Have you checked the interest rate lately?
Unfortunately the general trend on all savings account interest is currently downward. The reason for this is that the Treasury announced last autumn that banks could borrow virtually unlimited funds for lending from the Bank of England at just 0.5%, which has meant that they are not so keen on paying us much more than that on our savings.
Whilst the capital with deposit based savings is protected against falls, interest rates are lower than inflation and, in real terms, the value of deposits are falling. Monies should only be kept on deposit for emergency funds and to cover short term needs. Long term monies usually need to be invested in assets that provide the opportunity for capital to at least maintain pace with inflation.
Surprisingly, although it’s due to the government lending at 0.5% which has driven savings rates down, currently government-backed National Savings and Investments (NS&I) have a number products available which are very competitive and may provide a good home for your savings. Another advantage of NS&I products are that they are fully guaranteed by HM Government rather than limited to the £85,000 Depositor Protection Scheme limit as with most other savings banks.
If you are prepared to lock deposits up for a twelve month period or longer, there are a few companies still offering rates of 2% or more. Although, with rates currently so low, there may be little benefit in locking money away into fixed term deposits of more than 2 years at this time.
For a full appraisal of your deposit savings, please contact us.
Rates correct as at 21 May 2013