Despite a 0.25% bump in the base rate last week, interest rates remain well below inflation and have for nearly a decade now – so, have you spurned savings accounts and invested your money elsewhere?
The Bank of England base rate has been below 1% for nearly a decade now and it’s been an unrewarding period for anyone with money in a savings account.
While the news last week that the base rate was increasing by 0.25% was welcome news for savers, it’s unlikely to be enough – especially as many banks have already said they’d not be passing this on in full to savings accounts.
And this isn’t unusual: when the base rate last increased in November, less than a quarter (21%) of variable instant-access savings accounts passed it on in full to savers, and nearly half (48%) didn’t change their rate at all.
With inflation creeping beyond 2.5% after the Brexit referendum (well above interest rates on most instant access accounts), many savers are still looking for alternatives.
Risk vs Reward
This prompted our community member Wavechange to ask:
How will pensioners be affected, since continuing low interest rates may leave them unable to maintain their income without risky investment of their dwindling savings?
Which led me to wonder how many people have spurned low-risk strategies in favour of higher-risk investments that may offer greater returns.
A recent survey by an investment firm specialising in retirement suggests the picture’s far from clear.
The Retirement Sentiment Index from Retirement Advantage found that market volatility was putting off increasing numbers of over-50s from investing in stocks and shares.
Nearly two fifths of respondents to the survey said they were unwilling to take any financial risk with their pension pot, up from a quarter last year.
But the key to a comfortable retirement is investing in a way that allows your pot to generate an income for you later in life – you can find out more in our guide to planning your retirement.
Playing it safe
Personally, I have a small amount of money invested in National Savings and Investment (NS&I) premium bonds.
The average prize rate rate on them overall is 1.4% (though this isn’t guaranteed for each holder as it’s a prize draw), which is still below inflation but isn’t bad compared to many savings accounts.
And you get a giddy thrill when NS&I email you occasionally at the beginning of the month saying you’ve won something – could it be the £1m prize?
But honestly, I’ve found premium bonds a pretty good place to park my savings until I can come up with a longer term idea on what to do with them – something that really requires a lot of careful thought and planning, which I haven’t done yet.
Though I do understand that premium bonds may not be the best position for everyone, especially those in or near retirement.
On the other end of the investing spectrum, Which? Money have compiled some of the weird, wonderful and downright woeful investment schemes they’ve come across, including burial plots, car parking space, cryptocurrencies endorsed by ex-footballers and soybeans.
But being serious again for a moment, Which? Money’s have put together a comprehensive guide on how to build an investment portfolio, if that is a route you choose to go down.
So how have you invested your savings, if you have any? What would be your advice for others looking beyond low interest savings accounts?