Making money: what the experts think
Savings stinker
It’s been a terrible summer for savers. The Bank of England’s rate cut to 0.25% has triggered a slide in interest-rate cuts across hundreds of accounts. Arguably the worst affected, said Anna Mikhailova in The Sunday Times, are the 3.6 million Britons who hold their cash in Santander’s instant access 123 account, which currently pays 3% on balances between £3,000 and £20,000. That rate will be slashed to 1.5% in November, removing “one of the few remaining options for savers looking for a decent return on their cash”.
Stand-out appeal
It was probably only a matter of time before Santander succumbed, said Andrew Hagger of the consumer advice site Moneycomms. “Paying 3% with instant access was probably too good to be true in the current depressed savings market.” The average rate paid on current accounts with balances of £5,000 fell to 0.30% this month. Returns from conventional instant access savings accounts are even worse: more than a third now pay 0.25% or less, “with some offering returns as measly as 0.01%”. The “stand-out appeal” of the Santander account was even more striking when you consider that the current best-buy twoyear fixed-rate bond – “a product that would be expected to pay depositors more as they have no access to their money for 24 months – offers just 1.81%, said Naomi Rovnick in FT Money. There are still a few generous deals around. The Club Lloyds current account, for instance, pays 4% on balances of £4,000-£5,000 but – ominously – that too is now “under review”.
Rate-chasing
TSB, Nationwide, Tesco and Bank of Scotland also still have high-interest accounts on the market, said Richard Evans in The Sunday Telegraph. The problem is that “all pay their best rate on only a small tranche of your overall balance”, so you need to open “a number of them” to make a difference – a “fiddly process” that’s complicated to manage, particularly given that some accounts have a finite period of higher-interest rates. But with no end in sight to ultra-low rates, savers are going to have to get used to this kind of “active cash” strategy, said Rovnick. “Rate chasers” have never had to work so hard.