Helpful tips on how to be a savvy saver

WITH rates falling, you could find yourself earning virtually no interest on your savings if you don’t switch regularly.

“If someone handed you an extra £570 per year, would you say no?

“That’s the simple truth between a poor paying account and one of the best easy access accounts for someone investing £50,000,” Anna Bowes at Savings Champion says.

Even with poor rates, you should still have a cushion of cash savings to cover unforeseen events such as the car or boiler breaking down.

One recent survey put the average cost of unexpected bills at £328 a year. If you don’t have an emergency cash savings safety net, ask yourself how you would meet the cost.

If you’re not good at saving, set yourself goals such as funding a holiday – setting aside money will be easier with a reward at the end!

Don’t forget your cash ISA allowance. The introduction of the Personal Savings Allowance (PSA) means that many savers will not need to use a cash ISA to shelter their interest from tax.

But for those who use their full PSA (or don’t qualify as they are 45% taxpayers), currently you can squirrel away £20,000 a year.

Many cash ISAS pay lower rates than the equivalent taxable accounts, so make sure you check which option will pay you the most after tax, if applicable.

When your fixed-rate product matures or your bonus rate ends and you do nothing, often the consequences are dreadful as the rates will plummet.

Almost half of us (46%) have no idea what interest we’re earning on our savings, according to Hargreaves Lansdown.

Find this out and take a look at the Best Buys at bit.ly/2vrlkue, then move your money if need be.

Also consider offers made by your existing provider; sometimes you will be offered an account not available on the open market. Don’t assume it is a great deal, though – always check out the competition. Don’t be persuaded by alluring names or so called “preferential rates” for existing customers, as you can often do better elsewhere, Anna Bowes says. “HSBC, for example, offers a Premier Savings account which it claims offers preferential rates for Premier current account customers, but pays a paltry 0.01%,” she adds. NS&I is a popular savings institution in the UK as it offers unique protection by HMRC on all the money deposited with them – not just £85,000 per provider, as with the Financial Services Compensation Scheme. Since lockdown, NS&I has cancelled planned cuts to a number of its accounts and therefore now offers market-leading easy access accounts. It may be time to take a leap of faith and try a savings provider that you are less familiar with. For example, Shariacompliant savings accounts comply with Islamic law, but are available to any saver, regardless of religion or culture. “As Sharia law states that money itself has no intrinsic value, neither party can profit from an exchange of money, therefore the payment and receipt of interest is forbidden,” Anna says.

“Instead, Shariacompliant accounts pay an ‘Expected Profit Rate’ (EPR) as an alternative to interest, which is the level of profit paid by the provider to the saver.

“As a result, these providers cannot confirm that the rates on their fixed-term accounts are guaranteed – although to date the EPRS have always been met.”

As well as your ISA allowance, there may be other tax allowances waiting to be used or wasted.

Does your spouse pay less tax than you? If so, consider putting more savings in their name. ■

Did you know? Almost a third of adults aged fifty and over aren’t putting money into savings accounts, Co-op Insurance reports.