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Derin Clark

Online Reporter
Published: 16/12/2020
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A combination of Bank of England base rate cuts, a new funding for lending scheme and the ongoing economic uncertainty has resulted in saving rates falling to historic lows during 2020. It is clear that it has been a disappointing year for many savers, but, although we cannot predict the future, it is hoped that 2021 will see some signs of recovery.

Below we have highlighted some of the banks that savers should watch during 2021.

The up and coming challenger banks

Despite the economic uncertainty, a number of banks launched savings products for the first time this year. Of these, JN Bank and DF Capital offered some of the most competitive rates in both the easy access and fixed rate bond charts.

JN Bank, which is owned by The Jamaica National Group (JN Group), first entered the savings chart in October when it launched an easy access account, along with a one, two, three, four and five year fixed rate bond. Although these rates were not chart-topping at the time, they were still competitive, with the easy access account offering 0.55% on deposits of £1,000 or more. Meanwhile, the one year bond had a rate of 0.80% and the five year bond a rate of 1.30%.

October also saw DF Capital enter the savings charts for the first time. DF Capital launched a market-leading notice account during the month, with its 90 Day Notice Account (Issue 1) paying 1.11% monthly. At the same time, DF Capital also launched a highly competitive one year fixed rate bond that paid 1.18%.

Although both of these banks have since reduced their rates, as newcomers into the savings market, they could potentially need to increase their funds next year or want to increase their brand awareness, which could see them launch new, competitive savings products.

Another bank that started offering savings products this year that savers may want to watch out for in 2021 is Zopa. Originally founded as a peer-to-peer (P2P) company, Zopa gained its banking licence this year and in August launched a range of fixed rate bonds. The bonds launched ranged from a one to five year fixed term and, although did not offer chart-topping rates, were still highly competitive at the time, with the one year paying 1.04% and the five year paying 1.29%.

Since the summer, Zopa has withdrawn all its saving products, but there is the possibility that it will decide to re-enter the market next year.

As JN Bank, DF Capital and Zopa all have a UK banking licence, they are part of the Financial Services Compensation Scheme (FSCS). This means that deposits of up to £85,000 in each of these banks are protected should the bank collapse. For more information about this scheme, read our guide on depositor protection schemes.

Banks that may enter the market during 2021

When new banks enter the savings market for the first time, they often do so offering competitive rates. As such, savers may want to watch out for banks that have a UK banking licence, but that have not yet entered the savings market. Of these, two to watch are Castle Trust Bank and Oxbury.

Castle Trust Bank currently offers fixed rate bonds and ISAs to its existing customers. Next year, the bank may decide to extend its savings products to new customers, in which case it might enter the charts with a competitive rate to attract savers.

Oxbury, which is a bank aimed at supporting the farming sector, is in the process of planning the launch of its savings products. At launch Instant Access, Notice and Fixed Term Savings Accounts will be available to any farmer, business or individual saver. Again, Oxbury may offer competitive rates and as such, is a bank that savers may want to look out for next year.

Banks in process of getting a banking licence

Another type of bank to watch for next year are those in the process of getting a UK banking licence. Once these banks have their licence, they will be able to start offering saving products to consumers and, as seen with the banks entering the market this year, could do so with highly competitive rates.

One bank in the process of getting its licence is Vive, which has already stated that it is planning to offer fixed rate savings accounts, along with personal loans. If Vive gains its banking licence, it is likely to be an online-only bank that is mainly operated through an app and using open banking (a secure method of giving providers, especially lenders, access to the consumer’s financial information).

The established challengers

Along with the new banks, savers should also keep watch on banks that have consistently offered good rates during 2020, as these banks may continue to offer competitive rates into 2021.

Bank of London and The Middle East (BLME), for example, has regularly offered the top rates in the fixed rate bond charts throughout 2020. As such, savers should continue to watch this bank’s rates next year, as they are likely to remain at the top, or near to the top, of the charts.

As well as this, savers should keep a look out for the winners of the Moneyfacts Consumer Awards Savings & ISAs category winners. Last year, Skipton Building Society won the High Street Savings Provider of the Year award, RCI Bank won Online Savings Provider of the Year, and Charter Savings Banks won ISA Provider of the Year.

The providers shortlisted in the High Street Savings Prover of the Year category in the 2021 Moneyfacts Consumer Awards are Barclays Bank, Britannia, Halifax, Leeds Building Society, Nationwide Building Society, Post Office Money®, Sainsbury’s Bank, Skipton Building Society, Virgin Money, and Yorkshire Building Society.

The shortlist for the 2021 Online Savings Provider of the Year is Aldermore, Charter Savings Bank, Cynergy Bank, Ford Money, Gatehouse Bank, Marcus by Goldman Sachs®, OakNorth Bank, Paragon Bank, RCI Bank and Secure Trust Bank.

Meanwhile, the ISA Provider of the Year shortlist for 2021 is Al Rayan Bank, Aldermore, Charter Savings Bank, Ford Money, Leeds Building Society, Metro Bank, Paragon Bank, Shawbrook Bank, Virgin Money and Yorkshire Building Society.

The winners of these awards for 2021 will be announced on 21 January 2021.

Easy access savings accounts to watch for in 2021

The economic uncertainty has resulted in larger numbers of savers looking to put their money into accessible easy access accounts in preference to locking into fixed bonds and ISAs, a trend that is likely to continue into 2021.

While easy access saving rates may not see significant improvements from the historic low rates experienced this year, savers should keep watch on banks that have consistently offered competitive easy access rates during 2020.

Paragon Bank, for example, regularly appeared in the Moneyfacts Best Buy easy access chart at the end of 2020 and offered competitive rates from September to December this year. Another bank to watch out for is Aldermore, which has been offering a competitive easy access rate towards the end of 2020, as well as earlier in the year.

Another bank savers should be aware of moving into 2021 is Marcus by Goldman Sachs®. Although this bank reduced its rate during 2020, throughout 2019, it regularly offered the top-paying easy access rate. If Marcus by Goldman Sachs® does increase its rate next year, it is likely that SAGA, which is under the same banking licence, will follow and also increase its easy access rate.


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