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A Gloomy Start for Savers

A Gloomy Start for Savers

Category: Savings

Updated: 31/10/2008
First Published: 13/02/2006

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 It is now over 6 months old so the content may be out of date.

We are only just into the second month of the New Year, but already 2006 has delivered more than its fair share of bad news for the nations savers.

Although many financial pundits are forecasting small cuts in interest rates later this year, many banks and building societies have made some fairly substantial rate reductions already.

Since the turn of the year, the AA, Abbey, Alliance & Leicester, NatWest, Nationwide BS, Lloyds TSB and Smile have all slashed rates.

If you’re not sure you are getting the best deal for your hard earned savings, contact your bank or building society to check your current interest rate and compare this against the best-buy charts in the press or on websites such as www.Moneyfacts.co.uk.

Why is this happening? Well, there doesn’t appear to be any real logic; however it must be said that some institutions have only cut rates at certain tiers, whilst others have made cuts ‘across the board’ at the same time as they are increasing rates on others. So it looks as if it’s down to a bit of tinkering with products and a bit of ‘robbing Peter to pay Paul’.

For example Nationwide announced cuts of up to 0.2% on some of its savings accounts, yet almost simultaneously announced that it would be increasing the credit interest on its flex (current) account from 3.0% to 4.25% from 1 April.

The bad news is not limited to rates being cut; we have also seen a couple of the best-buy savings products for the ‘over fifties’ age group withdrawn from the market. The Portman BS 50+ savings account was paying 5.00% whilst the Stroud & Swindon BS Diamond account was paying 4.85% - neither of these accounts is now available to new investors even though both were only launched just a little over three months ago.

The real message to savers here is just because you received a good rate of interest when you opened your savings account, there is no guarantee it will stay that way. If you don’t think you are getting a decent return, vote with your feet and transfer your account to another provider. After all, you work hard for your money, so in return should want it to work hard for you.

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.