Put your money where the interest is during the recession

8/7/2019 Put your money where the interest is during the recession

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Put your money where the interest is during the recession

Tue 25th Aug 2009

The onset of recession has made Brits think twice about almost every aspect of their finances - whether that be their outgoings, earnings, cutting back on luxuries, how much to contribute to pensions and, of course, where exactly to put their savings.

As they attempt to recoup the losses made during the credit crunch of last summer, British banks may havetheir minds on issues other than generating competition.

However, this is not to say that high street and supermarket banks have stopped offering savings accounts,bonds and ISAs with competitive rates for those anxious about the fate of their savings during such aturbulent period.

Perhaps one of the most talked-about savings accounts to be offered of late is that from a relatively newface on the British lending landscape - Santander.

Having acquired Bradford & Bingley, Abbey National and Alliance & Leicester (A&L), it is safe to say thatSantander will be a more common sight on the UK's high streets following the completion of rebrandingnext year.

At the present time, however, Abbey's Super Fixed-Rate Monthly Saver and A&L's Premier Monthly Saver go where other banks dare not to - both offering six per cent AER.

However, access to these packages is subject to the opening of either Abbey's Reward or Preferred InCredit Rate Current Account, or A&L's Premier Direct or Premier 50 Current Account.

Those who want less commitment for their interest could consider the Halifax Regular Saver, which is idealfor those hoping to save between £25 and £500 a month at a fixed rate of five per cent AER.

Additionally, the Lloyds TSB Monthly Saver Account is paying a five per cent fixed-rate AER on depositsbetween £25 and £250, while Sainsbury's Internet Saver currently offers a variable rate of 2.9 per cent AERon deposits between £1,000 and £500,000 for a period of 12 months.

As for ISAs, savers may have noticed that National Savings and Investments has raised the interest rate of its standard savings account from 1.2 per cent to 2.5 per cent - almost double the original figure.

Perhaps equally attractive is Standard Life's Cash ISA - which allows customers to enjoy 2.65 per centvariable tax-free interest per annum or AER. Savers choosing this option can put aside up to £3,600 eachyear tax-free, as well as enjoying no penalties for withdrawals.

Some savers may be considering their options when it comes to bonds - which could be a good movewhen opening an account for a child, according to lovemoney.com writer Ally Hunt.

If this is the case, Leeds Building Society could be the place to turn, as last week, it launched a three-year postal bond with a 4.3 per cent return, or a monthly interest rate option of 4.11 per cent AER - which couldbe attractive for those relying upon it as a source of income.

Another financial services provider to turn to for savings bonds could be Barnsley Building Society.Although withdrawals and early closure are excluded from the deal, savers could capitalise on its offer of aguaranteed fixed rate of interest during the term and, again, monthly or annual interest options.

For a five-year bond, customers can access a gross per annum or AER of 5.4 per cent, while for the three-year package, this figure stands at 5.15 per cent. Two and four-year bonds are also an option and all areavailable to those wishing to invest between £100 and £500,000.

So, as Brits who have been doing their homework on savings may have discovered, there are still a rangeof ways in which to capitalise on hard-earned nest eggs, despite a loss of confidence among consumersduring the course of the economic downturn.

In fact, even though the base rate is at an all-time low and VAT has been temporarily dropped, Brits coulduse the recession as an excuse to shop around even more scrupulously for the best ways to make their savings grow.





The best fixed-rate bond available is Indian bank ICICI¶s two-year bond at 4.35% on a minimumdeposit of £1,000. Rothschild, the private bank, offers the same rate on a minimum £20,000 deposit² a return of 2.61% for a higher-rate taxpayer or 3.48% for a basic-rate taxpayer.

M&S Money, Barclays, First Direct, Skipton and NatWest have all cut rates on Isas recently, angeringsavers who scrambled to take out the best deals before the end of April.

Consumers also say banks won¶t let them transfer from low-paying accounts ² such as Cheltenham& Gloucester¶s Isa, which pays 0.05% ² to better-paying products at the same bank.

http://www.timesonline.co.uk/t ol/money/investment/article6493070.ece

Britain's biggest banks and building societies have punished Isa savers more than ordinaryaccountholders since interest rates started to fall, according to new research.

Millions of people have salted away nearly £160 billion in Isas over the past decade and the schemesare likely to get even more popular ² the tax-free interest is one of the few ways to boost returns withinterest rates at a 57-year low of only 2%.

However, the country¶s 10 largest savings institutions have slashed their average Isa rates by more

than the interest on their easy-access accounts since February last year, when Bank rate was cut to5.5%, according to research from data firm Moneyfacts. The figures do not even include the latest onepercentage point reduction to 2%.

