Why it WON’T pay savers to wait for better rates

SAVERS are advised to avoid playing a long game of ‘wait and see’ in the hope that cash account rates will rise.

A slight fall in the official rate of inflation in May to 2 per cent – bang on the Bank of England’s target rate – will do little to help people who want to boost savings and beat the rising cost of living.

And experts say that following a brief spell of competition in the savings market, the arrival of a slower-paced summer period has caused best-buy rates to stall. Sitting back and hoping for better – higher interest rates and lower inflation – is not the answer if money is stagnating in a poor-paying account.

Anna Bowes, of rate scrutineer Savings Champion, says: ‘People who have money sitting in the bank paying all of 0.1 per cent, waiting for something else to happen, are losing far more when they could be earning interest elsewhere. At least move money to a best-buy easy access account and consider locking away some money for longer if you want to beat inflation.’

Top paying easy access accounts include those from the Goldman Sachs brand Marcus, which can be managed online and by phone, and Virgin Money. Both pay a variable rate of 1.5 per cent.

Savers can at least match inflation and only lock money away for one year with Metro Bank’s one-year fixed-rate bond. The account can be opened inbranch as well as online. A one-year deposit account that surpasses inflation comes from the Islamic bank Blme. Its rate of 2.2 is ‘expected’, not guaranteed, though it is understood the bank has always paid the expected profit to date.

Like the other providers mentioned, it is a member of the Government-backed Financial Services Compensation Scheme. This protects savers’ deposits up to £85,000 per person, per institution if a company were to fail. Longer-term fixed-rate bonds comfortably beating inflation include a five-year deal from Secure Trust Bank at 2.66 per cent and a three-year deal at 2.4 per cent from Indian-owned ICICI Bank UK.

Challenger banks – which may be those with unfamiliar names – are more likely to offer higher rates.

Darren Cook, of financial data company Moneyfacts, says: ‘High street banks pay on average 0.95 percentage points less on their five-year deals than the average challenger bank.’

Many best-buy deals are online-only, which isolates people who are not confident with internet banking or who do not have an internet connection at home.

These customers should concentrate on local building societies or challenger banks that allow accounts to be opened by post or by phone. For example, PCF Bank and Charter Savings Bank.

For help, visit savingschampion.co.uk or moneyfacts.co.uk.