Savings rates have hit a record low, according to data published on Monday, just as thousands of people are expected to start looking for a new home for their nest-egg cash when the first pensioner bonds mature on Friday.
The National Savings & Investments pensioner bonds, known officially as 65+ guaranteed growth bonds, went on sale in January 2015 and were a huge success, with 470,000 people signing up for the one-year version of the account paying 2.8% interest.
But when the bonds mature, from 15 January onwards, those savers who do not find a new home for their cash will be automatically moved into another one-year NS&I savings account paying a much lower 1.45%.
Those looking for a decent-paying account to move to may struggle. Financial data website Moneyfacts said savings rates, as measured by the average easy-access cash Isa rate, “have hit another record low”.
It said the typical Isa rate had fallen steadily from 1.52% in January 2013 to 1.25% a year later, then down again to 1.13% in January 2015 and to 1.06% this month.
“Back in 2013, the top-paying easy-access Isa paid 2.75% yearly, but the best rate today is only 1.5% – a significant 1.25% less,” said Charlotte Nelson, a spokeswoman for the website. “Standard easy-access savings accounts don’t fare any better, with the top rate falling by 0.68% from 2013 to just 1.65% today.”
From April 2016 all basic rate taxpayers will be able to earn up to £1,000 a year in interest on their savings completely tax-free, while higher rate taxpayers will be able to take the first £500 in interest tax-free. Nelson said Isas were likely to lose some of their attraction as a result, meaning low rates were likely to become more prevalent.
There was one piece of good news for savers, however. The Nottingham building society has launched a savings account paying 5%. The Savvy Saver account aims to help people save for Christmas 2016, has a fixed end date of 12 December and allows customers to save up to £100 a month. It is exclusively available through the society’s branch network and can be opened with a minimum of £10.
The society, which operates in 56 locations across nine counties, said that if someone saved £100 a month for 12 months without making any withdrawals, they could earn up to £32.50 gross interest by the anniversary of the first deposit, based on the current 5% variable rate.
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