Get creative to make the most of your savings

BRITONS are being urged to hit back against the great savings rate rip-off by demanding a much better return on their money.

Yesterday the Daily Express revealed how savings rates are at a five-year low despite the Bank of England hiking base rates to 0.75 per cent in August.

You can get far better returns if you make the effort to shop around and look beyond cash.

Damien Fahy, founder of personal finance website MoneyToTheMasses.com, said savers need to vote with their feet: “Do not let the banks profiteer at your expense.”

CASH With average easy access savings accounts paying just 0.49 per cent, savers can be forgiven for giving up on cash altogether.

Anna Bowes, founder of the independent savings rate platform SavingsChampion.co.uk, said there are better rates away from the big high street banks: “It is time to take a leap of faith to a challenger bank. Your money is safe as the first £85,000 is still covered by the Financial Services Compensation Scheme.”

Kent Reliance Building Society pays 1.37 per cent on £1,000 with easy access, while Virgin Money pays 1.36 per cent on £1. You can get more by locking money away for longer, with Paragon, ICICI and Vanquis all paying a fixed rate of 2.20 per cent for two years on a minimum £1,000.

Charter Savings Bank pays 2.41 per cent over three years on £1,000 and 2.70 per cent over five years (see Best Buys on page 42).

BONDS Corporate bonds are a riskier but more rewarding alternative to cash. Fahy said you can spread the risk by investing in a fund that invests in hundreds of different corporate bonds and use your Isa allowance for tax-free returns.

He tips global fund Schroder High Yield Opportunities, which currently yields 6.17 per cent a year: “It has also managed to consistently grow its payout year-on-year since 2013 and outperformed its sector over one, three and five years.”

INNOVATIVE FINANCE ISA To get an even better return, it pays to be a little innovative. The new Innovative Finance Isa typically offers tax-free rates of between 4 and 8 per cent a year, but there is extra risk.

Innovative Finance Isas (Ifisas) lend money to growing businesses via the rapidly increasing peer-topeer (P2P) lending market, sometimes called crowdfunding.

Ifisas are offered by a string of companies including Landbay, Lending Works, Money & Co, London Capital & Finance and RateSetter and you can invest as part of this year’s Isa allowance.

They are regulated by the Financial Conduct Authority and carry out checks on who they lend to, but funds are not protected by the Financial Services Compensation Scheme, so there is a risk.

Neil Faulkner, co-founder and managing director of Ifisa ratings company 4thWay, said some asset-secured P2P lending sites such as FundingSecure and MoneyThing can pay around 12 per cent after fees before bad debts: “Spread money across platforms with solid records and maximum security.”

Faulkner said the Innovative Finance Isa is not for everybody, so make sure you know what you are buying.

SHARES Patrick Connolly, certified financial planner at Chase de Vere, said stock market investors have been handsomely rewarded by a bull run lasting nearly 10 years, but many are cautious about committing new funds: “If worried, a regular monthly savings plan takes the angst out of market timing.”

Terry Smith’s £18billion Fundsmith Equity is the UK’s most popular fund, up 309 per cent since launch in November 2010, double the stock market return.

Lindsell Train Global Equity is next most popular, according to Interactive Investor’s head of investment Rebecca O’Keeffe, who added: “The Vanguard LifeStrategy range of ready-made investment portfolios are also popular due to their low cost diversified approach.”