
Obviously in the long-term you’d expect US equities to deliver positive real (after inflation) returns. My point is just that one shouldn’t look at asset classes in isolation. Even if you’re not buying a flat after all, holding some cash can make sense in a diversified portfolio. It can buffer your wealth at times like this, and you can redeploy the cash into buying cheaper assets after falls, which gives it an optionality strength.
@Andrew — Premium bonds are not a savings account. 🙂 But otherwise I agree they are an option, especially if you’re lucky enough to pay taxes on cash savings. Their appeal is diminishing a little as rates rise though.
@The Investor : Good point! In practice, with the full £50,000 saved, you’re going to get a return close to 1%/yr, which as you mentioned is close to 1.8% with instant access if you’re an additional-rate tax payer and get no personal savings allowance.
Worth noting (as your linked article does) that the FSCS offers a temporarily increased limit of £1million for 6 months in certain circumstances eg cash from a house sale
Also, the Chase A/C has a daily withdrawal limit of £25k.
@TI – Premium bonds are sufficiently similar to savings accounts in terms of risk and return that I’d be inclined to include them in any comparison. I thought with the rate increase the average return was now 1.3% tax free (equivalent to ~1.625% before tax for a higher rate payer) if they are exceeding their allowance?
How much cash? 35-40%! Saving for a so-far entirely theoretical house purchase, but also – approaching retirement – I decided to hedge the 25% tax-free lump sum from my pension with cash in my ISAs rather than doing it with the limited and expensive and low-yielding cash-like options available within my SIPP and workplace DC pension scheme (i.e. “money-market” and “liquidity” funds). Also, when I started out, not knowing much about investment, I wasn’t really convinced that bonds were that much better than cash in savings accounts for the low-risk part of my pie. Apart from anything else, you can shop around for the best interest rate, whereas I figured you have to assume an average return on bonds. Those comparisons between average bond yields and average savings rates aren’t very helpful, because why would you leave your money in an “average” account? Even worse when they say “by the way, when we talk about cash, we really mean T-bills”.
So I’ve probably put far too much effort into scraping out the last 0.1% of interest, mostly by using regular savings accounts and fixed rate cash ISAs. At one stage I was running about a dozen regular savers at a time. As each one matured into easy access, I’d deal it out into the surviving ones. But right now, instant access rates are creeping up, but regular savers rates not so much, so the premium for locking your money away doesn’t justify the hassle in my view. (I suspect that while Funding For Lending was available a lot of building societies were running regular saver accounts as a way of retaining their long-term customers without actually drawing in much money from them.)
For me, the big advantage (for that entirely theoretical house purchase!) of fixed rate cash ISAs is that unlike fixed-rate non-ISA accounts, they have to allow you access, although there will be a penalty and many only allow full closure, not partial withdrawal. I addressed the last point by having useful chunks in separate accounts. But cash ISA rates are generally only about the same as the after-basic-rate tax rates on the equivalent non-ISA accounts. In any case, I expect most readers of this site would be better off using their ISA allowance to avoid the paperwork hassles of holding equities, bonds etc. outside a wrapper, let alone the potential CGT.
As for premium bonds, I was put off by moneysavingexpert’s analysis, which suggests that you’ve got to have pretty much the maximum holding to even approach the theoretical interest-rate equivalent. Might be different if I was a higher-rate tax payer though.
Marcus have just announced a new bonus of 0.25% that can be added to their 1.15% savings account , so you can get 1.3% in total. It is even available to those that were mid-way through the year of a lower bonus they offered, like me.
Worthwhile signing in and getting it if anyone hasn’t done so already.
I do like their user interface, very slick, it puts a few other providers to shame.
Just a lesson for others especially beginner investors. I’m in my 50’s and had to unexpectedly retire through ill health – so thrown my retirement plans a bit into the air. Have around 40% of my portfolio in cash now but was all mainly in cash apart from personal pensions. I transferred these this year into SIPP’s as I felt they were stagnating over the years and providers were no longer looking after me but taking high charges. Due to my circumstances and high inflation and cash accounts losing money in real terms, I also decided to start investing – mainly in passive index funds as I know nothing about investment. At the time I started this process in October/November last year many well known sites were writing about investing in this or that US index fund (and ETF’s) would have made you a millionaire over the last 20 years or whatever investing X amount so I started investing quite a bit in these in 100% equities (as well as in some international funds and a tech fund as well.)
