Worst returns in a decade
SAVERS are suffering their worst losses in a decade.
Prices are rising at their fastest rate for more than nine years. Yet the average rate paid on easy-access accounts has fallen to an all-time low of 0.09 pc, Bank of England figures show. It means the gap between price rises and what you can earn on savings is at its widest for ten years.
Inflation burst through the 3pc barrier in August, hitting 3.2pc a year, 60pc up from 2pc in July. Worse still, the Bank last week warned inflation is likely to rise to more than 4 pc. There is not a savings account that goes anywhere near matching these rates.
As a result, savers are seeing the value of their money eroded. After taking into account the average 0.09pc interest paid on easyaccess accounts, inflation means savers are losing out to the tune of 3.11 pc.
Every £1,000 saved a year ago is now worth just £969. At 4.2pc inflation your £1,000 will devalue to £958. The situation is far worse than a year ago when accidental savers put aside billions during the pandemic.
The average rate on easy-access accounts was only a fraction higher than today at 0.1 pc. But the rise in the cost of living was 0.2 pc.
Experts are urging savers to squeeze all they can out of rainy-day cash to lessen the blow of rising inflation.
The amount in easy-access accounts has jumped by 24 pc to £958 bn since March 2020. We also have £246 bn in current accounts, paying no interest, up 34 pc over the past 18 months. Leaving your nest egg with a big bank is your worst option — most pay only 0.01pc on easy-access accounts.
With inflation at 3.2pc, it means you would lose as much as £319 a year on each £10,000 after taking £1 interest into account. But by switching to a smaller bank or building society, you could earn as much as 0.65 pc.
There are now 14 accounts paying 0.5pc or more. Top deals include Marcus by Goldman Sachs, Charter Savings Bank and Saga, which raised rates to 0.6pc last week, while Ford Money and Aldermore Bank went up to 0.5 pc. Other leaders include Investec at 0.58 pc, and Tandem’s 0.55 pc.
Others come with restrictions but may be suitable for part of your savings. Family BS pays the highest at 0.65pc but you can add money only until November 5. Aldermore pays 0.6 pc on its double access account, but limits you to two withdrawals. Coventry BS’s limited access online account pays 0.55pc or 0.5pc on its branch or postal-based version and allows six withdrawals. The society also has a new four access saver at 0.65 pc, allowing four free withdrawals a year.