Keep saving... for that green flash moment
WHEN cartoonist Ralph Steadman appeared on Radio Four’s Desert Island Discs 20 years ago, he was quite precise as to the location of the island he should be holed up on. It would be in the South Pacific Ocean, north west of New Zealand, somewhere in the vicinity of the Pitcairn Islands.
This would enable him, he said, to sit on the beach either before sunset or just as the sun was rising – and wait for the green flash on the horizon. An indicator of dusk or the breaking of dawn. A sight that would exhilarate him. ‘God would give you his own show,’ he told presenter Sue Lawley at the time.
According to some financial experts, the savings market is about to experience its own version of the ‘green flash’. Savings rates, they say, could be on the march upwards again after a miserable decade. Yes, a new dawn awaits savers. Hip hip hooray.
Their cause for optimism stems from the fact that two Government lending schemes, designed originally to stimulate the economy and encourage the banks to continue lending to small businesses, are drawing to an end.
Between now and the end of next month, the taps on Funding for Lending and Term Funding will be turned off. It will mean the banks and building societies will no longer have access to the cheap money available under these initiatives. So, instead of relying on the Government for borrowing, they will have to turn to savers. That should mean higher savings rates as they look to encourage customers to lodge new funds with them.
SavingsChampion, an organisation set up to encourage savers to maximise the interest on their cash balances, has done some interesting research into how savers have been treated since Funding for Lending was introduced in July 2012. It does not make for pretty reading. ‘Badly’ is the word that springs to mind.
Five-and-a-half years ago, you could easily get more than 3 per cent interest by putting your money in an easy access saving account.
Today, despite the fact that the Bank of England’s base rate is at the same level as it was in July 2012, the best easy access rate is just a tad over 1.3 per cent. The Government’s two lending schemes have stopped the need for financial institutions to attract savers by paying top dollar rates.
Some banks, says SavingsChampion, have cut rates as if they were woodcutters on speed. For example, Santander Bank was paying interest of 3.3 per cent on its variable rate Isa (Direct Isa Issue 9) back in July 2012. Today, its equivalent Isa is paying either 0.25 or 0.5 per cent, dependent on how much you are prepared to squirrel away in the account.
Anna Bowes, head honcho at SavingsChampion, does not believe that savings rates will rise back to 2012 levels unless there are further increases to the Bank of England’s base rate. Indeed, she feels the Government’s lending schemes have encouraged the banks to pick up bad habits, cutting savings rates whenever they feel like it and increasing the margin between savings and mortgage rates to boost profits and rebuild balance sheets. Such bad habits, she says, may take a while to shake off. But the green flash moment is nearer than it has been for a while. A GENTLE reminder. If you have yet to complete your tax return for the year ending April 5, 2017, may I suggest you wait no longer. The deadline – January 31 – is fast approaching and failure to file online in time will result in a minimum £100 fine.
If you need any encouragement it is my main task today – in amongst sneaking out to see new film The Post (a film about the good work journalists do in exposing coverups) at my local Curzon cinema.
So may I suggest you gather your assortment of key documents – P60, P11D and also P45 if you have left an employer mid-tax year – and get cracking. Yes, there is no time like the present.
Do not forget to include any income from buy-to-let properties or dividends from investments. Just as importantly, remember to note down all your expenses including the charitable donations you have made under Gift Aid – they will help reduce your overall tax bill.
Given the new wave of love between ourselves and the French (thank you Emmanuel Macron for promising to lend us the Bayeux Tapestry) may I end with two words? Bonne chance.
Rates could be on the march upwards again after a miserable decade. A new dawn awaits