That's because the best rates on the market are currently offered by notice savings accounts that require savers to give providers a heads-up before taking any money out.
Some ask for as little as seven days notice, but the current top deal – paying 5.1% AER – requires account holders to tell the provider more than six months in advance of when they want the cash.
So who are notice savings accounts best suited for, and are there better ways to save in the short-term?
How do notice savings accounts work?
Like instant-access accounts, notice savings accounts offer a variable rate of interest. This means the provider can change the rate it pays whenever it chooses. But unlike instant-access, notice accounts require you tell your provider in advance that you want to make a withdrawal.
Some notice accounts demand that you let them know months ahead, which is unlikely to suit you if you need to get at your savings unexpectedly. If you have to make an emergency withdrawal from a notice savings account, you're likely to lose some interest.
If you don't need access to your cash in a hurry, however, notice accounts usually reward you with higher rates than saving in an instant access. Our analysis of Moneyfacts data on 17 January 2025 found eight out of 10 of the top variable-rate accounts are notice products.
Find out moreNotice savings accounts currently offer best rates
Notice accounts currently offer the best savings rates on the market. The average interest paid on a notice account is currently 3.99% AER compared to 2.89% for instant-access products.
This table shows how the best notice accounts currently compare with the best instant-access accounts. Results exclude accounts that impose opening restrictions and are ordered by rate.
As you can see, rates on all of the top notice accounts are higher than even the best instant-access deal.
Market Harborough Building Society pays the most interest on nest eggs, giving 5.1% AER on holdings in its 195 Day Notice Account. That's significantly more than the top instant-access rate of 4.86% offered by GB Bank.
Find out more:More notice gets higher returns
Generally, the longer the notice period, the more interest providers are likely to pay on your savings.
Market Harborough Building Society's leading notice account asks savers to tell them 195 days before they intend to make a withdrawal. That's more than six months in advance. The next best notice account is Plum's 95-day Notice Pocket at 5.05%, which asks for just over three months' notice.
Notice periods of even longer are not unheard of. This time last year, United Trust Bank had the best notice account rate of 5.58% AER but required customers to notify them of cash withdrawals 200 days in advance.
The reason you're offered better rates for longer notice periods is because it allows banks to do more with the money, explains Sarah Coles, Head of Personal Finance at Hargreaves Lansdown. She says that if providers have 195 days before they need to give the cash back, for example, they can treat it like a fixed-term account and get more of a return on these funds.
Do fixed-term accounts offer better rates?
In the past, fixed-term accounts have been the go-to for savers who don't need immediate access to their cash. These offer a fixed interest rate in exchange for locking your money away for, typically, between six months and five years. You can't withdraw without penalty before the end of the term, and usually can't add to the account after the initial deposit. Traditionally, fixed-term account rates have beaten the best variable-rate savings accounts. But that's not currently the case.
The current top fixed-term account is Zenith Bank's six-month bond, but its rate of 4.8% AER is lower than all of the top five notice savings accounts, and is also beaten by the best instant-access savings account from GB Bank.
However, fixed rate accounts do offer a guarantee that the interest rate on your account won't drop before the end of the term – something that may not be the case with variable-rate notice and instant-access accounts.
Find out more:Rate gap closing between instant-access vs notice
Notice savings accounts may beat other types of account, but the gap between top rates is getting tighter. That's thanks to a surprise uptick in interest offered on some instant-access accounts over the last month.
Today's top instant-access rate has risen from 4.75% AER to 4.86% since 18 December. While that's still 0.24 percentage points less than today's best notice account rate of 5.1%, this gap was much wider two years ago.
On 18 January 2023, there was a difference of 0.64 percentage points between the top notice and instant-access rates.
Are notice savings accounts worth the wait?
For savers, notice accounts are a halfway house between instant-access and fixed-term accounts.
The main benefit, as already mentioned, is the higher rates they offer in exchange for less flexibility. Unlike fixed bonds though, your money isn't totally locked away – you can still add to your nest egg whenever you wish, and typically don't need to wait as long to access your money.
However, you still can’t get your hands on the cash in an emergency, and the variable rate means interest can be cut if the bank wants to. At the moment, this is a particular risk.
If the Bank of England continues to reduce the base rate in 2025, savings rates are likely to fall too. A base rate cut matters to savers because banks often respond by reducing the interest paid on savings accounts. Variable-rate products are usually hit first.
Savers considering opening a notice account should therefore ask themselves whether they are prepared to accept the uncertainty over the rate in return for a little bit more flexibility over withdrawals compared with a fixed-rate account.
Plus, the negligible returns offered by notice accounts compared to instant-access deals mean savers may want to reconsider whether the benefits of tying their cash up at all are currently worth it.
Find out more:source https://www.which.co.uk/news/article/you-can-still-get-5-on-your-savings-but-theres-a-catch-avI2O9v20mwW