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Michelle Monck

Michelle Monck

Consumer Finance Expert
Published: 06/01/2021

2020 ended with savings rates at historic lows but will 2021 bring better rates for savers and is it worth switching your savings account?

Data from the Bank of England shows there is £215 billion held in savings accounts paying zero rates of interest. During 2020 many people became accidental savers due to lockdowns and regional restrictions that limited their spending. As a result, there was £150 billion saved into cash savings accounts during last year. By October 2020 savings balances had reached £111 billion compared to £45 billion in October 2019.

While savings rates at the start of 2021 remain depressed compared to previous years, those earning no interest or low interest on their savings could instead be earning up to 1.00% on a one-year fixed rate bond or 0.75% with an easy access account.

Savers can switch their accounts easily especially when using online savings accounts. Research from Investec Bank plc revealed that 79% of savers chose a digital or online based savings account in 2020 and just over half of respondents felt an online account would pay a better rate of interest. Data from supports this as 68% of accounts paying a variable rate of 0.50% or more can be opened online. Nearly a fifth of savers had avoided branch-based accounts to reduce the chances of catching COVID-19.

Linda Brown, Head of Savings at Investec, said: “It’s clear that the Covid-19 crisis has accelerated the use of online and digital platforms, but this is a continuation of a trend we’ve seen among our own client base in recent years. It’s becoming more and more important for people to be able to interact digitally with their savings products as it provides a slicker experience that puts the client in control, particularly at times when freedom of movement and access to branches is restricted.”


What are the best savings accounts that can be opened online?

The best one-year fixed rate bond that can be opened online is available from Ahli United Bank (UK) Plc and its Raisin UK – 1 Year Fixed Term Deposit account. It pays a rate of 1.00% gross and interest is paid on maturity. The minimum balance is £1,000 and the account must be opened through the Raisin savings platform.

The best easy access savings account that can be opened online is available from ICICI Bank UK and its SuperSaver Savings Account. It pays a rate of 0.75% gross and interest is paid monthly. Savers will need to open an ICICI HomeVantage Current Account as part of opening the SuperSavings Saver Account.

There is also emerging competition for savers funds from savings apps that have recently launched including Plum and Chip. These connect to a savers main bank account and use AI to identify opportunities to save money. Right now, Chip is offering 1.25% on its Chip+1 easy access account for balances up to £5,000. The 1.25% is paid out as a bonus rather than interest and money is protected by the Financial Services Compensation Scheme (FSCS). readers can apply for this account using VIP passcode MF4CT5.

Find out more in our guide how to save money using a savings app.

Will NS&I come back with market leading savings rates in 2021?

In November 2020 NS&I reduced the rates on its market leading account and as a result many other banks and building societies also followed with rate reductions. Bank of England data shows that savers withdrew £6.2 billion from NS&I accounts in November and based on this data NS&I now has a potential shortfall of £5 billion in its savings balances. NS&I may therefore return with a competitive savings rate in 2021 to make up this shortfall.

Savings rates expected to remain low in 2021

According to reports from AJ Bell, markets are pricing a 70% chance that the bank of England base rate will not change in 2021, with a 30% chance of a further cut to rates.

Laith Khalaf, financial analyst at AJ Bell explains further:

“While market prices can of course be proved wrong, there are good reasons to think that the Bank of England will keep rates low throughout the coming year. Unemployment is expected to rise sharply in the coming months, and the UK economy is, at best, going to be in recovery mode.

“With such a fragile economic situation, the Bank won’t want to rock the boat by hauling in its vast monetary stimulus programme any time soon. Whether the MPC takes the plunge with negative rates really depends on the course of the pandemic, and the progress of the economy, in the coming months. A Brexit deal has at least averted a further economic shock which might have tipped the Bank of England towards a rate cut.”

While rates are not expected to increase in the short to medium term savers that want to access their funds in the next five years should make sure they compare savings rates to get the best rate they can. Those that don’t need to access their money for five to ten years or even longer can also consider investing in the stock market. Investing over the long term helps to reduce the effect of volatility in the stock market and savers worried about risk can look for more conservative investments as part of their investment portfolio. Savers can find out more about how to invest their money in our guide.


Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time. Links to third parties on this page are paid for by the third party. You can find out more about the individual products by visiting their site. will receive a small payment if you use their services after you click through to their site. All information is subject to change without notice. Please check all terms before making any decisions. This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.

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