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Long term investors face savings ‘precipice’

Long term investors face savings ‘precipice’

Category: Savings

Updated: 19/06/2012
First Published: 19/06/2012

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.
Longer term fixed rate investors in the UK are again facing a savings precipice this year when they come to reinvest, as rates for long term products continue to fall.

Over 4.9 million fixed rate products worth almost £94 billion will mature in 2012, with the largest number due to mature in November (519,997), according to HSBC analysis of Moneyfacts.co.uk data.

Savers who invested in the 2.3 million fixed rate products that have matured thus far in 2012 will lose £124 million in income if they simply re-invest their savings pot into similar products.

However, most of the loss in income is down to the longer term products, with shorter term bonds generally offering increased returns.

While investors who put their money into one year and eighteen month bonds will see a slight rise in the returns they receive by re-investing in the best buy products currently available, those who lock their money away for longer are likely to see the largest decline in returns.

This is because four year products are showing the largest fall in investment income.

"Many savers value the guaranteed income and security offered by fixed rate products and can often make higher returns on their money compared to those who aren't prepared to lock their money away and opt for ordinary savings accounts," said Bruno Genovese, head of savings at HSBC.

"However, those who want to reinvest their savings from matured fixed rate products into comparable deals this year may find that their income drops significantly - a shock felt particularly for those approaching or in retirement.

"We urge people not to simply reinvest their savings in a similar product, but to seek advice and consider all their options first."

Savers looking for the best rate of return on their newly matured funds should check the Moneyfacts.co.uk Best Buy tables.

Whether you're looking for a short term home for your money, or you want to tie up you savings for years to come, we'll have the right account for you.

Find the best savings rates for you - Compare savings accounts

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.