Bonus rates give savers the biggest bang for their buck

Attractive introductory rates are in vogue in the UK savings market with many of the top accounts including short term bonuses.

Savers seeking to maximise returns in this low-interest rate environment should look to take advantage of these deals but be mindful that the rate will drop significantly once the bonus period ends and be aware that the bonuses on many accounts are variable.

Six of the top ten easy access savings accounts and four of the top ten cash ISAs include introductory bonus rates.

For example, the ING Direct savings account is paying the highest easy access rate at 3.0 per cent - 1.5 percentage points above the Bank of England base rate which is just 0.5 per cent. However, this rate includes a 2 pre cent bonus which lasts for 12 months so after the first year it will drop back to just 1%. Similarly, Barclays is offering a market-leading cash ISA, its Golden ISA, paying 3.61 per cent, but this rate includes a 1 per cent bonus so the rate will fall to 2.61 per cent after 12 months.

Accounts with bonuses shouldn't be avoided but savers must be vigilant. Many bonuses are variable so the providers have the right to alter them during the introductory period. Savers also need to be aware of when the introductory offer ends and be ready to move their money to another account if the rate then looks uncompetitive against the rest of the market.

Kevin Mountford, head of banking at moneysupermarket.com, said; "At a time when so many accounts are offering rock bottom rates, bonuses are a great way for savers to get returns well above the 0.5 per cent base rate.

"Banks are desperate to claw in savers' cash, and use bonus rates to tempt in new customer deposits. Once the bonus period ends, providers hope most customers won't be bothered to move their money despite the lower rate.

"However, savers can easily play the banks at their own game as long as they keep switching to the most competitive deals when the bonus period comes to an end - usually after 12 months. A really savvy saver could spend a long time benefiting from savings bonuses as long as they are willing to put a little effort in.

"As a final note of caution, some bonus rates are not fixed and savers should keep an eye on their accounts in case their provider reduces the bonus at short notice.

"We've seen a number of providers reduce bonuses recently and with interest rates expected to remain unchanged for the foreseeable future, this practice could become more prevalent. Banks and building societies won't be able to use base rate changes as an opportunity to manipulate profit margins so they may look for other ways of doing so, of which this is one.

"Not all bonuses are variable though so you can protect against further falls in variable savings rates by opting for an account with a fixed bonus element."