Find the best savings as rates tumble
Many were still reeling from seeing December’s shock one point rate cut applied to their accounts early in the New Year.
Two out of five of all variable savings accounts now pay interest of 1% or less, according to a survey by rates analyst Moneyfacts carried out last week.
The latest bank rate fall means that savers’ returns will deteriorate further, which is particularly painful for pensioners who rely on income from their savings.
Fixing seemed the only option
Judith and Gordon Hill, from High Wycombe, Buckinghamshire, are retired and rely on savings to supplement their pension income and pay for holidays.
Ex-bank worker Judith, 66, and Gordon, 69, a former sales manager, have put some of their savings into a nine-month fixed-rate bond with Saga, provided by HBoS-owned Birmingham Midshires. Saga has since withdrawn its fixed-rate bonds.
‘When our previous Saga bond matured in October, Saga offered us an excellent rate of 7% as a follow-on product,’ says Judith, who has two grown-up children and one grandchild. ‘With rates falling fast, we knew we had no chance of getting a reasonable rate of return in an instant-access account. Fixed rates give us peace of mind in the short term.’
Conservative leader David Cameron has promised bigger tax breaks on savings income to encourage a greater savings culture.
But for now, earning a real rate of return on cash, after tax and inflation, is nearly impossible.
Many institutions have used bank rate cuts as an excuse to take a hatchet to savings rates and bolster profits.
The AA, Abbey, Barclays, Cahoot, Halifax, RBS NatWest and also Britannia, Chelsea, Chorley & District, Stroud & Swindon, Tipton & Coseley and West Bromwich building societies all cut some savings rates by more than the fall in the base rate during at least one of the cuts made between October and December.