/ Money

Is it time to save our savers?

Life saving ring

The Bank of England today announced that the base rate will remain at 0.5% for the 30th consecutive month, meaning savers could have lost more than £43bn in that time. So should we give savers a break?

Those of us with any money left to save will be getting used to the idea that 3% on our cash is the best we can expect to return at the moment.

With cheap borrowing available and high unemployment, should we worry about the nation’s savers or is it more important to continue to try to stimulate the economy?

A survey earlier this week highlighted that there isn’t always correlation between high savings balances and quality of life. So, it’s not just the affluent or those living in nice areas that are suffering. The impact of poor savings rates cuts across demographic boundaries.

Falling in to the savings gap

The problem has been exacerbated by the fact that in the current low-interest rate environment, financial companies are doing little or nothing to let you know about the decent rates that are out there.

When we looked at the ‘savings gap’ at the end of 2010, we found that many companies didn’t put the rates they were providing on statements or in a prominent place on their websites. Many people were floundering in poor-paying accounts, with 25% of accounts paying 0.1% or less and 47% paying 0.5% or less. The savings gap, or the interest people were missing out on, totalled £12bn at the time.

It seemed to us at the time that people were getting the worst of both worlds and providers are in no rush to help us out. Some of the biggest banks are still re-paying the debt to the UK’s taxpayers.

Should we care about the nation’s savers?

There are some loud voices out there standing up for the plight of savers. Save Our Savers campaigns actively for a ‘fair deal for savers’ and hopes to protect savings from ‘devaluation through inflation, unfair legislation and taxation and exploitative financial practices’.

It’s a tricky balance, but does the fact that neither the Bank of England, nor the nation’s financial providers, seem to care about savers verge on discrimination? This issue particularly impacts older savers having to live off the income from the savings that they’ve built up over the years.

Or is it more of a case of accepting where we are in the economic cycle and putting the needs of borrowers, small businesses and the nation’s finances first?

Comments
Profile photo of save our savers
Member

With a rapidly ageing population, growing care costs and a stagnant economy, saving has never been more essential. Unless there are a significant number of savers providing for their own future and retirement, the burden on the state is going to be more than it can possibly bear. But with record low interest rates and inflation pushing ever higher, many savers are in despair. That’s why we’re asking the government to provide temporary relief by suspending income tax on savings interest, even more important after the withdrawal of the NS&I index-lined certificates. We also have an epetition to this effect. http://epetitions.direct.gov.uk/petitions/7740

Member
Mikhail says:
8 September 2011

I opened offshore account in Russian rubbles and getting 10% of interest per year paid monthly, can move money in and out at any time and it is tax free. My risk is in fluctuation of GBP/RUB exchange rate.

As soon as British savers will find out an easy and safe way to open saving accounts in other countries more British banks will need a bail out. Time to cut branches, bonuses and save the savers.

Profile photo of gk
Member

I’ve been puzzled for a while why the regular comparisons of savings products offered by Which? never seem to mention (as far as I can tell) the index-linked savings certificates from National Savings and Investments (http://www.nsandi.com/savings-index-linked-savings-certificates).

Provided the current inflation rate (RPI in July: 4.96%) stays about the same for 12 months (and it certainly has been rather stable for quite a while now, except for huge drop in autumn 2008; http://timetric.com/dataset/uk_national_statistics/?indexes=uk_rpi_all_items_retail_prices_index ), it will pay about 5.5% after a year, tax-free and risk-free.

Of course, one can find the relevant information on the Which? site, but why not at least provide a link to it when reporting the latest interest rates for (1-year-plus) savings accounts/bonds and ISAs?

(And no, I’m not working with or for them or any other government agency.)

Profile photo of Paul Davies
Member

Hi GK,

We are aware of the excellent deal offered by the NS&I inflation-beating certificates and covered their withdrawal with some sadness earlier in the week.

The reason that we don’t include in the Best Rate tables is because the fixed-rate deals included do not feature variable products, which the NS&I deal is. It’s impossible to tell what the rate paid by the savings certificates will be – as you say this depends on the inflation rate in the preceeding year.

So it wouldn’t be possible to benchmark this product against the others in the table that come with a fixed interest rate (% AER).

Hope this helps.

Paul.

Profile photo of mgp001
Member

Regrettably a few days ago I saw on Teletext that NS&I have “pulled” inflation-linked savings. Is there a conspiracy?

Profile photo of gk
Member

I had no idea they had just been withdrawn. 🙁

I’d actually been thinking for quite a while about moving savings into them but one of the reasons why I hadn’t (apart from inertia) is that I couldn’t figure out why Which? was apparently so reluctant to include them in comparisons of saving products and only ever mentioned them on their own, in more or less routine reports. I wondered if there was there some downside I was unable to see?

I understand the point that they are structured differently excludes from being included in tables of savings accounts and ISAs. I was only suggesting to mention them alongside the other savings products, given their relatively huge (and risk-free) interest rate.

All water under the bridge now …