Savings rates hit ‘record low’

Powered by article titled “Savings rates hit ‘record low'” was written by Rupert Jones, for on Monday 11th January 2016 15.18 UTC

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. © Guardian News & Media Limited 2010

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