SAM BRODBECK PERSONAL ACCOUNT

High street banks are adept at eroding your money – it’s time to look further afield

As a rule of thumb, financial advisers say you should have at least six months of outgoings held as cash in an emergency fund. This should be in an account you can raid at a moment’s notice and that hopefully pays a little interest.

For me, that would mean about £9,000. Many of you will have far more than this in savings accounts – and will have been dismayed to hear that rates for millions of people will fall again. National Savings & Investments (NS&I) is to cut the rates on 14 of its savings deals, including lengthening the odds on winning Premium Bonds. There will still be two monthly winners of the £1m jackpot, but there will be fewer winners of all other prizes, from £25 to £100,000.

That means 22 million bondholders are left with an effective “rate” of just 1.3pc, down from 1.4pc. Inflation in January was 1.8pc – meaning the value of your money is eroding rapidly.

Marcus, the easy-access account that marked Goldman Sachs’s first foray into consumer saving, also trimmed its rate this week. New customers will now earn 1.3pc. The jubilation that greeted the launch of Marcus – and its market-leading 1.5pc interest rate – tells you all you need to know about the dire state of the savings market since the financial crisis. More than 400,000 people are happy to leave £14bn in an account they know is losing them money.

Things are not going to get better any time soon. The Bank of England restrained itself from cutting the official rate in January, but it wouldn’t take much of an economic wobble to panic Threadneedle Street into slashing back to 0.5pc or even 0.25pc.

All of which means one thing. Anyone with chunky amounts sitting in cash cannot wait for banks to do them a favour. Ranting and raving about banks “ripping off their loyal customers” will not help. Banks are profit-seeking businesses, and will pay you as little as market forces allow.

As a source of funds for the Treasury, NS&I has the convenient excuse that it has to think about “the interest of taxpayers” when setting rates.

Inflation-beating rates do exist but you will have to trust

It’s not Nigerian banks you should be worried about but ‘mini-bonds’

lesser-know names. NS&I’s three-year guaranteed growth bonds will pay 1.3pc (down from 1.7pc) from May. Nigerian bank FCMB pays nearly 50pc more, at 1.9pc. Like NS&I, which is guaranteed by the Government, deposits held by FCMB are protected up to £85,000 by the FSCS scheme.

I accept I may be on to a loser, asking you to trust a Nigeria-based bank – after years of being spammed by strangely generous “princes”.

Rather than foreign banks, savers should be wary of the growing number of sharks touting “mini-bonds” and other unregulated accounts promising returns far higher than those above. Appearing top of a Google search is not a guarantee of anything. Use your bargepole accordingly.