7th October 2026
For years, savers have had to put up with the feeling that their money was doing very little for them.
Interest rates eventually rose, but inflation often rose faster.
Now the picture is rather different.
National Savings & Investments has just increased the rates on its British Savings Bonds, with the new fixed rates reaching 5.17% for five years. The one-year rate is 4.99%, two years 5.07% and three years 5.10%.
That is beginning to look like a serious return for people who simply want to keep their money safe.
But NS&I is not the only option.
Cash ISAs deserve a look
For many savers, a Cash ISA may be even more interesting.
The big advantage is simple.
The interest is tax-free.
The 2026/27 ISA allowance is £20,000, so someone with spare cash can put up to £20,000 into an ISA this tax year and shelter the interest from income tax.
Current best-buy Cash ISA rates are around 4.6% for easy access, while fixed-rate ISAs are offering rates above 5%, with some five-year products reaching about 5.25%.
That makes the Cash ISA particularly attractive for people who are already paying tax on their savings interest or who have enough savings to be approaching their Personal Savings Allowance.
It also means the comparison with ordinary savings accounts is not simply about which headline percentage is highest.
A slightly lower tax-free rate can sometimes leave you with more money in your pocket than a higher taxable rate.
What could £50,000 earn?
The numbers are worth looking at.
At 5%, £50,000 produces roughly:
£2,500 a year.
At 5.17%, it produces about:
£2,585 a year.
That is not going to make anybody rich.
But it is also not insignificant.
It could pay several months of council tax, a substantial part of a household's annual energy bill, or provide a useful additional income stream.
For someone with £100,000, 5% would produce about £5,000 a year before tax.
Suddenly, the decision about where the money sits becomes rather more important.
But don't simply chase the highest rate
This is where savers need to be careful.
The highest interest rate is not automatically the best account.
You need to ask:
Can I get my money when I need it?
Is the rate fixed or variable?
Does the rate include a temporary bonus?
How long is the money locked away?
What happens when the fixed period ends?
Is the interest taxable?
And perhaps most importantly:
Is the money protected if the institution fails?
The Financial Services Compensation Scheme currently protects eligible deposits up to £120,000 per person per authorised institution.
That £120,000 figure is worth remembering if you have substantial savings.
NS&I has one major advantage
NS&I is different from an ordinary bank or building society.
It is backed by the UK Government, so its savings products have the full backing of HM Treasury rather than relying on the normal FSCS compensation limit.
That makes the new British Savings Bond rates particularly interesting for people who value security above squeezing out the absolute last fraction of a percentage point.
The five-year British Savings Bond currently pays 5.17%.
But there is a price for that certainty.
Your money is tied up for five years.
That may be fine if you know you won't need it.
It could be inconvenient if your circumstances change.
Perhaps the answer is to split the money
This is where things get more interesting.
There is no rule saying all your savings have to sit in one account.
Someone with £50,000 might decide that:
£10,000 should remain immediately accessible.
£20,000 could go into a Cash ISA.
£20,000 could be placed into a fixed-rate savings product.
The exact amounts would obviously depend on individual circumstances.
But the principle is useful.
Keep some money available. Put some somewhere tax-efficient. Consider fixing some if you don't need it.
That can be much more sensible than putting everything into a five-year bond simply because it has the highest rate.
What about ordinary savings accounts?
They should not be ignored.
Moneyfacts' latest market figures show easy-access rates around 5%, while some fixed-rate bonds are paying more than 5%. Five-year fixed savings rates are currently reaching around 5.35%.
But some of the best headline rates come with conditions.
A five-year account may require you to lock the money away.
An easy-access account may contain a temporary bonus.
A regular saver may offer an impressive rate but restrict how much you can put in each month.
So the headline number needs to be read alongside the small print.
And then there are Premium Bonds
NS&I's Premium Bonds remain another possibility.
The current prize fund rate is 4.35%, and prizes are tax-free.
But this is not the same as receiving 4.35% interest.
The prize fund rate represents the average return across the entire pool.
One person may win nothing.
Another may win considerably more.
That makes Premium Bonds quite different from a fixed savings account.
They are therefore more about the combination of security, accessibility and the possibility of winning than about guaranteeing a particular income.
Should you consider investing instead?
This is where the conversation changes completely.
A Stocks and Shares ISA can potentially produce a higher return over a long period, but the value can fall as well as rise.
Someone who needs the money in two years should not necessarily treat the stock market as a substitute for a savings account.
Someone who has money they genuinely will not need for ten or fifteen years is in a different position.
The longer the time horizon, the more reasonable it can become to consider investments rather than simply cash.
But that involves risk.
There is no 5% guarantee.
You could have more money in the future.
You could also have less.
There is another reason to look at savings now
The Bank of England currently has Bank Rate at 3.75%.
But it is facing an awkward situation.
Inflation is above its 2% target, and the Bank has warned that prolonged higher energy prices could create more persistent inflation and potentially require interest rates to rise again.
That means the old assumption that interest rates will simply keep falling may no longer be safe.
For savers, that creates an interesting possibility.
If rates remain high, people with cash can continue earning reasonable returns.
If rates rise, new savings products may become more attractive.
But if rates eventually fall again, someone who has already fixed a good rate could benefit from having locked it in.
Nobody knows which way rates will move.
Don't forget expensive debt
There is one important exception to all of this.
If someone has a credit-card balance charging 20% or more, earning 5% on savings while paying 20% on debt is unlikely to make financial sense.
The same principle applies to other expensive borrowing.
Sometimes the best return on spare cash is paying off costly debt.
That is effectively a guaranteed saving on the interest that would otherwise have been charged.
So what should someone with spare cash do?
Perhaps the first step is not to open another account.
It is to look at what you already have.
How much is sitting in a current account?
How much interest is it earning?
When does your existing fixed-rate account mature?
Are you using your ISA allowance?
Are you paying tax on savings interest?
Could you need the money within the next year?
And how much of it could you safely lock away?
Those questions may produce a surprisingly large difference.
Savers have choices again
This is perhaps the most encouraging part of the story.
We have spent years talking about the problems caused by higher interest rates for borrowers.
Mortgages become more expensive.
Loans cost more.
Credit cards become painful.
But the other side of the interest-rate equation is finally becoming visible.
Savers get paid.
And if you have built up a financial cushion, it may be time to ask whether that money is doing as much for you as it could.
You don't necessarily need to take investment risks.
You don't need to lock everything away for five years.
You don't need to chase the highest rate in Britain.
But leaving a substantial sum sitting in a current account earning virtually nothing is becoming increasingly difficult to justify.
For someone with spare cash, perhaps the most important question now is simply:
“Is my money working as hard as I am?”
Finally
If you have any spare mony do NOT leave it in a current account. Get it moved every month to an intrest paying account. Why keep building profits for the bank - get your share - its easy and once you start you will find it very good for your life.