The Bank Of England Base Rate has been at a record low of 0.5 per cent since March 2009 and last week it once again remained unchanged - the 22nd month in a row. As a result of record low interest rates it’s more important than ever that you do everything you can to earn the highest interest rate possible on your savings. It’s easy to switch savings account and well worth spending a few minutes checking what rate you are getting on your savings and moving it to a better paying account today.
Surprisingly some people are losing out on any interest at all by keeping large sums of money at home instead of safely depositing them with a bank or buildings society. The Financial Services Compensation Scheme (FSCS) that protects UK savers if a bank or building society gets into financial difficulties has calculated that we have £7billion at home. The average amount kept at home is £280 per household, not including money in wallets. This money is not only at risk of being lost or stolen, but is also not earning any interest. Worryingly 4% of those surveyed admitted to having over £1,000 at home and this included 1% with more than £10,000 at home. Low interest rates are to blame for almost a third of people keeping money at home. Check your household insurance to see how much cash is covered if you are the victim of a burglary - the best policies may only cover a maximum of £1,000 of cash at home. Since the end of Dec 2010 savers covered by the FSCS are protected up to £85,000 per person, and per company, or group of companies.
Mark Neale, Chief Executive of the FSCS, said: ‘Even though interest rates are currently low, those wishing to save money should always do so with a bank, building society or credit union which is covered by the FSA, the UK financial regulator. It is vital that savers know their money is protected up to the new limit of £85,000.’
Separate research from Which? last November revealed that UK savers are missing out on £12 billion a year because banks keep us in the dark about what interest we earn on our savings. Despite this almost four in ten savers said they wouldn’t switch savings account because they think that all savings interest rates are pretty much the same. When in fact, Which? calculates that savers could earn an extra £322 a year in interest by moving their money to accounts paying the best interest rates.
A Which? spokesperson said: ‘All too often, banks and building societies lure in savers with attractive rates of interest, then reward their loyalty by quietly slashing rates to a paltry level later on. It's a scandal that banks seem to reserve the most pitiful returns for their most loyal customers.’
Get a Better Rate on Your Savings
Check what interest rate you are getting on your savings. For example, you could earn 2.9% AER with the Post Office Online Saver account, which includes a 1.25% bonus for 12 months and gives you unlimited penalty-free access to your money. If you pay tax you should have a look at cash Isas. Each year you can invest up to £5,100 in a cash Isa and any interest you receive will be free of tax. You could earn 2.8% with a Principality BS E-Isa Issue 2 including a bonus of 1% for 12 months.