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Savers told to shop around

Savers told to shop around

Category: Savings

Updated: 12/10/2009
First Published: 12/10/2009

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.
Savers have been urged to make sure they are receiving the best interest rates possible, after research revealed the amount of money held by UK adults in cash savings accounts had fallen by more than a fifth since March.

According to the latest Savings Monitor from Investec Private Bank, since the Bank of England cut the base rate to 0.5% on 5 March this year, the average amount held in cash savings has fallen by 22%, from an estimated £18,000 to around £14,000.

On average, UK adults now have just over a quarter (27%) of their savings (excluding property and equity ISAs) in cash, compared with 31% in March.

Yet, while more than a quarter of regular savers have decreased the amount they regularly deposit since the base rate fall, six per cent have bucked the trend and increased the amount they put away.

Worryingly, however, over a third of all savers (36%) had no idea what rate of interest they are getting on any of their savings accounts.

Particular concern has been expressed that an estimated four million savers have balances of £25,000 or more, and yet typically only receive a rate of just 0.95% gross AER.

"Regular cuts to the Bank of England base rate, coupled with a squeeze on household finances, means that many people are reducing the amount of money they are saving," said Linda McBain, head of banking at Investec Private Bank.

"Despite this, almost one in five adults still have half their assets in cash and over four million people have £25,000 or more in cash savings accounts. However, these savers could be missing out on higher rates of interest by leaving their cash in accounts paying derisory rates, sometimes well below the base rate.

"Those savers with larger deposits should switch to accounts paying a consistently competitive rate of return if they want to avoid missing out on hundreds of pounds in interest each year."

Speaking to Moneyfacts.co.uk, Philip Shaw, economist at Investec, said he expected interest rates to start rising through the first half of 2010, offering savers some hope of soon being able to achieve a better return on their money.

"Even so, with public expenditure cuts due to weigh down on the economy and banks' ability to lend still limited by the weakness of their balance sheets, official rates are likely to remain in relatively low territory, perhaps in a range of 2%-3%, for much of 2010 and 2011," he added. "The overall impact should be that deposit rates will rise, especially as the market for retail inflows seems set to remain competitive for some time."

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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