However we know what happened this year with these growth stocks and not many weeks ago were down some 20% (and tech around 30%.) I haven’t looked since as it’s too scary. So this is not now just losing out to inflation, this is losing in real terms – in 5 figures and tens of 000’s and it hurts especially when you are in forced retirement. The thing is I never heard of asset allocation, I’d not found the Monevator site or read many of the excellent articles that I have now – just wish I had done so earlier. I’m not risk averse. I think I’m fairly risk tolerant but when you are retired it is a bit of a disaster. It’s just good that the downturn didn’t start a bit later or I’d have maybe have invested around 90%. I’m not worried about dips as that’s just a part of it but it’s the not knowing how long it will be before they recover – a year or two is not end of the world but if it goes on for 5 or 10 then it is.
So this is a lesson in that if you need your money soon – keep some cash aside and do proper asset allocation to reduce any pain. This is what can happen if you go in all equities. I did read comments of readers saying why invest in bonds when there was little or no return. To be honest I’d never really heard of bonds and still don’t relish investing in them but see the point of them – not for a return necessarily but as portfolio protection but when I do I will keep it simple with bond funds as I think it’s easier, less time consuming and less knowledge needed for a beginner investor especially when I don’t see it as a hobby.
Just for the moment it has put me off investing any more. However you still read articles that say don’t sit on the sidelines with more than 5 or 10% cash and don’t try to wait/time the market trying to anticipate when the downturn has ended but I’d have been better staying all in cash as I believe bonds are still losing. So what to do is the question?
I do think proper asset allocation is the most difficult thing for a beginner to get to grips with. I like keeping things simple but I think the 100 (or 120) minus your age rule is a bit too simplistic as who says when you are going to need your money or when you will retire? I prefer the sound of allocating to “pots” such as a short term cash pot for the next couple of years (and I’ve already got that) and I could say I’ve already allocated my long term higher risk pot in equities – although admittedly should not have done that first and if known what I know now would have done it differently but bit late now.
The problem I’ve still got to think about is allocating the medium term pot for the next say 5 or 6 years after the cash pot but to what is the difficult question at this time? Should this all be in bonds if you are going to need the money after perhaps 2 years or other things as well – even a split with some equities? Not sure and not sure if now is the right time to invest in bonds or keep holding cash instead as I’ve read that even bonds at the moment aren’t always doing their normal job in providing much protection to the portfolio.
Just seems to be nothing at the moment where you can make a real return taking inflation into account but seems cash is where you suffer the least. Hard times it seems. Need to read some more I think but unfortunately there are many conflicting views on different websites from various commentators which just is more confusing. I mean your articles are first class and both the Accumulator and the Investor have excellent knowledge but from what I have read don’t always agree on best method of asset allocation as the Accumulator advocates bonds whereas the Investor suggests he doesn’t really hold them to any degree preferring cash instead so is quite difficult and precarious for the beginner. I’m not being critical by the way (I’m not qualified) and I know there is no absolute guaranteed answer and everyone is different, but just saying it is quite difficult for the beginner to navigate and I can see how many would be put off investing.
All the best to everyone, great site and good reading.
@Jam, I too was able to add that Marcus bonus today. To be honest I can’t quite work out their approach, why don’t they just offer the headline interest?
Not quite so sure about the slick interface though, without the instructions in the email it would have been quite difficult to find your own way through the menus to the point where you claim the new bonus.
Albert S, I have every sympathy with your difficulties. I have been attempting to involve my children in my investments simply to encourage some “learning experiences”; their retirements look like being much more difficult than those of us currently retired. And wow is the current situation a full on learning experience!
I agree entirely with the Treasurer to encourage holding cash in readiness, while, as you say, there is complete bafflement about where to turn.
I have always understood in business, finance and indeed military sectors , re- enforcing failure is a non option. Once one sees the market falling it would only make losses greater to keep investing. It is also worth recalling this is when compounding “reverses”, a 20% fall in capital value, requires a 25% increase, to return just to the starting point!
