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Five minute finance: Savings

Five minute finance: Savings

Category: Savings

Updated: 23/02/2010
First Published: 22/02/2010

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

There was further bad news for savers last week after figures released from the Office for National Statistics showed that inflation had increased to 3.5pc. The rise means that in order to beat both tax and inflation, standard rate tax payers need to find a savings account earning 4.38pc a year, while higher rate tax payers need to earn 5.83pc.

The only savings products on the market at present that will achieve such a level are selected regular ones, where savers can invest only a restricted amount per month, and fixed rate bonds, but then only if you're prepared to lock your money away for at least two years.

Meanwhile, the situation is unlikely to get much better anytime soon for savers. Mervyn King, the Governor of the Bank of England, warned that the bank base rate was likely to remain at its all time low of 0.50% for the rest of the year and into 2011, leaving savers with little chance of any significant increase in the rate of interest they can earn on their money.

As providers increasingly compete for saver's tax free ISA allowances, savers can at least expect these rates to increase in the coming weeks.

Norwich & Peterborough relaunch popular online account

Norwich & Peterborough Building Society has launched the third issue of its popular E-Saver account, which pays a current rate of 2.55pc gross. The account has a standard variable interest rate of 1pc and an extra 1.55pc bonus will be paid on the first anniversary of the account opening. Savers can withdraw cash without notice, as long as the account balance remains above £1. The initial deposit can be made by cheque, although all other transactions must be carried out online. The account is available to both new and existing customers, although funds must be new money to the Society.

Variable Rate Cash ISA relaunched

Another new rate from HSBC, this time a relaunch of the Variable Rate cash ISA available to HSBC Plus and Premier customers. This account pays a monthly rate of 1.74pc including a bonus of 0.99pc for 12 months. The minimum deposit required is £1, although for regular savings it is £10. Transfers can be made from ISA balances held with other providers, although transfers from existing HSBC cash ISAs are not allowed. The account can be applied for and operated in branch, by telephone or by post.

New Chelsea Cash ISA for senior savers

The fourth issue of Chelsea Building Society's Over 50s Cash ISA account pays a monthly rate of 2.08pc. A minimum deposit of £5,100 is required and all withdrawals can be made without advance notice or penalties. Transfers in are accepted and the account can be operated in branch and by post. Savers looking to apply for this account must have been born on or before 5 April 1960.

Rothschild rolls out new three year fixed rate bond

Rothschild Reserve's new fixed rate bond account offers customers the choice of a fixed annual rate at 4.55pc, a monthly interest option at 4.46pc, or 4.78pc payable on the bond's maturity date of 15 April 2013. Savers can invest between £20,000 and £2m. Neither early access or further additions are permitted. Applicants must be aged 18 and over and the account can be operated by post only.

New two year fixed rate bond from SAGA

This new two year fixed rate bond offers customers an annual rate of 3.90pc. For those wishing to receive monthly interest, a rate of 3.83pc is available. Savers can invest between £1 and £10m and further additions can be made while the issue is open. Early access to funds is allowed, although this is subject to 180 days' loss of interest. The account can be opened online or by telephone by savers aged 50 and over.

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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.