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5.5% savings rate: Where to find the highest interest in 11 years

Australia’s best paying savings account is not the one you think.

Compilation image of people walking across a street, and a fan of notes and coins to represent savings
Make your money work for you with these high-interest savings accounts. (Source: supplied) (Samantha Menzies)

The highest savings rate available right now is sitting at an 11-year high of 5.5 per cent. As the cost-of-living crisis continues to bite, here’s where to go to get the most bang for your savings buck.

The best savings rates available are generally 1.5 percentage points above the official cash rate, but they don’t always move in lockstep with official moves.

Also by Nicole Pedersen-McKinnon:

Another thing I learned a while ago is that many Aussies don’t realise the highest-paying is not always the highest-profile one.

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Here’s where you need to look.

The online savings landscape

ING brought the first fee-free online savings account to Australia around 24 years ago - when comedian Billy Connolly powerfully persuaded us with sheer comedic charisma (expensively for ING) to jump on board. The European-originating bank shook up a complacent and antiquated Aussie market, where customers were the losers.

I’d been working for the Financial Times in London the year before, where ING had already rolled out its heavy-hitting strategy for saver success. So, I knew the drill.

But here’s the thing – it secured such a name so fast in Australia for offering the best savings rates, that pretty quickly, it could pay a lot less and savers would still sign up. And there have since been many years when synonymous-with-savers ING was not, in fact, the highest-paying deposit option.

But guess what? It’s back. Big time.

The top accounts for savers

More than two decades on from ING’s emphatic Aussie entrance, the savings space is now a competitive one, with many institutions vying for your deposit dollars – they are a cheap source of funding for lending to other customers.

The table below shows that many accounts are nipping at ING’s again-impressive interest heals, but only the age-limited BoQ offering is equal to it. The latest high-rate payer is the Virgin Money Boost Saver, but it pays a little less on a little more - its maximum deposit is $250,000 versus ING’s $100,000.

Highest ongoing savings rates (excludes kids accounts)

Table of highest savings rates avaliable
Note: base rate is the rate applied when conditions are not met for that month. (Source: supplied)

Today’s high-rate hurdles

There is, however, something the eagle-interest-eyed will notice about every institution in the above table: all offer a teeny-tiny base rate. This is the guaranteed interest rate paid each month, with the balance of any possible interest over and above conditional on your contributions, withdrawals and, sometimes, other sky-high qualification criteria.

Of the all-age accounts, Virgin Money’s base rate is the lowest - just 0.05 per cent - but with a potential 5.3 per cent if you meet all the criteria. When total available savings rates were last at these levels, it was typical for account interest to be half: half ratio of base to bonus.

All today’s offers rely on, frankly, customers stumbling at the high-interest hurdles.

However, ING’s account is the most attractive, with 0.55 per cent assured and the potential for 4.95 per cent more. Though no account is truly as generous as 11 years ago, its savings reputation is restored to reality.

Nicole Pedersen-McKinnon is the author of How to Get Mortgage-Free Like Me, available at www.nicolessmartmoney.com. Follow Nicole on Facebook, Twitter and Instagram.

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