One has in fact lost nothing in existing investments while one does not sell and should it all go to pot, as little men, we can be sure we will be trampled in the panic of big institutions. So I am with the Treasurer, keep ones remaining powder dry until the smoke clears – and many other mixed metaphors!
Usually making no decision is just abdicating control. But as you say there are no hard and fast rules (or we would all be billionaires), so now is the time if there ever was, IMHO, for an exception, take no action while there is absolutely no “intel”. The risk of investing blindly must be inordinately high, compared with the risk of losing out from inactivity for a short time.
Where one stores ones ammunition for the future is the Treasurer’s concern, clearly the most rewarding savings accounts are best, as long as protected – so never more than £85,000 in any one. The finesse of fixed rather than easy access, especially when accounts are changing rates so frequently I would suggest is not something to be overly exercised about.
I have always understood Wellington owed a lot of his success, to orderly withdrawals, to prepared and defendable positions! So I recommend steady inaction and thorough reviews of past actions, hopefully to improve future direction when the “investment climate” at least moderates.
I am holding too much cash and always have been, but I am terribly risk averse. I also had a bad experience due to my job situation over the covid period that led to a short period between jobs. Having a huge cash buffer was reassuring and it also made me less keen on SIPPs, as I did feel a bit exposed in that short window. Having decent SIPP accounts is no use at the point you are effectively unemployed and it made me re-evaluate my saving/investment plans when I started in my new role. Like someone has indicated already, don’t assume health, redundancy, or life events wont derail your plans. I painlessly aquired a new, equivalent role, but in retrospect, I was in near shock at the time as I did not see the situation coming in advance. I was very well positioned for even years of unemployment if it came to that, but the experience alone probably made me value cash savings even more.
Interestingly, this small period of being unemployed made me value LISAs more, as I now view them as a proper good contingency between early retirement and access to pensions. To me, LISAs are almost a SIPP, with nearly as good government top up, but also accessible before pension access age if things go really badly, albeit with a punitive early access charge.
I still find losing money due to inflation on a cash pot very acceptable, and balance this with a near 100% index fund employer matched pension and more balanced LISA and SIPP allocations (index equities/bonds, almost no cash), with ISAs being at the end but lower equity positions.
I know my expected return is greatly reduced by this approach, but it serves my needs: large contingency in cash if i was suddenly in need of it, and most risky assets are almost all funded in accounts with government top ups and/or employer matches, so even 20-40% market drops would be acceptable to me.
The above is NOT optimal on average, I understand, but my likely path to FI will have too much cash and be slower than it could be. I am fine with my line of work. FI to me is about having options. This is always my position with finance things – I don’t criticise choices people make as long as they understand them – in my case, I am both losing money in real terms due to inflation, and also prohibited from experiencing the potential gains from alternate decisions. Fine.
On the savings account side, I’ve got lazy now and just use a well known platform that offers 1 year fixes from many banks and you just take your pick. Recent rates have been 2.2-2.4%. As I use a single platform, I don’t have to do any paperwork – that is where the lazyness comes in, I no longer can face application paperwork. In my very younger days I would have been prepared to chase the top rates, but not anymore.
I like Hargreaves Lansdown’s recently launched Active Savings service. You can open and manage a range of easy access or fixed-term savings accounts from various banks and building societies via the HL platform, alongside ISAs etc. I don’t have a massive cash allocation, but having it all under one roof definitely simplifies things.
I should also mention that I own shares in Hargreaves Lansdown, so my glasses may be rose-tinted.
Can someone explain the cash/low risk options in a SIPP? I have plenty of equity coverage in my SIPP so I have been paying my recent SIPP contributions into either into a Gilt fund or just leave the cash in the SIPP. I thought there would be a fund that tracks a savings account or something similar but I cant find anything. ,Even if it only pays 1% it would be better than nothing. I have a Halifax/AJ Bell SIPP.
Johnny
I carry around five years expenses in cash or cash equivalent. About 20% of that is in NS&I index linked certificates. Sure, it’s too high – but it means I can weather all but the stormiest of bear markets. Currently, I mitigate against inflation losses by topping it up with contributions from salary, buying in bulk on sale and spending on bill reduction measures.
