Complete lack of interest for risk-averse savers

SAVERS earned the lowest amount of interest in decades last year, despite having record high balances.

Interest rates on deposit accounts plunged to a new low in 2017, even as savings and cash Isa deposits climbed 2.6 per cent to £1.32trillion. Savers earned just £4.6billion in total interest on cash savings, down from £6billion a year earlier and the lowest level for 20 years, according to research from website StepsToInvesting.com.

The average savings rate has plunged from just over 4.8 per cent in 1998 to a mere 0.35 per cent last year.

In 2007, the last full year before the financial crisis, savers scooped £33.1billion in interest, more than seven times last year’s figure, but years of near-zero interest rates have taken their toll. Simon Longfellow, head of StepsToInvesting, said savers willing to take on extra risk can get higher dividend income by investing in the stock market: “The amount of potential income that savers are currently missing out on is staggering.”

However, savings rates look set to improve with the Bank of England signalling further interest rate hikes and new figures showing cash Isa rates are now rising for the first time in seven years.

The average cash Isa now pays 0.7 per cent compared to just 0.53 per cent a year ago, a rise of nearly a third, according to business information service Defaqto. Long-time savers can get up to 2.25 per cent from a fixed-rate cash Isa over five years.