Fight back now to win the war on saving rates
SAVERS reeling from NS& I’s decision to slash interest rates and cut premium bond prizes are being urged to make their money work harder by either shopping around for better deals or focusing on paying down their debts.
Getting a decent return is harder than ever and yesterday’s announcement by National Savings & Investments piled on further misery for savers.
The Treasury- backed provider, which has 25 million customers, cut the rate on its market- leading easy access direct saver account from 1 per cent to 0.15 per cent.
Its best buy income bonds fell from 1.15 to 0.01 per cent, and its investment account from 0.80 to 0.01 per cent.
These come into force from November 24 and financial experts are urging NS& I savers to consider every method of boosting their return.
Anna Bowes, co- founder of Savings Champion, said “the savageness of these rate cuts is devastating” and could force down rates elsewhere: “If a wall of money is pulled out of NS& I it could swamp other savings providers, destroying the recent pick- up in competition.”
In today’s savings market, any bank or building society that offers a market- leading rate is besieged by potential customers.
Last week Skipton Building Society pulled its online bonus saver, which paid 1.20 per cent including a 0.5 per cent bonus, after “unprecedented demand” in the first 24 hours.
NS& I was forced to act after savers paid in £ 14.5 billion in a few months, and Hargreaves Lansdown personal finance analyst Sarah Coles said: “It has to balance the needs of savers against taxpayers, who eventually pick up the bill.”
For those wanting easy access, the Skipton eSaver Issue 16 currently pays 0.70 per cent on balances up to £ 25,000, rising to 1.01 per cent for savings over £ 50,000. Ford Money’s Flexible Saver pays 0.75 per cent.
Coventry Building Society’s Double Access Saver pays a variable 1.20 per cent, with just two charge- free withdrawals a year.
Coles said you get more if you can tie up your money in a fixedrate bond: “You can earn up to 1.31 per cent over one year with Oaknorth, and 1.36 per cent over two years with Aldermore.”
She added: “This way you will also lock in a rate, which can be particularly useful when savings rates could fall further.”
More than 22 million people hold premium bonds and although the prize fund rate was also cut the drop was less severe, from 1.40 per cent to 1 per cent. From December the odds of each £ 1 bond winning a prize will fall from 24,500 to 1 to 34,500 to 1.
Scottish Friendly savings specialist Kevin Brown said those with debts should divert savings into paying them off instead.
The difference between the interest paid on savings and that charged on debts is huge – many credit cards charge around 20 per cent, with overdrafts up to 40 per cent.
Brown said others may want to consider stocks and shares: “They offer the potential for more attractive returns, but with risk attached.”