@Jam, @Jonathan and anyone else using Marcus: You can renew your bonus any time you like – meaning you always have at least 11 months bonus to run, if you renew monthly, until such time as they reduce or stop the bonus. Just view your account, then click the link at the bottom right of the page.
Possible reasons for having a bonus instead of just a higher variable rate are that the bonus is guaranteed, so helping retain customers in falling rate scenarios; and some people will forget to renew the bonus, so saving Marcus money.
@ G
I would regard your cash as 4 years expenses and disregard the NSI ILSCs. I have c£120k in ILSCs and they have grown at 9% in the admittedly extraordinary last 12 months. They are the last thing I would consider drawing down, at the moment at least and probably ever, so I don’t include them in any consideration of how many years spending I hold in cash. It would be different if it was still possible to put in new money.
@John Michael Simpson
I made the same search for “cash equivalents” within a SIPP, and there don’t seem to be equivalents to savings or deposit accounts. I _think_ there must be some legal prohibition. It seems that the closest you are likely to find is a “money market” or “liquidity” fund. They’re typically used in automatic “lifestyling” options to hold an increasing percentage of your pot in the last few years before your planned retirement date, so that you wind up with 25% in something “cash-like” that you can use to fund your tax-free lump sum. They’re designed to be very low-risk, but they _can_ go down a bit as well as up, and management and platform charges will eat away at them if you leave your money in them for an extended period.
Thanks @David. I took a punt on a “Cautious Portfolio” HSBC thing so see what happens. Currently down 1% after a week lol. Leaving in cash probably best option at moment…
@John – I recommend TI’s excellent article about cash in portfolios here:
https://monevator.com/cash-in-an-investment-account/
And also TA’s equally excellent money market fund article which is linked in the above one.
We are getting awfully old so I am keen to simplify things e.g. to reduce the number of providers we use. But we also want to hold lots of cash preferably at good interest rates. And of course we want to avoid paying tax on our interest.
One of our trade-offs is to use regular savers but only with banks or BSs we already use. Ditto cash ISAs. Or, at a pinch, open with a new provider only if we abandon an old provider: “one in, one out” as HMG might say.
Maybe we could use Hargreaves Lansdown but their cash ISAs are not flexible, a substantial disadvantage in my view, and you can’t transfer into them except by the circuitous route of transferring into their S&S ISA and then onwards to one of their cash ISAs.
What I particularly value is an account that pays a guaranteed margin above the Bank of England base rate. We’ve got one at the moment but I’ve not seen anything else on the market for ages.
There are certain points in the cycle when cash is king and I believe this is such a time. I’ve been predominantly in equities since the 1987 dip and managed an average return of ~8%p.a. but in recent years the risks have increased significantly…climate, biodiversity loss, AI and now Trump so a couple of years back I gradually switched to cash (Coventry BS) 80% with a few gilts and some gold for the remainder.
Lots of references to better returns over the long term…but I do not have confidence there is a long term. As someone wisely said, markets always bounce back…until one day they don’t.
@John Edwards – I agree whilst cash can be a better option at certain points (when other stuff is tanking) obvs most often it does not do better than equities. At the minute, after inflation, you are not earning more than around 1% ish on most cash accounts (excluding the faff of regular savers which, for most, aren’t going to make much difference in real terms as deposit limits are that low anyway, I personally can’t be bothered as 7% on next to nowt is, well next to nowt). The 8% you have managed up to now is significantly better – do you really think that is going to turn around when it never has before? In the short term anything can happen but seriously, in the long term?
That’s quite pessimistic – why don’t you believe there is a long term? There has always been climate change and bio-diversity loss – no doubt we will adapt to it and overcome. Humans might not be around at some point and the earth will end and so will the sun but I don’t believe it’s gonna be anytime soon – so everybody living should be fine for now I think. There used to be an ice age at one time and living things still survived/evolved. The “end of the world is nigh” narrative has always been around about as long as we have been around. There will no doubt be challenges – and I agree stuff sure don’t look rosy in the world today but we’ve always had problems and we cope in the end – even with stuff like antibiotics, some bright spark will no doubt come up with summat to save us all from armageddon in the end – you never know it might even be AI that cracks it.
