When did you last look at the rate on the savings account your bank opened for you years ago? Not the headline rate on the poster in the window. The rate you’re actually getting. For a lot of people the answer is “no idea”, and that’s exactly what the bank is counting on.
You don’t need to become a day trader to fix this, and you don’t need to bet your rainy-day fund on the stock market. You can get a better return while keeping your money safe and within reach. You just have to do the boring bit: compare, move and keep an eye on it.
Why is my savings account paying so little?
Because you let it. Banks know most customers never move their savings, so the old accounts, the ones nobody checks, often pay much less than the accounts used to win new customers. Some of the best-known names on the high street pay a fraction of what smaller banks and building societies offer for exactly the same thing: instant access to your money.
The gap adds up. Put £20,000 in an account paying 1% and you get £200 a year. The same money at 4% gets you £800. That’s £600 a year for filling in an online form, or £6,000 over ten years before you count interest on the interest. These are example rates, not quotes from any bank, but gaps that size do exist and they last.
A useful rule of thumb: compare what you’re getting with the Bank of England’s Bank Rate. If your easy-access account pays well below it, your bank is keeping the difference.
Is my money safe if I move it to a bank I’ve never heard of?
Usually, yes, as long as the firm is authorised in the UK. Since 1 December 2025 the Financial Services Compensation Scheme has protected up to £120,000 per person, per authorised bank or building society, up from £85,000. If you have a joint account, each holder gets their own £120,000.
The catch is the word “institution”. Some banks share a single banking licence across several brands, so money held under two brand names can count as one pot. If you’re holding large sums, check which licence each account sits under before you assume you’re covered twice.
Many of the better-paying accounts come from app-based banks and smaller building societies. That says nothing about how safe they are. Within the limit, a deposit with a small authorised bank has the same protection as one with a household name.
Loyalty is a fine thing in a dog. In a savings account it’s an expensive habit.
Are Premium Bonds worth it compared with a savings account?
Premium Bonds don’t pay interest. Each £1 bond goes into a monthly prize draw run by National Savings & Investments (NS&I), which is backed by HM Treasury. That makes them about as safe as it gets, with no £120,000 limit to worry about. You can hold from £25 up to £50,000, and every prize is tax-free.
NS&I sets a “prize fund rate”, which goes up and down with the wider savings market. From the July 2026 draw it rose to 3.80%, from 3.30%, with the odds for each £1 bond shortened to 22,000 to 1. The important point is that this is an average across all bondholders, not what you’ll get. A handful of £1 million and other large prizes pull the average up, so most people’s actual return comes in below the headline rate. Some months you win nothing at all.
Where Premium Bonds really make sense is tax. In the 2026/27 tax year, the Personal Savings Allowance lets basic-rate taxpayers earn £1,000 of interest tax-free, higher-rate taxpayers £500 and additional-rate taxpayers nothing. Hold £30,000 at 4% as a higher-rate taxpayer and you earn £1,200 in interest. That’s £700 over your allowance and £280 in tax. To match a tax-free 3.80%, a higher-rate taxpayer who has already used their allowance needs a savings account paying about 6.3%.
That gap gets wider. From April 2027, the tax rates on savings income rise by two percentage points, to 22%, 42% and 47%. Scotland uses its own income tax bands for earnings, but savings income is taxed at the UK-wide rates, so the change affects you wherever you live in the UK.
What is a money market fund and is it risky?
A money market fund pools investors’ cash and lends it out for short periods to banks, governments and large companies. Lending that short is low risk, and the return tends to follow Bank Rate up and down. Many investment platforms now offer them, often as somewhere to park cash inside a stocks and shares ISA or a SIPP.
The trade-offs are real, though. A money market fund is an investment, not a deposit, so the FSCS deposit guarantee doesn’t apply. Big falls in value are rare, but the price isn’t guaranteed. You’ll pay a fund charge and often a platform fee, which come straight off your return, so a fund that looks better than a savings account on paper can lose that edge once fees are taken. Getting your money out can also take a day or two rather than happening instantly.
Outside an ISA or pension, payouts from these funds are usually taxed as interest, so they eat into your Personal Savings Allowance just like a bank account would. Inside an ISA they’re tax-free. The cash ISA allowance is also changing: from 6 April 2027, under-65s can put only £12,000 a year of their £20,000 ISA allowance into cash, while over-65s keep the full £20,000. If you’re in your fifties, that’s one more reason to use your full allowance while you still can.
How to build a cash pile that actually earns its keep
For most people the answer isn’t to pick one option. It’s to use them in layers. Keep a few months’ spending in a top-paying easy-access account or easy-access cash ISA, where you can reach it the same day. Higher-rate taxpayers with spare cash above their allowance might add Premium Bonds for the tax-free return, as long as they accept that the return isn’t guaranteed. Money market funds suit cash you’re holding inside an investment account or pension while you decide what to do with it.
Whatever you choose, look at the rates every six months or so. Rates on easy-access accounts can change without warning, and the bank that paid you well last year may already be cutting. None of these options will make you rich. They’re there to stop inflation eating your cash while it waits. Money you won’t need for five years or more is a different decision, and MoneyHelper or an FCA-regulated financial adviser can help you weigh it up.
In short
If your savings sit in an old account paying well below Bank Rate, you’re giving money away for nothing. Moving to a better easy-access account keeps you protected up to £120,000 per bank by the FSCS, while Premium Bonds offer a tax-free, government-backed alternative that’s especially worth a look for higher-rate taxpayers. Money market funds can beat both inside an ISA or pension, but they’re investments, not deposits, so check the fees and understand the risk first.
Sources
Midcent Money
Andrew Ingram writes about money for men 45 and over – the years when retirement starts to feel real and the decisions get bigger. Pensions and retirement planning, investing, savings, mortgages and tax: what changed, what it means for your plans and what's worth doing about it. No hype, nothing to sell, and a clear steer on when it pays to get personal advice.
One of Midcent's writers. Spotted something? Write to andrew@midcent.uk.
