Provided below are the average annual gross (i.e. pre-tax) rates of interest currently available in the United Kingdom on a variety of account types:

These are the average rates currently available on new deposits. Consequently, with a bit of research, you should be able to find accounts paying rates of interest above those shown.

When you open a savings account what you are actually doing is lending money to a financial institution - you are providing it with a loan. In return, the institution undertakes to pay you interest whilst it has the use of your funds. Because savings accounts are generally perceived as low risk, savers are prepared to accept lower rates of return than are available on other types of investment. Consequently, savings accounts tend to be regarded more as a means of protecting funds against inflation, rather than as a practical method for increasing wealth.

Two different rates of inflation are commonly quoted for the United Kingdom, based on two different indices:

This examines prices for a range of goods and services that a typical household might buy. The rate of inflation measures by how much this index has increased over the past year. This is the index that forms the basis for the Government's inflation target and, as such, is the measure most commonly quoted.

This also examines prices for a range of goods and services that a typical household might buy. The big difference between the Consumer Prices Index and the Retail Prices Index is the latter includes housing costs and mortgage interest payments. Given that most households incur housing costs, such as council tax and buildings insurance, it is often argued the Retail Prices Index provides the more relevant inflation measure for the average person on the street.

Tax affects your rate of return. In order to keep up with inflation, the higher the rate at which you pay income tax the higher the gross (i.e. pre-tax) rate of interest needs to be.

The interest rates quoted below are the minimum gross rates you need to achieve just to keep up with inflation, as measured by the Retail Prices Index (which for most people is the most relevant inflation measure). If the gross interest rate currently being paid on a savings account is below the rate shown, your savings will be losing purchasing power over time - you will be able to afford less goods and services in the future than you can now. If you want the value of your savings to increase in value (in terms of purchasing power), you need to find a savings account paying a gross rate of interest that is above the rate shown.