Also Trump is only short term. What does he have left – about 3 years of his 2T I think, then he will be history although admittedly one of his clan might take over or some other (half baked) fruit cake, like his vice, JDV (or god forbid Pete Hegseth). What sane person would call their military – the “Dept. of War.” I don’t think wars (i.e. killing, usually more innocents than the tyrants they’re supposed to be targeting) are a game of fun. I agree there are a lot of “nutters” in the world – many leaders/dictators and others and it only takes one (with a nuclear button or a deadly lab virus maybe!) but there have been many nutters around for decades and we’re still sat here debating it.
>”As someone wisely said, markets always bounce back…until one day they don’t.”
Is this a wise quote though because up to now they have done, so it’s actually never happened and if it’s never happened in history then they were wrong and so not so wise after all maybe? If it happens one day we can maybe class them as wise then.
Also if you follow that through – you know the “I’ll only invest in cash/gilts/gold now as I don’t believe there is any long term, due to this or that reason, for equities, then wouldn’t that mean that the stock market and so global companies would have to also fail long term, no longer make profits etc. and therefore no real economy would be left, no growth/GDP so nowt really. The only worry we’d have in that scenario wouldn’t just be equities are no good – likely everything and the banking system wouldn’t be in much of a good state either so don’t know where that would leave cash on deposit and most other stuff too. (Better get the guns/ammo out the shed and the beans/toilet rolls stocked up).
AI – well nobody knows where that might go – it hasn’t ever been done before. They’re only educated (or maybe uneducated) guesses. I’d guess some of it will do good stuff like health diagnostics, some bad likely net loss of employment although will create some as well. Don’t really believe they’re gonna let the darn beast destroy the whole world (and as any comedian would add – if AI gets any ideas beyond it’s station – well we’ll just pull the plug out the wall!). Do we really wanna destroy ourselves or let regulation be that lax that a piece of hardware/software can take over the world.
As I said believing the whole world is gonna end tomorrow (eg. Nostradamus et al) has been with us since the beginning of time – hundreds of predictions of an ending/failing world – all of which failed themselves up to now. I mean I’ve been sat here with my tin hat on in the basement of my castle for the last 50 years, I come out now and then to see if the sun’s still shining up there.
Timely article as I think my current cahoot account is dropping it’s rate in the next few months. MSE is quite good for this sort of info too.
@LLF I think John knows all this, I’ve got two of his investing books sitting on my shelf, and I’m pretty sure they didn’t say stick it all in cash. On the subject of ‘long term’ John, if you don’t mind me asking, how old are you?
@Rhino – Never heard of him TBH. I just can’t see what he is saying really – seems more like conspiracy theory territory especially with the second paragraph.
He did say >”so a couple of years back I gradually switched to cash (Coventry BS) 80% with a few gilts and some gold for the remainder.” So is saying believes mainly cash (80%) with rest in gold and a few gilts. Okay that’s his prerogative what he does and gold’s been on a decent run over last few years but cash real returns – not that great, just better than the pitiful rates we were getting before. For a start I think my global equities have done far better than his cash has over the past couple of years anyway.
Tipped to do better but over the long term – what is his “long term” as you implied – is he perhaps very aged? US equities not tipped to be particularly outstanding in that period but global, which most passives have, is better and 60/40 still forecast better. Most seem to think long term is more than 10 years. (ST<5 yrs, intermediate 5-10 yrs).
I'm no particular fan of Vanguard (at all) but they do have some market foresight and forecasts in the same ballpark as others. Vanguard's outlook for long term asset classes for next 10 years based on the Vanguard Capital Markets Model® (VCMM) as of early 2026:
10-Year Annualised Return Forecasts (2026–2035)
Vanguard projects that cash will deliver annualised returns in the range of 3.1% to 4.1% (real returns after accounting for a forecast inflation rate of 1.9% – 2.9%, cash is expected to provide a positive real return of roughly 1% to 2% annually).