Abbey has been one of the worst offenders with its Easy Isa slashed by 2.79 points even though Bankrate had been cut by only 2½ points ² from 5.5% to 3% ² ahead of the latest reduction. Its standardEsaver account, by contrast, is down only 2.24 percentage points.

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The research comes as the government is coming under growing pressure to do more to help hard-pressed savers, having pumped billions into the banks only to watch them fail to play fair by passingon rate cuts.

Vince Cable, the Liberal Democrat Treasury spokesman, warned last week that banks were ³runningrings around government´. He said: ³The government is becoming progressively enfeebled by the dayas the banks do what they want. It¶s the government¶s job, since it has put in all this taxpayers¶money, to set strategic priorities for the banks to protect long-term savers.´

There are now 10 Isas paying less than Bank rate. The Smile cash Isa had a headline-grabbing rate

of 7.25% in February 2000 when Bank rate was 5.75%. However, the rate is now only 1% ² 1%below Bank rate. Barnsley building society, which is likely to merge with Yorkshire building society,pays 0.2% if you hold between £100 and £500.

Overall, Isa rates have been cut by an average 2.05 points, while easy-access accounts are downonly 1.97 points. This will cost Isa savers about £126m a year in lost interest payments.

Things are likely to get worse as firms take the latest Bank rate cut into account.



Michelle Slade from Moneyfacts said: ³The full impact of the latest cut will not be seen until next year as banks usually cut rates from the beginning of the following month. So, potentially, the averagecould fall by another 1%.´

Savings rates on a normal deposit account do not look good either. The average rate for a deposit of £5,000 has plummeted to its lowest level in more than four years ² and that is before December¶scut. It stands at 2.3%, compared with 2.49% in April 2004.

David Black of Defaqto, the research firm, said: ³With rates on cash Isas as low as 0.2% in oneinstance it makes sense to check that your current deal is still competitive but make sure that youdon¶t lose the tax-free status if you decide to transfer to a new provider.´

http://www.timesonline.co.uk/tol/money/savings/article5336249.ece

Given that the Bank of England has set base rates at just 0.5%, achieving the highest cash ISA interestrate on personal savings is extremely important. Whilst a saver isn't going to become rich overnight, thereare a number of ways to ensure that the best possible return is achieved. Don't settle for the first rateoffered by a bank as there are a number of online deals that aren't widely available on the high street.

Individual Savings Accounts

Under current Inland Revenue rules, an ISA is a form of tax-free savings. Savers born prior to the 5th April1960 can invest up to £5,100 in a best buy cash ISA. Those born after this date can currently only invest upto £3,600, but this is set to change on the 6th April 2010. Up to £10,200 (or £7,200 for under-50's) can beinvested in a stocks and shares ISA or divided equally between equities and cash.

Perform an ISA Transfer

It is advisable to move funds to an Individual Savings Account offering the best ISA rate. The processshould be initiated through the new provider, not the old one. An ISA transfer should be completed within a30 day period, although this could be affected by business volumes- especially towards the end of thecurrent tax year. Those with variable rate ISA's should check cash ISA interest rates at least once a year.

Cash ISA Interest Rates

Whilst a saver can visit high street banks to find the best buy cash ISA, it isn't a terribly efficient method. Itis far more effective to use an online comparison site, such as uswitch.com or moneysupermarket.com.These sites allow someone to trawl through the cash ISA interest rates offered by all the leading banks andfinancial institutions based on specific search criteria.

Fixed Vs Variable Rate Cash ISA Interest Rates

The returns on a fixed rate ISA deal will be higher in return for locking up money for a specific period of time. Early withdrawal will incur a penalty that is equivalent to x months of interest. Bank base rates are lowand look set to stay that way, but it is impossible to be 100% sure. Should the saver feel that interest ratesare likely to rise, a variable rate ISA would be the better option.

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Fixed Rate Bonds Best Rates

Investment news, data & advice for private investors from M oneyWeek.www.MoneyWeek.com

Achieving the best possible cash ISA interest rate isn't a complex process, but it does involve a bit of research. Too many savers become complacent and simply accept the rate that is offered by their highstreet bank. Use a comparison site, such as uswitch.com, to find the best buy cash ISA at least once every12 months. Make the most of tax-free savings allowances before April 5th each year.

Sources

Read more at Suite101: How to Get the Highest Cash ISA Interest Rate: The Best ISA Rates

on Tax Free Savings http://building-personal-

savings.suite101.com/article.cfm/how_to_get_the_highest_cash_isa_interest_rate#ixzz0mc

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Put your money where the interest is during the recession