How much do you earn from your savings? Chances are, it isn't a lot, what with interest rates being at historic lows and limited signs of improvement. In fact, research from Charter Savings Bank shows just how paltry savers' earnings can be, with the shocking finding that it could be barely £33 per year – £300 less than seven years ago.
Their figures show that the average interest rate on instant access accounts, arguably where people keep most of their money, is just 0.39%, which is even below the Bank of England base rate (0.50%). Based on a typical UK savings pot of £8,500, this means that savers will be earning an average of just £33 per year in interest, all thanks to historically low interest rates and poor high street offerings.
This is in stark contrast to the kind of returns that could have been achieved before base rate was cut so dramatically. In March 2009 – the month of the last reduction – savers could have found a fixed rate bond that paid over 4% annually, which means the same £8,500 savings pot would have earned £343 in interest per year.
"The combination of a low base rate, quantitative easing and poor high street offerings has meant that the last few years have been difficult for savers," said Paul Whitlock, director of Savings at Charter Savings Bank. "With Mark Carney's recent admission that the base rate looks increasingly less likely to rise until latter half of 2016, the year ahead may prove to be another challenging one for UK savers."
However, even though the rates on offer from well-known names are lacking somewhat, there is an alternative: and challenger banks are it. They've now become "a viable solution for those serious about their savings", said Paul, who pointed out that these lesser-known banks dominate the best buy tables – take a look at ours to see for yourself – and in many cases pay rates that top 2%, which is over five times more than some savers currently earn. "Although nearly seven years of historically low base rates may mean that you have missed out on even more interest, this doesn't mean that all is lost," he concluded. "In 2016 we urge savers to seek the best possible return on their money and join thousands of other savvy-savers in the UK who have engaged with the challenger bank movement."
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