NS&I’s new bonds prove signs looking up for savers
SAVERS have seen some improvements to the market in recent months – although experts say much of the boost has been driven by challenger banks.
During the second half of this year, the situation started looking up for savers, with the Bank of England base rate climbing from 0.25 per cent to 0.5 per cent in November.
Treasury-backed NS&I also announced in November that it was increasing interest rates across its variable rate product range and improving the odds for its 21 million Premium Bond customers, with the number of prizes paid out each month increasing from 2.3 million to an estimated 2.9 million.
In December, there was another boost for savers as NS&I said it was putting some fixed-term bonds back on general sale for the first time since 2009. It reintroduced one-year and three-year Guaranteed Growth Bonds and Guaranteed Income Bonds to general sale.
But while banks and building societies have been tweaking some savings rates upwards, experts have also pointed out that not all rates have rebounded to levels seen before the base rate was lowered to 0.25 per cent in 2016.
Charlotte Nelson, a finance expert at Moneyfacts.co.uk, said: “Whilst savers will be happy at the news that rate rises are finally being seen, they are unlikely to be jumping for joy, as the main banks have still yet to get involved in this new-found competition.”
She added: “2017 has seen some positivity finally return to the savings market with rates starting to rise.
“All this positivity has been mainly fuelled by the challenger banks fighting to be at the top of the ‘best buys’ and leap-frogging each other to get that prized position.”
Ms Nelson predicted the savings market in 2018 is likely to be similar to this year “with small positive gains as challenger banks look to remain competitive throughout the year”.
She said those with money stuck in accounts paying less than the base rate should “vote with their feet”.
The landmark scheme to automatically place people into workplace pensions will also take a step further next year as minimum contribution rates start to rise.
From April 6 2018, the new minimum contribution rate from April will rise from two per cent to five per cent.
Employers must increase contributions into their staff ’s automatic enrolment pension to at least two per cent – and staff contributions must also increase to make up the shortfall needed to bring the total minimum contribution up to five per cent. For example, if the employer pays two per cent, the staff contribution is three per cent.