Which is not bad if you like certainty and are in drawdown but real return not great for any others.
International Equities: 7.0% – 9.0% (Developed ex-U.S.) More attractive valuations and higher dividend yields make non-U.S. developed markets a primary opportunity.
Balanced Portfolio Returns: A classic 60/40 diversified portfolio is projected to return between 5% and 7% annually over the next decade.
U.S. Equities: 3.9% – 5.9%. Return expectations are "subdued" due to high valuations, though a "bull case" for AI could push these to 8% – 10%. U.S. Value Stocks are a top conviction, projected to return roughly 7% as they benefit from broadening technology gains.
Emerging Markets are also expected to offer stronger long-term returns than U.S. growth stocks.
Fixed Income: Global Bonds 4.0% – 5.3%
So Vanguard and most other experts are wrong? Could be over the short/medium term, who knows but long term saying equities worse?? Never happened before and can't see it will now even though we are undoubtedly in difficult times.
Even TA/TI might advise whether going with an 80% cash, 20% gilts/gold allocation over the long term or for the average "investor" wanting to maximise their long term returns (so not retirees/SORR etc) is what would likely do this or indeed what they are doing themselves right now (although feel free to "no comment"/plead the Fifth Amendment).
Vanguard may not be correct but I think it's likely more accurate than Mr. Edwards will be. Think I'll stick with my internationally diversified equities and come back in 10 years or more and we'll see.
Think I'm already off to a head start as AI says:
"Global equities have performed significantly better than cash over the last two years (spanning early 2024 to early 2026), driven by strong corporate earnings, AI-driven momentum, and a broad recovery in 2025. While cash offered high, safe returns in early 2024 due to high interest rates, equity markets outpaced them as inflation moderated and stocks continued to rise.
Performance Highlights (Last 2 Years):
Global Equities (2024-2025): 2024 was a strong year for stocks, with the MSCI AC World Index returning 19.6%. In 2025, global equities continued their upward trajectory, rising 13.9% despite volatility, with emerging markets and specific regions like Europe seeing strong gains.
Cash: Cash returns were attractive in 2023 and early 2024 as interest rates peaked. However, as central banks began cutting rates, cash became less competitive compared to the robust returns from equities.
Why Equities Outperformed:
Corporate Earnings: Strong corporate earnings growth, especially in the AI sector, drove equity valuations higher.
Market Resilience: Despite geopolitical tensions and a major tariff shock in early 2025, stock markets recovered and continued to rise, proving more resilient than many anticipated.
Dividends: Including dividends, the total return on equity investments significantly widened the gap over the modest yields from cash savings.
@Lord Fauntleroy
“… if AI gets any ideas beyond it’s station – well we’ll just pull the plug out the wall..”.
If that doesn’t work, perhaps nanites would do the job. ( Ref: ‘I Robot’ )
@Rhino…I was late to the investing scene starting with the free shares from Abbey National demutualisation. Back then I was in my 40s. I was lucky to have a reasonable run through to the big crash of 2008 but quickly recovered the following year and continued with the investing journey until 2023 when big red flags started to loom on the horizon.
The investments built up in my S&S ISA have since been transferred to my cash ISA and my remaining SIPP is invested in government bonds and gold.
I’ve had a decent run over the past 30 years and I am content to have cashed in my chips and left the table. I really do not see any upside for traditional investors as the global economy will inevitably collapse at some point in the not too distant future…my best guess, within the next decade.
Obviously I hope I am wrong on this but the risks are apparent for everyone to see. When you dig down into the science around climate crisis and biodiversity loss it is clear that the current system of economic growth and endless consumption of resources is rapidly breaking down.
Of course we continue to ignore all the warnings and red flags at our peril.
Article: “Although I think fixed savings accounts have a place, I tend to steer clear. That’s because if I can manage without access to the cash for five years, then I can invest it in potentially more lucrative assets like shares.”
Well, you might consider gilts, rather than going to the uncertainty of shares, if you have a five-year-hence, known liability to match. In this space, it’s not about maximising expected returns (and in any case, five years really isn’t long enough to hold shares), but about ensuring that a future liability can be matched with an asset which will certainly deliver the capital required.